In re JEFFREY HAMMEL

 
 
 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
SECURITIES ACT OF 1933 
Release No. 10282 / January 18, 2017  
SECURITIES EXCHANGE ACT OF 1934 
Release No. 79817 / January 18, 2017  
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 3846 / January 18, 2017  
ADMINISTRATIVE PROCEEDING 
File No. 3-17792 
 
In the Matter of 
JEFFREY HAMMEL, CPA  
Respondent. 
 
ORDER INSTITUTING PUBLIC 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT OF 
1933, SECTIONS 4C AND 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934, 
AND RULE 102(E) OF THE COMMISSION’S 
RULES OF PRACTICE, MAKING 
FINDINGS AND IMPOSING REMEDIAL 
SANCTIONS AND A CEASE-AND-DESIST 
ORDER 
 
I. 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that 
public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to 
Section 8A of the Securities Act of 1933 (“Securities Act”), Sections 4C
1
 and 21C
2
 of the 
                                                 
1
 
 Section 4C provides, in relevant part, that:  
The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege 
of appearing or practicing before the Commission in any way, if that person is found . . . (1) not to possess 
the requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have 
engaged in unethical or improper professional conduct; or (3) to have willfully violated, or willfully aided 
and abetted the violation of, any provision of the securities laws or the rules and regulations thereunder. 
2
 
 Rule 102(e)(1)(iii) provides, in pertinent part, that: 
 

 
2 
 
 
 
Securities Exchange Act of 1934 (“Exchange Act”), and Rule 102(e)(1)(iii) of the Commission’s 
Rules of Practice against Jeffrey Hammel, CPA (“Hammel” or “Respondent”). 
II. 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (“Offer”), which the Commission has determined to accept.  Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are 
admitted, and except as provided in Section IV.G. herein, Respondent consents to the entry of 
this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to 
Section 8A of the Securities Act, Sections 4C and 21C of the Securities Exchange Act of 1934, 
and Rule 102(e) of the Commission’s Rules of Practice, Making Findings and Imposing 
Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 
III. 
On the basis of this Order and Respondent’s Offer, the Commission finds
3
 
that: 
SUMMARY 
 This matter concerns the conduct of Jeffrey Hammel (“Hammel”) in connection with a 
financial restatement that occurred at Orthofix International, N.V. (“Orthofix”).  Hammel served 
as the Chief Financial Officer (“CFO”) of Orthofix’s largest segment, its Spine Segment 
(“Spine”).  In that role, Hammel was responsible for the accounting and financial functions of 
Spine, including preparing its operating results (which were included in Orthofix’s public filings 
with the Commission). 
 From early 2011 to late 2012, Hammel recorded revenue on several transactions that 
resulted in the company making material misstatements in its public filings.  In particular, 
improper revenue was recorded on three transactions with one of Orthofix’s largest international 
distributors, including one transaction in which the company sold a product that could not be 
resold due to Orthofix’s delay in providing a required associated product and two transactions in 
which payment for the product was contingent on approval of the product by a regulatory body.  
This recording of revenue upon shipment of the products for these three transactions was 
                                                                                                                                                             
The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before 
it . . . to any person who is found...to have willfully violated, or willfully aided and abetted the violation of 
any provision of the Federal securities laws or the rules and regulations thereunder. 
3
 
 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or 
entity in this or any other proceeding.
 

 
3 
 
 
 
improper because it did not meet the fixed or determinable or collectability criteria for revenue 
recognition. 
 As part of his job responsibilities, Hammel annually signed management representation 
letters on behalf of Spine that were provided to Orthofix’s independent auditors.  Prior to the 
fiscal year 2012 audit of the company’s financials, Hammel was aware of transactions with 
extended credit terms and/or oral agreements. Despite his awareness in this regard, Hammel 
signed a letter to the company’s independent auditors in connection with the company’s fiscal 
year 2012 audit representing that he was not aware of any transactions with extended credit 
terms and/or oral agreements that had not been disclosed to the company’s independent auditors. 
 By engaging in the foregoing conduct, Hammel was a cause of Orthofix’s violations of 
Securities Act Sections 17(a)(2) and 17(a)(3) and the reporting, books and records, and internal 
controls provisions of the federal securities laws. Hammel also violated Exchange Act Rules 
13b2-2(b) and 13b2-1. 
RESPONDENT 
Jeffrey Hammel, 50, served as the Chief Financial Officer of Orthofix’s then-largest 
segment, its Spine Segment, from July 2010 to approximately February 2013.  Hammel resigned 
from Orthofix in February 2013 prior to the issuance of the FY 2012 financial statements by 
Orthofix.  Hammel is a Certified Public Accountant in the state of Ohio and maintained an active 
license until the license lapsed in 2008.  
FACTS 
A. Orthofix’s Business and Hammel’s Responsibilities 
 
1. Orthofix’s business was primarily divided into two Global Business Segments during the 
relevant period – Spine and Orthopedics.  Spine was Orthofix’s largest segment and 
contributed two-thirds of the company’s overall revenues. 
2. Spine had several operating divisions during the relevant period including Orthofix 
Spinal Implants (“OSI”), which was responsible for international sales of spinal implants 
and related instruments. 
3. From approximately July 2010 to February 2013, Hammel served as the Chief Financial 
Officer of the Spine Segment.  In that role, Hammel was responsible for the accounting 
and financial functions of Spine, including preparing its operating results (which were 
included in Orthofix’s public filings with the Commission).  Moreover, Hammel annually 
signed management representation letters and certifications on behalf of Spine that were 
provided to Orthofix’s independent auditors. 
4. Hammel reported directly to Spine’s President, a salesperson, during the relevant period.  
The Spine President was in charge of Spine’s sales and overall management and had 

 
4 
 
 
 
several sales persons who worked under him, including an individual who served as 
Spine’s Vice President of Global Sales and Development (“Spine Sales VP”). 
5. While Hammel reported directly to the Spine President during the relevant period, he also 
had dotted line reporting responsibility to Orthofix’s Corporate CFO.  The Corporate 
CFO was responsible for the preparation of Orthofix’s public filings, including its 
consolidated financial results.   
6. Spine sold various products including spinal and cervical implants and related 
instruments.  Spine sold the above products through two primary methods:  (i) sales of its 
products to U.S. and international distributors who then sold the products to hospitals and 
physicians, and (ii) sales of its products directly to hospitals and physicians in the U.S. 
B. Revenue Recognition Practices 
7. With limited exceptions, Orthofix recognized revenue during the relevant period based on 
the “sell-in” method, which provides for revenue recognition upon shipment of products 
to the distributor. 
8. ASC 605-10-25-1 provides that revenue may be recognized only when it is both realized 
or realizable and earned.  Consistent with the authoritative literature, Orthofix’s financial 
statements disclosed four criteria as its revenue recognition policy. 
9. The four criteria are: (i) persuasive evidence of an arrangement exists; (ii) delivery has 
occurred or services have been rendered; (iii) the seller’s price to the buyer is fixed and 
determinable; and (iv) collectability is reasonably assured. 
C. Hammel Improperly Recorded Revenue on Transactions with Brazilian Distributor 
 
a. Implants without Instruments Transactions 
10. OSI had several international distributors during the relevant period, but its largest 
distributor of product was located in Brazil (hereinafter “the Brazilian Distributor”).  In 
fact, for eight of the nine quarters from Q1 2011 to Q1 2013, the Brazilian Distributor 
was the Company’s second largest customer on a revenue per quarter basis. 
11. Entering 2011, Orthofix (and OSI) had a receivable of approximately $5 million from the 
Brazilian Distributor from prior sales.  The Brazilian Distributor forecasted that it would 
purchase approximately $8.5 million of Orthofix implants and instruments in FY 2011. 
12. Prior to this time, the Brazilian Distributor agreed to purchase implants along with 
instrument sets previously used in surgeries from Orthofix.  Implants and instruments 
were interconnected because the implants could not be used in patients without related 
instrument sets. 

 
5 
 
 
 
13. At this time, however, the Brazilian Distributor could no longer purchase previously used 
instrument sets because ANVISA (the Brazilian equivalent of the U.S. Food and Drug 
Administration) imposed new regulations prohibiting the importation of used instrument 
sets. 
14. Orthofix (and OSI) did not have the new instrument sets (105 in total) available to be 
shipped along with the implants it shipped to the Brazilian Distributor.  Rather than 
waiting until the new instrument sets were available, Orthofix – in FY 2011 – shipped 
approximately $5 million in implants to the Brazilian Distributor despite the fact that 
these implants could not be used in patients without the new instrument sets. 
15. Orthofix recognized the approximately $5 million revenue upon shipment of the above 
implants.  This recognition of revenue was improper as delivery of the interconnected 
product – the instruments – had not yet occurred.  As such, payment timing and terms 
were contingent upon the instrument sets being made available and therefore, revenue 
recognition was inconsistent with Orthofix’s accounting policy because it did not meet 
the fixed or determinable criteria or the collectability criteria. 
16. This improper recognition of revenue caused Orthofix’s financial statements to be 
materially misstated in its Forms 10-Q for the second and third quarters of FY 2011 and 
its year-end Form 10-K for FY 2011 and corresponding earnings releases. 
17. As of the summer of 2012, virtually none of the 105 instrument sets had been shipped to 
the Brazilian Distributor.  Thus, the Brazilian Distributor refused to pay for the implants 
because those implants that Orthofix had previously shipped to the Brazilian Distributor 
could not be used without the instrument sets. 
18. Hammel became aware subsequent to the shipment of the implants that the corresponding 
105 instrument sets had not been delivered, but did not take sufficient steps to evaluate 
the impact of the continued non-delivery of the instrument sets on the previously 
recognized revenue.   
19. In fact, as of August 2012 all of the corresponding instrument sets had still not been 
delivered and – at that time – Hammel knew that (i) the Brazilian Distributor had been 
provided extended payment terms to pay for the implants and (ii) the Brazilian 
Distributor could not sell the implants because Orthofix was delayed in sending the 
corresponding instrument sets. 
b. Firebird Transaction 
 
20. In late May 2012, the Spine President discussed a product launch plan with the Brazilian 
Distributor to purchase approximately $2.5 million of a new Orthofix product called 
Firebird.  This product, however, had not yet been approved by ANVISA and, therefore, 
could not be shipped into Brazil until such approval was obtained.   

 
6 
 
 
 
21. The Brazilian Distributor agreed to place the order on the following conditions: (i) one 
year to pay for the implants from the date of anticipated ANVISA approval; (ii) 210 days 
to pay on all subsequent product orders; and (iii) all corresponding instrument sets 
needed to be available once ANVISA approved the implants.  No one knew when 
ANVISA would grant approval. 
22. At this time, Spine had an unwritten policy that modifications to the terms in existing 
distributor agreements be approved by Hammel.  The Spine Sales VP and Spine President 
agreed to the Firebird order terms without approval from Hammel.   
23. Hammel learned of this transaction a few weeks after the product had been shipped to the 
warehouse but before the company filed its third quarter FY 2012 financial results.  In 
particular – on July 24, 2012 – the Spine Sales VP forwarded Hammel an email 
describing the transaction along with a series of emails containing prior discussions 
between him and the Brazilian Distributor’s President.   
24. Hammel replied to the Spine Sales VP – “[Spine Sales VP], can you please address how 
we ended up with a full year to pay for the June order.  I have a hard time managing that 
with a lot of pressure to reduce our ballooning [Days Sales Outstanding].”  The Spine 
Sales VP replied, “we accepted this due to the need for that size of an order.” 
25. Despite the contingent nature of the sale and Hammel’s own concerns about how this 
transaction would impact the company’s Days Sales Outstanding, Hammel recognized 
over $2 million in revenue from this transaction immediately upon shipping the implants 
to the Brazilian Distributor’s warehouse located in the United States.   
26. The recognition of revenue here was improper because the Brazilian Distributor’s 
obligation to pay, and the payment terms themselves, were contingent upon ANVISA 
approval and, therefore, revenue recognition was inconsistent with Orthofix’s accounting 
policy because it did not meet the fixed or determinable criteria or the collectability 
criteria. 
c. Fall 2012 Implants Transaction 
 
27. Beginning in September 2012, the Spine Sales VP solicited the Brazilian Distributor to 
purchase approximately $1.5 million of Orthofix implants that had not yet been approved 
by ANVISA.  Thus – as with the summer 2012 sales transaction with the Brazilian 
Distributor – this product could not be shipped into Brazil until that approval occurred.   
28. The Brazilian Distributor indicated that it would agree to the purchase but only under the 
following two conditions: (i) the ability to renegotiate the payment terms if ANVISA 
approval did not occur by the end of 2012 (just three months away) and (ii) one year to 
pay for the product.   
29. The Spine Sales VP forwarded an email to Hammel concerning the transaction terms for 
his approval.  Hammel approved the transaction and recognized the revenue from this 

 
7 
 
 
 
transaction immediately upon shipping the implants to the Brazilian Distributor’s 
warehouse located in the United States. 
30. This revenue recognition was improper because the Brazilian Distributor’s obligation to 
pay, and the payment terms themselves, were contingent upon ANVISA approval and, 
therefore, revenue recognition was inconsistent with Orthofix’s accounting policy 
because it did not meet the fixed or determinable criteria or the collectability criteria. 
d. Hammel Did Not Reassess Revenue Recognition After Meeting with Brazilian 
Distributor  
31. In December 2012, Hammel learned from an email sent to him by the Spine Sales VP 
that the Brazilian Distributor’s President had in June 2012 informed the then-Spine 
President and Spine Sales VP that it would not pay $4 million of its amounts payable by 
the end of December 2012.  Rather, the Brazilian Distributor’s President informed the 
then Spine President and Spine Sales VP that it would only pay $1.6 million of its 
amounts payable by December 2012 and the remainder by February 2013. 
32. On December 1, 2012, Hammel forwarded the email to the New Spine President (who 
had previously served as the company’s Corporate CFO) and wrote: 
[The Brazilian Distributor’s President] says below they made a payment agreement 
with [the Spine President] . . . I have no idea what may have been promised.  I do 
know that I fought pricing and terms concessions, but those were ultimately given at 
some point despite my denials.  This was commonplace.  I was told that I was the 
decision maker on pricing and terms and then secretly overridden.  [The Spine Sales 
VP] did it all of the time – don’t know how much [the Spine President] was involved. 
33. On December 7, 2012, the Brazilian Distributor’s President travelled to the U.S. to meet 
with Hammel and the Spine Sales VP.  At that meeting, the Brazilian Distributor’s 
President provided a Power Point presentation with a detailed chronology of events on 
several sales transactions involving the Brazilian Distributor, including the implant-
without-instruments transactions, the June and September 2012 transactions, and the 
payment plan related issues. 
34. After this December 7 meeting, Hammel did not reassess the revenue that the company 
had previously recognized and disclosed in its financial statements with the Brazilian 
Distributor.  Moreover, Hammel did not forward or provide the Power Point presentation 
to Orthofix’s then Corporate CFO. 
35. As a result of this and other errors described previously and below, Orthofix materially 
misstated its financial results in its FY 2012 Form 10-K and corresponding earnings 
release. 
 

 
8 
 
 
 
D. Hammel Improperly Recognized Revenue with Italian and Spanish Distributors  
 
36. In addition to the Brazilian Distributor, OSI had relationships with other international 
distributors including in Italy and Spain. 
37. During his tenure as Spine’s CFO, Hammel became aware of extended payment terms 
being granted to OSI’s Italian and Spanish distributors as a result of those distributors 
experiencing financial difficulties.  Hammel did not, however, evaluate the impact of 
these facts on Orthofix’s revenue recognition. 
38. For example, in early December 2011, the Spine Sales VP emailed the Italian Distributor 
and solicited it to make a $400,000 order.  The Italian Distributor’s President responded 
that it could make the order if they had extended payment terms of 180 days and the 
ability “in case of cash difficulties” to extend those payment terms.   
39. Hammel was copied on these email exchanges and – despite the specifically identified 
financial difficulties in Italy – recognized the revenue associated with this order upon 
shipment.  This revenue recognition was improper because payment terms were 
contingent upon timing of the Italian Distributor’s sell-through and payment receipt of 
the products and, therefore, revenue recognition was inconsistent with Orthofix’s 
accounting policy because it did not meet the fixed or determinable or collectability 
criteria.   
40. Similarly, in early December 2011, the Spine Sales VP solicited the Spanish distributor to 
make a $300,000 order.  The Spanish Distributor noted the difficult conditions in the 
Spanish economy at the time.  The Spine Sales VP responded that “based on the expected 
challenges in Europe due to the instability of the financial institutions,” he could offer 
extended payment terms of 180 days for instruments and 150 days for implants. 
41. In late December 2011, the Spine Sales VP forwarded the email exchange to Hammel for 
his approval of the extended payment terms.  Hammel provided this approval and 
recognized the revenue from this transaction upon shipment of the products.  This 
revenue recognition was improper because it did not meet the fixed or determinable or 
collectability criteria. 
E. Hammel Incorrectly Accounted for Certain Spinal Stimulation Product Transactions 
42. Beginning in the first quarter of FY 2012, the Spine President began exploring 
opportunities to generate more revenue in the domestic spine market by selling spine 
stimulation products directly to wholesale distributors who would then resell them to 
doctors and hospitals.  Prior to this time, Orthofix sold these products directly to doctors 
and hospitals.   
43. At this time, the wholesale market for these products was dominated by an Orthofix 
competitor.  To draw market share away from this competitor, the Spine President and 
Hammel determined to sell Orthofix spinal stimulation products at deeply discounted 

 
9 
 
 
 
prices-per-unit to the wholesalers, and pay a referral fee to the wholesaler that was 
termed a “commission.”  
44. Hammel accounted for these commissions as expenses rather than as reductions to 
revenue.  This accounting treatment was improper because where the vendor does not 
receive an identifiable benefit for the commissions, sales discounts such as these are 
presumed to be a reduction in the seller’s price pursuant to ASC 605-50-45-2.  Thus, 
these commissions should have been treated as further price discounts and as a reduction 
in revenue. 
45. Due to this improper accounting, Orthofix overstated its revenue by approximately $1.4 
million in the third quarter of FY 2012, and a total of approximately $1.7 million in FY 
2012. 
46. Moreover, Hammel was aware of two spinal stimulation transactions in which the 
purchasers were granted rights to exchange the products for cervical stimulation products.   
47. Because Orthofix could not and did not reasonably estimate the revenue recognition 
impact of the amount of future returns, Orthofix was precluded from recognizing revenue 
upon shipment in the above transactions pursuant to ASC 605-15-25-1(f).  As a result, 
Orthofix overstated its revenue by over $650,000 in the third quarter of FY 2012. 
F. Hammel Made an Inaccurate Representation to Orthofix’s Independent Auditors 
48. As of the company’s fiscal year 2012 audit – and as described by the conduct above – 
Hammel was aware that the company had entered into transactions with extended 
payment terms and that the company had made certain oral agreements such as the fact 
that the Brazilian Distributor’s payment for certain products was contingent on ANVISA 
approval.   
49. Nevertheless, Hammel – in connection with an audit of the company’s FY 2012 financial 
statements – represented through a February 15, 2013 management representation letter
4
 
provided directly to the independent auditors that: 
a. All significant oral agreements were made available to the auditors; 
b. There were no orders with extended credit terms; and 
c. All sales terms (express or implied), including all rights of returns were disclosed. 
 
50. Hammel provided the misleading representation at the direction of a company officer or 
director, namely, the company’s then-Corporate CFO. 
                                                 
4
 
 Hammel signed the management representation letter after he resigned from the company. 

 
10 
 
 
 
G. Orthofix’s Restatement 
51. Orthofix materially misstated several of its annual and quarterly filings and 
corresponding earnings releases, failed to make and keep books and records which, in 
reasonable detail, accurately and fairly reflected the transactions and dispositions of the 
assets of the issuer, and failed to devise and maintain a system of internal accounting 
controls sufficient to provide reasonable assurance that transactions are recorded as 
necessary to permit the preparation of financial statements in conformity with generally 
accepted accounting principles.   
52. Accordingly – in late March 2014 – Orthofix restated its financial statements for the first 
quarter of fiscal year 2013, all quarterly and annual periods in fiscal years 2012 and 2011, 
and the annual period for fiscal year 2010 as a result of misconduct.  Orthofix also 
acknowledged certain material weaknesses in its internal controls over financial 
reporting. 
VIOLATIONS 
53. Securities Act Section 17(a)(2) prohibits any person from obtaining money or property in 
the offer or sale of securities by means of any untrue statement of a material fact or any 
omission to state a material fact necessary in order to make the statements made, in light 
of the circumstances under which they were made, not misleading. 
54. Securities Act Section 17(a)(3) prohibits any person from engaging in any transaction, 
practice, or course of business which operates or would operate as a fraud or deceit upon 
the purchaser in the offer or sale of securities. 
55. Exchange Act Section 13(a) and Rules 13a-1, 13a-11, and 13a-13 thereunder require 
issuers to file such periodic and other reports as the Commission may prescribe and in 
conformity with such rules as the Commission may promulgate.  Exchange Act Rules 
13a-1, 13a-11, and 13a-13 require the filing of annual, current, and quarterly reports, 
respectively.  Rule 12b-20 of the Exchange Act requires issuers to add such further 
material information, if any, as may be necessary to make the required statements, in the 
light of the circumstances under which they are made not misleading. 
56. Exchange Act Section 13(b)(2)(A) requires issuers to “make and keep books, records, 
and accounts, which, in reasonable detail, accurately and fairly reflect the transactions 
and dispositions of the assets of the issuer.”  Exchange Act Section 13(b)(2)(B) requires 
issuers to devise and maintain a system of internal accounting controls sufficient to 
provide reasonable assurances that transactions are recorded as necessary to permit the 
preparation of financial statements in conformity with generally accepted accounting 
principles. 
57. Exchange Act Rule 13b2-1 prohibits any person from, directly or indirectly, falsifying or 
causing to be falsified, any book, record, or account subject to Exchange Act Section 
13(b)(2)(A). 

 
11 
 
 
 
58. Exchange Act Rule 13b2-2(b) prohibits any officer or director of an issuer or any other 
person acting under the direction thereof from directly or indirectly taking any action to 
mislead an accountant engaged in the performance of an audit if that person knew or 
should have known that such action, if successful, could result in rendering the issuer’s 
financial statements materially misleading. 
59. As a result of the conduct described above, Hammel was a cause of Orthofix’s violations 
of Securities Act Sections 17(a)(2) and 17(a)(3) and Exchange Act Sections 13(a), 
13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder.  
Hammel also willfully
5
 violated Exchange Act Rules 13b2-1 and 13b2-2(b). 
IV. 
In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
Accordingly, pursuant to Section 8A of the Securities Act, Sections 4C and 21C of the 
Exchange Act, and Rule 102(e)(1(iii) of the Commission’s Rules of Practice, it is hereby 
ORDERED, effectively immediately, that:  
A. Hammel shall cease and desist from committing or causing any violations and any future 
violations of Securities Act Section 17(a)(2) and 17(a)(3) and Exchange Act Sections 
13(a), 13(b)(2)(A), 13(b)(2)(B), and Rules 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, and 
13b2-2(b) thereunder.  
B. Hammel is denied the privilege of appearing or practicing before the Commission as an 
accountant. 
C. After two years from the date of this order, Respondent may request that the Commission 
consider his reinstatement by submitting an application (attention: Office of the Chief 
Accountant) to resume appearing or practicing before the Commission as:      
       1. a preparer or reviewer, or a person responsible for the preparation or 
review, of any public company’s financial statements that are filed with 
the Commission.  Such an application must satisfy the Commission that 
Respondent’s work in his/her practice before the Commission will be 
reviewed either by the independent audit committee of the public company 
                                                 
5
 
 A willful violation of the securities laws means merely “that the person charged with the duty knows what 
he is doing.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 
(D.C. Cir. 1949)). There is no requirement that the actor “also be aware that he is violating one of the Rules or 
Acts.” Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 
 

 
12 
 
 
 
for which he/she works or in some other acceptable manner, as long as 
he/she practices before the Commission in this capacity; and/or 
  2.    an independent accountant.  Such an application must satisfy the 
Commission that:      
           (a) Respondent, or the public accounting firm with which he/she is 
associated, is registered with the Public Company Accounting 
Oversight Board (“Board”) in accordance with the Sarbanes-Oxley 
Act of 2002, and such registration continues to be effective; 
   (b) Respondent, or the registered public accounting firm with which 
he/she is associated, has been inspected by the Board and that 
inspection did not identify any criticisms of or potential defects in 
the respondent’s or the firm’s quality control system that would 
indicate that the respondent will not receive appropriate 
supervision;  
   (c) Respondent has resolved all disciplinary issues with the Board, and 
has complied with all terms and conditions of any sanctions 
imposed by the Board (other than reinstatement by the 
Commission); and 
 
   (d) Respondent acknowledges his/her responsibility, as long as 
Respondent appears or practices before the Commission as an 
independent accountant, to comply with all requirements of the 
Commission and the Board, including, but not limited to, all 
requirements relating to registration, inspections, concurring 
partner reviews and quality control standards.  
D. The Commission will consider an application by Respondent to resume appearing or 
practicing before the Commission provided that his/her state CPA license is current and 
he/she has resolved all other disciplinary issues with the applicable state boards of 
accountancy.  However, if state licensure is dependent on reinstatement by the 
Commission, the Commission will consider an application on its other merits.  The 
Commission’s review may include consideration of, in addition to the matters referenced 
above, any other matters relating to Respondent’s character, integrity, professional 
conduct, or qualifications to appear or practice before the Commission. 
E. Within 30 days of the entry of this Order, Hammel shall pay a civil money penalty in the 
amount of $20,000 to the Securities and Exchange Commission.  If timely payment is not 
made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.  Payment must be 
made in one of the following three ways: 

 
13 
 
 
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request
6
; 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofin.htm; or 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to: 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
Payments by check or money order must be accompanied by a cover letter identifying 
Jeffrey Hammel as a Respondent in these proceedings, and the file number of these proceedings; 
a copy of the cover letter and check or money order must be sent to Antonia Chion, Division of 
Enforcement, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-
5720. 
F. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair Fund 
is created for the penalties referenced in paragraph IV.E above.  This Fair Fund may be 
added to or combined with the fair fund established in In the Matter of Orthofix 
International, N.V., (AP File No. 3-17791; Release No. 10281, January 18, 2017) and/or 
may be added to or combined with fair funds established for the civil penalties paid by other 
Respondents for conduct arising in relation to the violative conduct at issue in this 
proceeding or the Orthofix proceeding, in order for the combined fair funds to be distributed 
to harmed investors affected by the same violative conduct.  Amounts ordered to be paid as 
civil money penalties pursuant to this Order shall be treated as penalties paid to the 
government for all purposes, including all tax purposes.  To preserve the deterrent effect 
of the civil penalty, Respondent agrees that in any Related Investor Action, it shall not 
argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action 
grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of 
a final order granting the Penalty Offset, notify the Commission’s counsel in this action 
and pay the amount of the Penalty Offset to the Securities and Exchange Commission.  
Such a payment shall not be deemed an additional civil penalty and shall not be deemed 
                                                 
6
  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 
threshold, respondents must make payments pursuant to option (2) or (3) above. 

 
14 
 
 
 
to change the amount of the civil penalty imposed in this proceeding.  For purposes of 
this paragraph, a “Related Investor Action” means a private damages action brought 
against Respondent by or on behalf of one or more investors based on substantially the 
same facts as alleged in the Order instituted by the Commission in this proceeding.  
G. It is further ordered that, solely for purposes of exceptions to discharge set forth in 
Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true 
and admitted by Respondent, and further, any debt for disgorgement, prejudgment 
interest, civil penalty or other amounts due by Respondent under this Order or any other 
judgment, order, consent order, decree or settlement agreement entered in connection 
with this proceeding, is a debt for the violation by Respondent of the federal securities 
laws or any regulation or order issued under such laws, as set forth in Section 523(a)(19) 
of the Bankruptcy Code, 11 U.S.C. §523(a)(19).  
By the Commission. 
   
  Brent J. Fields 
Secretary 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES ACT OF 1933 
Release No. 10282 / January 18, 2017  

SECURITIES EXCHANGE ACT OF 1934 
Release No. 79817 / January 18, 2017  

ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 3846 / January 18, 2017  

ADMINISTRATIVE PROCEEDING 
File No. 3-17792 

 

In the Matter of 

JEFFREY HAMMEL, CPA  

Respondent. 

 ORDER INSTITUTING PUBLIC 

ADMINISTRATIVE AND CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT OF 

1933, SECTIONS 4C AND 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

AND RULE 102(E) OF THE COMMISSION’S 

RULES OF PRACTICE, MAKING 

FINDINGS AND IMPOSING REMEDIAL 

SANCTIONS AND A CEASE-AND-DESIST 

ORDER 

 

I. 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that 

public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to 

Section 8A of the Securities Act of 1933 (“Securities Act”), Sections 4C1 and 21C2 of the 

                                                 

1
  Section 4C provides, in relevant part, that:  

The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege 

of appearing or practicing before the Commission in any way, if that person is found . . . (1) not to possess 

the requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have 

engaged in unethical or improper professional conduct; or (3) to have willfully violated, or willfully aided 

and abetted the violation of, any provision of the securities laws or the rules and regulations thereunder. 

2
  Rule 102(e)(1)(iii) provides, in pertinent part, that: 

 



 

2 
 

 

 

Securities Exchange Act of 1934 (“Exchange Act”), and Rule 102(e)(1)(iii) of the Commission’s 

Rules of Practice against Jeffrey Hammel, CPA (“Hammel” or “Respondent”). 

II. 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (“Offer”), which the Commission has determined to accept.  Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are 

admitted, and except as provided in Section IV.G. herein, Respondent consents to the entry of 

this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to 

Section 8A of the Securities Act, Sections 4C and 21C of the Securities Exchange Act of 1934, 

and Rule 102(e) of the Commission’s Rules of Practice, Making Findings and Imposing 

Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 

III. 

On the basis of this Order and Respondent’s Offer, the Commission finds
3 
that: 

SUMMARY 

 This matter concerns the conduct of Jeffrey Hammel (“Hammel”) in connection with a 

financial restatement that occurred at Orthofix International, N.V. (“Orthofix”).  Hammel served 

as the Chief Financial Officer (“CFO”) of Orthofix’s largest segment, its Spine Segment 

(“Spine”).  In that role, Hammel was responsible for the accounting and financial functions of 

Spine, including preparing its operating results (which were included in Orthofix’s public filings 

with the Commission). 

 From early 2011 to late 2012, Hammel recorded revenue on several transactions that 

resulted in the company making material misstatements in its public filings.  In particular, 

improper revenue was recorded on three transactions with one of Orthofix’s largest international 

distributors, including one transaction in which the company sold a product that could not be 

resold due to Orthofix’s delay in providing a required associated product and two transactions in 

which payment for the product was contingent on approval of the product by a regulatory body.  

This recording of revenue upon shipment of the products for these three transactions was 

                                                                                                                                                             

The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before 

it . . . to any person who is found…to have willfully violated, or willfully aided and abetted the violation of 

any provision of the Federal securities laws or the rules and regulations thereunder. 

3
  The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or 

entity in this or any other proceeding. 



 

3 
 

 

 

improper because it did not meet the fixed or determinable or collectability criteria for revenue 

recognition. 

 As part of his job responsibilities, Hammel annually signed management representation 

letters on behalf of Spine that were provided to Orthofix’s independent auditors.  Prior to the 

fiscal year 2012 audit of the company’s financials, Hammel was aware of transactions with 

extended credit terms and/or oral agreements. Despite his awareness in this regard, Hammel 

signed a letter to the company’s independent auditors in connection with the company’s fiscal 

year 2012 audit representing that he was not aware of any transactions with extended credit 

terms and/or oral agreements that had not been disclosed to the company’s independent auditors. 

 By engaging in the foregoing conduct, Hammel was a cause of Orthofix’s violations of 

Securities Act Sections 17(a)(2) and 17(a)(3) and the reporting, books and records, and internal 

controls provisions of the federal securities laws. Hammel also violated Exchange Act Rules 

13b2-2(b) and 13b2-1. 

RESPONDENT 

Jeffrey Hammel, 50, served as the Chief Financial Officer of Orthofix’s then-largest 

segment, its Spine Segment, from July 2010 to approximately February 2013.  Hammel resigned 

from Orthofix in February 2013 prior to the issuance of the FY 2012 financial statements by 

Orthofix.  Hammel is a Certified Public Accountant in the state of Ohio and maintained an active 

license until the license lapsed in 2008.  

FACTS 

A. Orthofix’s Business and Hammel’s Responsibilities 

 

1. Orthofix’s business was primarily divided into two Global Business Segments during the 

relevant period – Spine and Orthopedics.  Spine was Orthofix’s largest segment and 

contributed two-thirds of the company’s overall revenues. 

2. Spine had several operating divisions during the relevant period including Orthofix 

Spinal Implants (“OSI”), which was responsible for international sales of spinal implants 

and related instruments. 

3. From approximately July 2010 to February 2013, Hammel served as the Chief Financial 

Officer of the Spine Segment.  In that role, Hammel was responsible for the accounting 

and financial functions of Spine, including preparing its operating results (which were 

included in Orthofix’s public filings with the Commission).  Moreover, Hammel annually 

signed management representation letters and certifications on behalf of Spine that were 

provided to Orthofix’s independent auditors. 

4. Hammel reported directly to Spine’s President, a salesperson, during the relevant period.  

The Spine President was in charge of Spine’s sales and overall management and had 



 

4 
 

 

 

several sales persons who worked under him, including an individual who served as 

Spine’s Vice President of Global Sales and Development (“Spine Sales VP”). 

5. While Hammel reported directly to the Spine President during the relevant period, he also 

had dotted line reporting responsibility to Orthofix’s Corporate CFO.  The Corporate 

CFO was responsible for the preparation of Orthofix’s public filings, including its 

consolidated financial results.   

6. Spine sold various products including spinal and cervical implants and related 

instruments.  Spine sold the above products through two primary methods:  (i) sales of its 

products to U.S. and international distributors who then sold the products to hospitals and 

physicians, and (ii) sales of its products directly to hospitals and physicians in the U.S. 

B. Revenue Recognition Practices 

7. With limited exceptions, Orthofix recognized revenue during the relevant period based on 

the “sell-in” method, which provides for revenue recognition upon shipment of products 

to the distributor. 

8. ASC 605-10-25-1 provides that revenue may be recognized only when it is both realized 

or realizable and earned.  Consistent with the authoritative literature, Orthofix’s financial 

statements disclosed four criteria as its revenue recognition policy. 

9. The four criteria are: (i) persuasive evidence of an arrangement exists; (ii) delivery has 

occurred or services have been rendered; (iii) the seller’s price to the buyer is fixed and 

determinable; and (iv) collectability is reasonably assured. 

C. Hammel Improperly Recorded Revenue on Transactions with Brazilian Distributor 

 

a. Implants without Instruments Transactions 

10. OSI had several international distributors during the relevant period, but its largest 

distributor of product was located in Brazil (hereinafter “the Brazilian Distributor”).  In 

fact, for eight of the nine quarters from Q1 2011 to Q1 2013, the Brazilian Distributor 

was the Company’s second largest customer on a revenue per quarter basis. 

11. Entering 2011, Orthofix (and OSI) had a receivable of approximately $5 million from the 

Brazilian Distributor from prior sales.  The Brazilian Distributor forecasted that it would 

purchase approximately $8.5 million of Orthofix implants and instruments in FY 2011. 

12. Prior to this time, the Brazilian Distributor agreed to purchase implants along with 

instrument sets previously used in surgeries from Orthofix.  Implants and instruments 

were interconnected because the implants could not be used in patients without related 

instrument sets. 



 

5 
 

 

 

13. At this time, however, the Brazilian Distributor could no longer purchase previously used 

instrument sets because ANVISA (the Brazilian equivalent of the U.S. Food and Drug 

Administration) imposed new regulations prohibiting the importation of used instrument 

sets. 

14. Orthofix (and OSI) did not have the new instrument sets (105 in total) available to be 

shipped along with the implants it shipped to the Brazilian Distributor.  Rather than 

waiting until the new instrument sets were available, Orthofix – in FY 2011 – shipped 

approximately $5 million in implants to the Brazilian Distributor despite the fact that 

these implants could not be used in patients without the new instrument sets. 

15. Orthofix recognized the approximately $5 million revenue upon shipment of the above 

implants.  This recognition of revenue was improper as delivery of the interconnected 

product – the instruments – had not yet occurred.  As such, payment timing and terms 

were contingent upon the instrument sets being made available and therefore, revenue 

recognition was inconsistent with Orthofix’s accounting policy because it did not meet 

the fixed or determinable criteria or the collectability criteria. 

16. This improper recognition of revenue caused Orthofix’s financial statements to be 

materially misstated in its Forms 10-Q for the second and third quarters of FY 2011 and 

its year-end Form 10-K for FY 2011 and corresponding earnings releases. 

17. As of the summer of 2012, virtually none of the 105 instrument sets had been shipped to 

the Brazilian Distributor.  Thus, the Brazilian Distributor refused to pay for the implants 

because those implants that Orthofix had previously shipped to the Brazilian Distributor 

could not be used without the instrument sets. 

18. Hammel became aware subsequent to the shipment of the implants that the corresponding 

105 instrument sets had not been delivered, but did not take sufficient steps to evaluate 

the impact of the continued non-delivery of the instrument sets on the previously 

recognized revenue.   

19. In fact, as of August 2012 all of the corresponding instrument sets had still not been 

delivered and – at that time – Hammel knew that (i) the Brazilian Distributor had been 

provided extended payment terms to pay for the implants and (ii) the Brazilian 

Distributor could not sell the implants because Orthofix was delayed in sending the 

corresponding instrument sets. 

b. Firebird Transaction 

 

20. In late May 2012, the Spine President discussed a product launch plan with the Brazilian 

Distributor to purchase approximately $2.5 million of a new Orthofix product called 

Firebird.  This product, however, had not yet been approved by ANVISA and, therefore, 

could not be shipped into Brazil until such approval was obtained.   



 

6 
 

 

 

21. The Brazilian Distributor agreed to place the order on the following conditions: (i) one 

year to pay for the implants from the date of anticipated ANVISA approval; (ii) 210 days 

to pay on all subsequent product orders; and (iii) all corresponding instrument sets 

needed to be available once ANVISA approved the implants.  No one knew when 

ANVISA would grant approval. 

22. At this time, Spine had an unwritten policy that modifications to the terms in existing 

distributor agreements be approved by Hammel.  The Spine Sales VP and Spine President 

agreed to the Firebird order terms without approval from Hammel.   

23. Hammel learned of this transaction a few weeks after the product had been shipped to the 

warehouse but before the company filed its third quarter FY 2012 financial results.  In 

particular – on July 24, 2012 – the Spine Sales VP forwarded Hammel an email 

describing the transaction along with a series of emails containing prior discussions 

between him and the Brazilian Distributor’s President.   

24. Hammel replied to the Spine Sales VP – “[Spine Sales VP], can you please address how 

we ended up with a full year to pay for the June order.  I have a hard time managing that 

with a lot of pressure to reduce our ballooning [Days Sales Outstanding].”  The Spine 

Sales VP replied, “we accepted this due to the need for that size of an order.” 

25. Despite the contingent nature of the sale and Hammel’s own concerns about how this 

transaction would impact the company’s Days Sales Outstanding, Hammel recognized 

over $2 million in revenue from this transaction immediately upon shipping the implants 

to the Brazilian Distributor’s warehouse located in the United States.   

26. The recognition of revenue here was improper because the Brazilian Distributor’s 

obligation to pay, and the payment terms themselves, were contingent upon ANVISA 

approval and, therefore, revenue recognition was inconsistent with Orthofix’s accounting 

policy because it did not meet the fixed or determinable criteria or the collectability 

criteria. 

c. Fall 2012 Implants Transaction 

 

27. Beginning in September 2012, the Spine Sales VP solicited the Brazilian Distributor to 

purchase approximately $1.5 million of Orthofix implants that had not yet been approved 

by ANVISA.  Thus – as with the summer 2012 sales transaction with the Brazilian 

Distributor – this product could not be shipped into Brazil until that approval occurred.   

28. The Brazilian Distributor indicated that it would agree to the purchase but only under the 

following two conditions: (i) the ability to renegotiate the payment terms if ANVISA 

approval did not occur by the end of 2012 (just three months away) and (ii) one year to 

pay for the product.   

29. The Spine Sales VP forwarded an email to Hammel concerning the transaction terms for 

his approval.  Hammel approved the transaction and recognized the revenue from this 



 

7 
 

 

 

transaction immediately upon shipping the implants to the Brazilian Distributor’s 

warehouse located in the United States. 

30. This revenue recognition was improper because the Brazilian Distributor’s obligation to 

pay, and the payment terms themselves, were contingent upon ANVISA approval and, 

therefore, revenue recognition was inconsistent with Orthofix’s accounting policy 

because it did not meet the fixed or determinable criteria or the collectability criteria. 

d. Hammel Did Not Reassess Revenue Recognition After Meeting with Brazilian 

Distributor  

31. In December 2012, Hammel learned from an email sent to him by the Spine Sales VP 

that the Brazilian Distributor’s President had in June 2012 informed the then-Spine 

President and Spine Sales VP that it would not pay $4 million of its amounts payable by 

the end of December 2012.  Rather, the Brazilian Distributor’s President informed the 

then Spine President and Spine Sales VP that it would only pay $1.6 million of its 

amounts payable by December 2012 and the remainder by February 2013. 

32. On December 1, 2012, Hammel forwarded the email to the New Spine President (who 

had previously served as the company’s Corporate CFO) and wrote: 

[The Brazilian Distributor’s President] says below they made a payment agreement 

with [the Spine President] . . . I have no idea what may have been promised.  I do 

know that I fought pricing and terms concessions, but those were ultimately given at 

some point despite my denials.  This was commonplace.  I was told that I was the 

decision maker on pricing and terms and then secretly overridden.  [The Spine Sales 

VP] did it all of the time – don’t know how much [the Spine President] was involved. 

33. On December 7, 2012, the Brazilian Distributor’s President travelled to the U.S. to meet 

with Hammel and the Spine Sales VP.  At that meeting, the Brazilian Distributor’s 

President provided a Power Point presentation with a detailed chronology of events on 

several sales transactions involving the Brazilian Distributor, including the implant-

without-instruments transactions, the June and September 2012 transactions, and the 

payment plan related issues. 

34. After this December 7 meeting, Hammel did not reassess the revenue that the company 

had previously recognized and disclosed in its financial statements with the Brazilian 

Distributor.  Moreover, Hammel did not forward or provide the Power Point presentation 

to Orthofix’s then Corporate CFO. 

35. As a result of this and other errors described previously and below, Orthofix materially 

misstated its financial results in its FY 2012 Form 10-K and corresponding earnings 

release. 

 



 

8 
 

 

 

D. Hammel Improperly Recognized Revenue with Italian and Spanish Distributors  

 

36. In addition to the Brazilian Distributor, OSI had relationships with other international 

distributors including in Italy and Spain. 

37. During his tenure as Spine’s CFO, Hammel became aware of extended payment terms 

being granted to OSI’s Italian and Spanish distributors as a result of those distributors 

experiencing financial difficulties.  Hammel did not, however, evaluate the impact of 

these facts on Orthofix’s revenue recognition. 

38. For example, in early December 2011, the Spine Sales VP emailed the Italian Distributor 

and solicited it to make a $400,000 order.  The Italian Distributor’s President responded 

that it could make the order if they had extended payment terms of 180 days and the 

ability “in case of cash difficulties” to extend those payment terms.   

39. Hammel was copied on these email exchanges and – despite the specifically identified 

financial difficulties in Italy – recognized the revenue associated with this order upon 

shipment.  This revenue recognition was improper because payment terms were 

contingent upon timing of the Italian Distributor’s sell-through and payment receipt of 

the products and, therefore, revenue recognition was inconsistent with Orthofix’s 

accounting policy because it did not meet the fixed or determinable or collectability 

criteria.   

40. Similarly, in early December 2011, the Spine Sales VP solicited the Spanish distributor to 

make a $300,000 order.  The Spanish Distributor noted the difficult conditions in the 

Spanish economy at the time.  The Spine Sales VP responded that “based on the expected 

challenges in Europe due to the instability of the financial institutions,” he could offer 

extended payment terms of 180 days for instruments and 150 days for implants. 

41. In late December 2011, the Spine Sales VP forwarded the email exchange to Hammel for 

his approval of the extended payment terms.  Hammel provided this approval and 

recognized the revenue from this transaction upon shipment of the products.  This 

revenue recognition was improper because it did not meet the fixed or determinable or 

collectability criteria. 

E. Hammel Incorrectly Accounted for Certain Spinal Stimulation Product Transactions 

42. Beginning in the first quarter of FY 2012, the Spine President began exploring 

opportunities to generate more revenue in the domestic spine market by selling spine 

stimulation products directly to wholesale distributors who would then resell them to 

doctors and hospitals.  Prior to this time, Orthofix sold these products directly to doctors 

and hospitals.   

43. At this time, the wholesale market for these products was dominated by an Orthofix 

competitor.  To draw market share away from this competitor, the Spine President and 

Hammel determined to sell Orthofix spinal stimulation products at deeply discounted 



 

9 
 

 

 

prices-per-unit to the wholesalers, and pay a referral fee to the wholesaler that was 

termed a “commission.”  

44. Hammel accounted for these commissions as expenses rather than as reductions to 

revenue.  This accounting treatment was improper because where the vendor does not 

receive an identifiable benefit for the commissions, sales discounts such as these are 

presumed to be a reduction in the seller’s price pursuant to ASC 605-50-45-2.  Thus, 

these commissions should have been treated as further price discounts and as a reduction 

in revenue. 

45. Due to this improper accounting, Orthofix overstated its revenue by approximately $1.4 

million in the third quarter of FY 2012, and a total of approximately $1.7 million in FY 

2012. 

46. Moreover, Hammel was aware of two spinal stimulation transactions in which the 

purchasers were granted rights to exchange the products for cervical stimulation products.   

47. Because Orthofix could not and did not reasonably estimate the revenue recognition 

impact of the amount of future returns, Orthofix was precluded from recognizing revenue 

upon shipment in the above transactions pursuant to ASC 605-15-25-1(f).  As a result, 

Orthofix overstated its revenue by over $650,000 in the third quarter of FY 2012. 

F. Hammel Made an Inaccurate Representation to Orthofix’s Independent Auditors 

48. As of the company’s fiscal year 2012 audit – and as described by the conduct above – 

Hammel was aware that the company had entered into transactions with extended 

payment terms and that the company had made certain oral agreements such as the fact 

that the Brazilian Distributor’s payment for certain products was contingent on ANVISA 

approval.   

49. Nevertheless, Hammel – in connection with an audit of the company’s FY 2012 financial 

statements – represented through a February 15, 2013 management representation letter4 

provided directly to the independent auditors that: 

a. All significant oral agreements were made available to the auditors; 

b. There were no orders with extended credit terms; and 

c. All sales terms (express or implied), including all rights of returns were disclosed. 

 

50. Hammel provided the misleading representation at the direction of a company officer or 

director, namely, the company’s then-Corporate CFO. 

                                                 

4
  Hammel signed the management representation letter after he resigned from the company. 



 

10 
 

 

 

G. Orthofix’s Restatement 

51. Orthofix materially misstated several of its annual and quarterly filings and 

corresponding earnings releases, failed to make and keep books and records which, in 

reasonable detail, accurately and fairly reflected the transactions and dispositions of the 

assets of the issuer, and failed to devise and maintain a system of internal accounting 

controls sufficient to provide reasonable assurance that transactions are recorded as 

necessary to permit the preparation of financial statements in conformity with generally 

accepted accounting principles.   

52. Accordingly – in late March 2014 – Orthofix restated its financial statements for the first 

quarter of fiscal year 2013, all quarterly and annual periods in fiscal years 2012 and 2011, 

and the annual period for fiscal year 2010 as a result of misconduct.  Orthofix also 

acknowledged certain material weaknesses in its internal controls over financial 

reporting. 

VIOLATIONS 

53. Securities Act Section 17(a)(2) prohibits any person from obtaining money or property in 

the offer or sale of securities by means of any untrue statement of a material fact or any 

omission to state a material fact necessary in order to make the statements made, in light 

of the circumstances under which they were made, not misleading. 

54. Securities Act Section 17(a)(3) prohibits any person from engaging in any transaction, 

practice, or course of business which operates or would operate as a fraud or deceit upon 

the purchaser in the offer or sale of securities. 

55. Exchange Act Section 13(a) and Rules 13a-1, 13a-11, and 13a-13 thereunder require 

issuers to file such periodic and other reports as the Commission may prescribe and in 

conformity with such rules as the Commission may promulgate.  Exchange Act Rules 

13a-1, 13a-11, and 13a-13 require the filing of annual, current, and quarterly reports, 

respectively.  Rule 12b-20 of the Exchange Act requires issuers to add such further 

material information, if any, as may be necessary to make the required statements, in the 

light of the circumstances under which they are made not misleading. 

56. Exchange Act Section 13(b)(2)(A) requires issuers to “make and keep books, records, 

and accounts, which, in reasonable detail, accurately and fairly reflect the transactions 

and dispositions of the assets of the issuer.”  Exchange Act Section 13(b)(2)(B) requires 

issuers to devise and maintain a system of internal accounting controls sufficient to 

provide reasonable assurances that transactions are recorded as necessary to permit the 

preparation of financial statements in conformity with generally accepted accounting 

principles. 

57. Exchange Act Rule 13b2-1 prohibits any person from, directly or indirectly, falsifying or 

causing to be falsified, any book, record, or account subject to Exchange Act Section 

13(b)(2)(A). 



 

11 
 

 

 

58. Exchange Act Rule 13b2-2(b) prohibits any officer or director of an issuer or any other 

person acting under the direction thereof from directly or indirectly taking any action to 

mislead an accountant engaged in the performance of an audit if that person knew or 

should have known that such action, if successful, could result in rendering the issuer’s 

financial statements materially misleading. 

59. As a result of the conduct described above, Hammel was a cause of Orthofix’s violations 

of Securities Act Sections 17(a)(2) and 17(a)(3) and Exchange Act Sections 13(a), 

13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder.  

Hammel also willfully5 violated Exchange Act Rules 13b2-1 and 13b2-2(b). 

IV. 

In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent’s Offer. 

Accordingly, pursuant to Section 8A of the Securities Act, Sections 4C and 21C of the 

Exchange Act, and Rule 102(e)(1(iii) of the Commission’s Rules of Practice, it is hereby 

ORDERED, effectively immediately, that:  

A. Hammel shall cease and desist from committing or causing any violations and any future 

violations of Securities Act Section 17(a)(2) and 17(a)(3) and Exchange Act Sections 

13(a), 13(b)(2)(A), 13(b)(2)(B), and Rules 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, and 

13b2-2(b) thereunder.  

B. Hammel is denied the privilege of appearing or practicing before the Commission as an 

accountant. 

C. After two years from the date of this order, Respondent may request that the Commission 

consider his reinstatement by submitting an application (attention: Office of the Chief 

Accountant) to resume appearing or practicing before the Commission as:      

       1. a preparer or reviewer, or a person responsible for the preparation or 

review, of any public company’s financial statements that are filed with 

the Commission.  Such an application must satisfy the Commission that 

Respondent’s work in his/her practice before the Commission will be 

reviewed either by the independent audit committee of the public company 

                                                 

5
  A willful violation of the securities laws means merely “that the person charged with the duty knows what 

he is doing.”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 

(D.C. Cir. 1949)). There is no requirement that the actor “also be aware that he is violating one of the Rules or 

Acts.” Id. (quoting Gearhart & Otis, Inc. v. SEC, 348 F.2d 798, 803 (D.C. Cir. 1965)). 

 



 

12 
 

 

 

for which he/she works or in some other acceptable manner, as long as 

he/she practices before the Commission in this capacity; and/or 

  2.    an independent accountant.  Such an application must satisfy the 

Commission that:      

           (a) Respondent, or the public accounting firm with which he/she is 

associated, is registered with the Public Company Accounting 

Oversight Board (“Board”) in accordance with the Sarbanes-Oxley 

Act of 2002, and such registration continues to be effective; 

   (b) Respondent, or the registered public accounting firm with which 

he/she is associated, has been inspected by the Board and that 

inspection did not identify any criticisms of or potential defects in 

the respondent’s or the firm’s quality control system that would 

indicate that the respondent will not receive appropriate 

supervision;  

   (c) Respondent has resolved all disciplinary issues with the Board, and 

has complied with all terms and conditions of any sanctions 

imposed by the Board (other than reinstatement by the 

Commission); and 

 

   (d) Respondent acknowledges his/her responsibility, as long as 

Respondent appears or practices before the Commission as an 

independent accountant, to comply with all requirements of the 

Commission and the Board, including, but not limited to, all 

requirements relating to registration, inspections, concurring 

partner reviews and quality control standards.  

D. The Commission will consider an application by Respondent to resume appearing or 

practicing before the Commission provided that his/her state CPA license is current and 

he/she has resolved all other disciplinary issues with the applicable state boards of 

accountancy.  However, if state licensure is dependent on reinstatement by the 

Commission, the Commission will consider an application on its other merits.  The 

Commission’s review may include consideration of, in addition to the matters referenced 

above, any other matters relating to Respondent’s character, integrity, professional 

conduct, or qualifications to appear or practice before the Commission. 

E. Within 30 days of the entry of this Order, Hammel shall pay a civil money penalty in the 

amount of $20,000 to the Securities and Exchange Commission.  If timely payment is not 

made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.  Payment must be 

made in one of the following three ways: 



 

13 
 

 

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request
6
; 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofin.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

Payments by check or money order must be accompanied by a cover letter identifying 

Jeffrey Hammel as a Respondent in these proceedings, and the file number of these proceedings; 

a copy of the cover letter and check or money order must be sent to Antonia Chion, Division of 

Enforcement, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-

5720. 

F. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair Fund 

is created for the penalties referenced in paragraph IV.E above.  This Fair Fund may be 

added to or combined with the fair fund established in In the Matter of Orthofix 

International, N.V., (AP File No. 3-17791; Release No. 10281, January 18, 2017) and/or 

may be added to or combined with fair funds established for the civil penalties paid by other 

Respondents for conduct arising in relation to the violative conduct at issue in this 

proceeding or the Orthofix proceeding, in order for the combined fair funds to be distributed 

to harmed investors affected by the same violative conduct.  Amounts ordered to be paid as 

civil money penalties pursuant to this Order shall be treated as penalties paid to the 

government for all purposes, including all tax purposes.  To preserve the deterrent effect 

of the civil penalty, Respondent agrees that in any Related Investor Action, it shall not 

argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action 

grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of 

a final order granting the Penalty Offset, notify the Commission’s counsel in this action 

and pay the amount of the Penalty Offset to the Securities and Exchange Commission.  

Such a payment shall not be deemed an additional civil penalty and shall not be deemed 

                                                 

6

  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 

threshold, respondents must make payments pursuant to option (2) or (3) above. 



 

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to change the amount of the civil penalty imposed in this proceeding.  For purposes of 

this paragraph, a “Related Investor Action” means a private damages action brought 

against Respondent by or on behalf of one or more investors based on substantially the 

same facts as alleged in the Order instituted by the Commission in this proceeding.  

G. It is further ordered that, solely for purposes of exceptions to discharge set forth in 

Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true 

and admitted by Respondent, and further, any debt for disgorgement, prejudgment 

interest, civil penalty or other amounts due by Respondent under this Order or any other 

judgment, order, consent order, decree or settlement agreement entered in connection 

with this proceeding, is a debt for the violation by Respondent of the federal securities 

laws or any regulation or order issued under such laws, as set forth in Section 523(a)(19) 

of the Bankruptcy Code, 11 U.S.C. §523(a)(19).  

By the Commission. 

   

  Brent J. Fields 

Secretary