United States v. Simon
United States Court of Appeals for the Second Circuit
425 F.2d 796 (2d Cir. 1969)
Auditors Carl Simon and colleagues (defendants) certified financial statements for a company despite knowing that loans to an affiliated company, listed opaquely as Valley Receivable, were largely uncollectible, that most of the pledged collateral was the company's own stock and partially encumbered by prior liens, and that the receivable balance had grown significantly between the fiscal year's close and the certification date, none of which was disclosed. The auditors were convicted of certifying a false or misleading financial statement, after the trial judge declined their request for a jury instruction that a conviction required a bad-faith departure from generally accepted accounting principles, and they appealed.
Whether a jury convicting auditors of certifying a false or misleading financial statement must be instructed that only a bad-faith departure from generally accepted accounting principles can support a conviction, where the auditors presented expert testimony that their disclosures complied with those principles.