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In October 1995, Veitia and Skalko executed an agreement on behalf of CRG to perform public relations work for Vector Aeromotive Corporation ("Vector"), a Nevada corporation based in Jacksonville, Florida, whose securities were registered with the Commission pursuant to Section 12(g) of the Exchange Act and were traded on the NASDAQ Small Cap Market. The contract called for Vector to compensate CRG with either $175,000 or 350,000 shares of stock. Vector in fact paid CRG $30,000 and gave CRG 290,000 shares of stock in March and, upon information and belief, another 350,000 shares in April 1996. From March through May 1996, CRG sold all of its Vector stock for over $410,000. All of CRG's Vector trading was in a new brokerage account Veitia opened at Spencer Edwards in which Skalko had trading authority.
CRG promoted Vector from December 1995 through July 1996. A long article was reprinted in the December 1995 and January and March 1996 editions of MoneyWorld. The January issue was introduced by a "Publisher's Note" from Veitia commenting that "the young pups we look at in this issue are all driven with the relentless passion to succeed. They share a rare entrepreneurial spirit that gives them a competitive edge in their markets. . . Vector Aeromotive . . . is ready to take the fast lane with the debut of its American-built M12 sports car." The thrice-printed article contended that "Vector is now positioned to carve its niche in the lucrative high-end auto market" and that "... Vector is certain to draw the attention of the press and Wall Street, and a spurt in trading activity -- one that could lead to rapid share appreciation -- is possible."
The statements in CRG's publications touting Vector were materially false and misleading because CRG failed adequately to disclose that it was being paid to promote Vector stock, the amount of compensation, that it was selling Vector stock while promoting it as a good investment to readers and that it was paying CRG employees commissions to promote Vector stock to brokers.
By virtue of the conduct described above, defendants CRG, Veitia, Spratt and Skalko violated Sections 17(a) and 17(b) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and defendants Stratcomm and Veitia are liable for violations by CRG as controlling persons of CRG pursuant to Section 20(a) of the Exchange Act.
STRATCOMM MEDIA LTD filed this 10SB12G on 03/09/2000.
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