The U.S. Securities and Exchange Commission yesterday charged three senior accountants with Coopers & Lybrand LLP (now PricewaterhouseCoopers LLP) with securities fraud in connection with their auditing practices.

The SEC filed a complaint in federal district court in Philadelphia, concerning Coopers’ auditing of the consolidated financial statements of Allegheny Health, Education and Research Foundation for the year ending June 30, 1997. The defendants are William Buettner, the engagement partner on the audit; Mark Kirstein, the senior manager on the audit; and Amy Frazier, the manager on the audit in charge of auditing, among other things, accounts receivable and bad debt reserves.

The complaint alleges that the defendants actively participated in a fraudulent scheme by AHERF, a Pennsylvania non-profit healthcare organization, to mask its deteriorating financial condition and that of a group of its subsidiaries.

“Ultimately, the defendants knowingly or recklessly issued false and misleading unqualified 1997 audit opinions that enhanced the credibility of AHERF’s reported financial statements,” said the SEC in its complaint.

The complaint alleges that the audit opinions falsely state that the audit was conducted in accordance with Generally Accepted Auditing Standards, that the financial statements were prepared in accordance with Generally Accepted Accounting Principles and that they fairly presented AHERF’s financial condition. The financial statements misrepresented that AHERF had net income of US$21.9 million for 1997; when it would have posted a net loss of $37.7 million.

The complaint charges Buettner with violating, and Kirstein and Frazier with violating or aiding and abetting Buettner’s violations of securities laws.