The SEC announced today that it has brought securities fraud charges against two former senior officers of Rent-Way, Inc. ("Rent-Way" or the "Company"), one of the largest rent-to-own companies in the United States, in connection with a scheme that caused Rent-Way to under-report expenses and substantially inflate reported earnings in 1999 and 2000. In addition, the Complaint charges Rent-Way with corporate reporting and record keeping violations and charges another former employee with record keeping violations. The Commission further announced that, simultaneously with the filing of the Complaint, it settled the charges against three of the defendants and partially settled the charges against the fourth defendant.

The Complaint alleges that, during fiscal 1999 and 2000, Rent-Way under-reported a variety of expenses by approximately $60 million. Each of Rent-Way's Forms 10-Q and Form 10-K filed in fiscal 1999 and 2000 overstated pre-tax earnings or understated pre-tax loss by between 12%-448%. In addition, approximately $35 million in fraudulent entries made to Rent-Way's books and records in the fourth quarter of fiscal 2000 were discovered prior to any public dissemination of the Company's financial results for that quarter. Jeffrey Conway ("Conway"), Rent-Way's former president, CFO, COO and a director, and Matthew Marini ("Marini"), Rent-Way's former controller and chief accounting officer, directed the fraudulent scheme. Conway directed Marini to meet periodic earnings forecasts that Conway set, and Marini directed lower level employees to make fraudulent entries to Rent-Way's books and records. Conway also directed Jeffrey Underwood ("Underwood"), Rent-Way's former senior vice president in charge of operations, to defer the recording of certain operating expenses at the end of fiscal 1999 and 2000. The effect was to inflate falsely and substantially the Company's financial results.

The defendants are as follows:

Rent-Way is a Pennsylvania corporation with its principal executive offices in Erie, Pennsylvania. Its common stock is listed on the New York Stock Exchange.

Conway, age 45, was the chief financial officer of Rent-Way from February 1992 through September 1999 and president and chief operating officer of Rent-Way from September 1999 until he resigned in December 2000. Conway also served as a director from February 2000 until he resigned in December 2000. Conway is a certified public accountant.

Marini, age 38, was the controller of Rent-Way from October 1995 to December 1999 and the chief accounting officer from December 1999 until he was terminated in October 2000.

Underwood, age 46, was the senior vice president in charge of operations overseeing all of Rent-Way's operations from September 1999 to July 2002.

The Complaint alleges as follows:

Beginning in December 1998, Conway directed Marini to do whatever was necessary to ensure that the Company met its earnings guidance but not to tell Conway how he was meeting the earnings guidance so that Conway could maintain "plausible deniability" (i.e., the ability to deny direct knowledge of the misconduct). Beginning in December 1999, Marini told Conway the details of his fraudulent conduct and continued to discuss with Conway details of his ongoing efforts to meet the Company's earnings guidance. Conway condoned and encouraged Marini's actions.

Marini systematically understated Rent-Way's operating expenses across many corporate-level accounts and also inflated the Company's miscellaneous and other income accounts. Marini accomplished this by directing lower level accounting employees to make unsupported and false entries to the Company's corporate general ledger.

Conway also directed Underwood to defer improperly the recording of certain rental merchandise related losses at the end of fiscal 1999 and 2000 for the sole purpose of meeting the Company's earnings targets.

When the fraudulent scheme began to unravel in October 2000, Conway and Marini took overt steps to conceal the manipulation from the auditors and from other officers of the Company. For example, in order to bring a store-level rental merchandise account into balance with the corporate level general ledger that had been manipulated, Marini directed an employee to add back to the store-level point of sale system approximately $16 million in rental merchandise losses that had been written off in an earlier quarter. When the employee refused, Conway directed the employee to follow Marini's instructions. Conway also directed another employee to misrepresent to the CFO the true nature of the discrepancy in the accounts, and Conway and Marini later concocted a false explanation of the problem in order to prevent any further investigation by the CFO.

The Complaint further alleges that in May 2000, Conway engaged in illegal insider trading by selling 6,500 shares of Rent-Way stock at a time when he had nonpublic information about the true financial condition of the Company and the fraudulent scheme.

The Commission alleges that, as a result of the foregoing, Rent-Way violated Sections 13(a) and 13(b)(2) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 12b-20, 13a-1 and 13a-13 promulgated thereunder; Conway and Marini violated Sections 10(b) and 13b-5 of the Exchange Act and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, and are also liable as control persons of Rent-Way under Section 20(a) of the Exchange Act for Rent-Way's violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13; and that Underwood violated Section 13(b)(5) of the Exchange Act and Rule 13b2-1.

The Commission seeks a Final Judgment (i) permanently enjoining each defendant from future violations of the securities laws; (ii) ordering Conway to pay disgorgement plus prejudgment interest; (iii) imposing civil penalties against Conway, Marini and Underwood; and (iv) barring Conway and Marini from serving as an officer or director of a public company.

The Company has consented to the entry of a final judgment that permanently enjoins the Company from further violations of the reporting and books and records provisions of the federal securities law. In determining to accept Rent-Way's settlement offer, the Commission considered that Rent-Way undertook remedial actions and cooperated with Commission staff.

Defendant Conway has consented to the entry of a final judgment that permanently enjoins him from further violations of the antifraud, reporting and books and records provisions of the federal securities laws; permanently bars him from serving as an officer or a director of a public company; and orders him to pay $129,350 in disgorgement of the loss he avoided on his sale of Rent-Way stock plus $30,067 in prejudgment interest, and a $200,000 civil penalty.

Defendant Marini has consented to the entry of a judgment that permanently enjoins him from further violations of the antifraud, reporting and books and records provisions of the federal securities laws, and that permanently bars him from serving as an officer or a director of a public company. The amount of any civil penalty that Marini must pay is left open to a later determination.

Defendant Underwood has consented to the entry of a final judgment that permanently enjoins him from further violations of the books and records provisions of the federal securities laws and orders him to pay a civil penalty in the amount of $25,000.

The offers of settlement by the defendants will be submitted to the Court for its approval.

The Commission thanks the United States Attorney for the Western District of Pennsylvania and the Federal Bureau of Investigation for their assistance to its investigation. In a separate action, Conway, Marini and Underwood each pleaded guilty to a criminal information for their respective roles in the fraudulent scheme.