He was barred by the SEC this month because he had continued to audit companies even though his Utah license expired three years ago. And David was arrested in December for allegedly issuing bad checks in Livingston, Mont.
The PCAOB this month revoked the registrations of the Davis Accounting Group and Etania Audit Group. Reese's Utah license expired on Sept. 30, 2008 and on Nov. 4, 2010 it was revoked and he was ordered to stop holding himself out as a CPA. He prepared at least 23 audit reports filed with the SEC after his license expired and he stopped paying Utah fees.
The PCAOB's involvement began in November 2007 with an informal request for information about DAG's audits of three issuers. The firm asked for extended deadlines. On May 2, 2008, Davis and his firm received new requests that were expanded to include documents regarding DAG's internal operations, such as its document retention policy.
However, on July 31, Davis wrote that he did not have all documents in proper form. but expected them within a week. He said his father had suffered serious injuries that his mother-in-law would be undergoing life-threatening surgery and he had to take care of "certain family matters." On October 31, a letter from Davis cited personal bereavement and said he was under a physician's care for depression. Meanwhile, in April 2009, a grand jury subpoenaed DAG for documents relating to several of its audit clients and individuals associated with them.
Some documents arrived in February 2010 and Davis promised more. But in an April 6 hearing, he produced no evidence those were submitted. Davis testified he had good and bad days and that he reserved good days for business, including a week-long trip to China to negotiate with a client. His firm also issued more than 30 audit reports during a period he claimed to be incapacitated.
The PCAOB said his staff included an accounting manager, who supervises a staff of four, a tax manager with one employee and an audit manager, along with administrative staff. The investigation reported that Davis himself said that he had "a great staff and audit personnel that can take over and handle multiple client assignments." It also found that the grand jury subpoena had been received 10 months after the PCAOB's first request.
The clients' names were not given. However, one client was the now bankrupt Copper King Mining Co. Copper King's former CEO and a stock promoter and a disbarred attorney who helped sell and promote stock have been charged by the SEC with illegally selling $12.2 million in securities.
Davis, whose firm had audited Copper King, claimed he was hired as CFO by Copper King and Western Mining Co. as debtors in possession to perform a forensic audit. The companies claimed Davis seized control of records when they wouldn't pay him for pre-petition work. He said he surrendered documents to the SEC, Internal Revenue Service and Department of Labor.
Davis alleged the companies tried to conceal information and he needed to protect documents, which he claimed were his as a work product. Davis lost that argument when the court held he was not licensed and was ordered in March to give the records to the plaintiffs.
