The complaint...
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
WACO DIVISION
)
SECURITIES AND EXCHANGE COMMISSION, )
) CASE NO.
Plaintiff, )
)
v. )
)
GREAT WHITE MARINE AND RECREATION, INC., )
and A. COLIN SMITH, )
)
Defendants, )
)
KENNETH URSREY, )
)
Relief-Defendant. )
)
COMPLAINT
Plaintiff Securities and Exchange Commission (“Commission”), for its claims against the defendants and relief-defendant, alleges and states:
SUMMARY
1. The Commission brings this action to immediately halt an ongoing fraudulent distribution of the unregistered securities of Great White Marine and Recreation, Inc. (“Great White”), a Nevada corporation with its principal office in Waco, Texas, by the company and A. Colin Smith (“Smith”), its president, chief executive officer and chairman of its board of directors, and to secure funds and assets held by these defendants and the relief-defendant for the benefit of their victims.
2. Great White is engaged in the business of brokering sales and selling water craft, ranging in size from personal water craft to oceangoing yachts, all-terrain vehicles, and motors, parts and accessories for this mechanized recreational equipment. While the company offices in Waco, Texas, nearly all of its sales operations are conducted in Mexico. Great White's shares have never been registered with the Commission under the Securities Act of 1933, but are traded in the over-the-counter (“OTC”) market by Commission-registered broker-dealers, and quoted by means of the National Association of Securities Dealers Automatic Quotations System (“NASDAQ”) OTC Bulletin Board. The company recently filed a Form 10-SB registration statement with the Commission, registering securities under the Securities Exchange Act of 1934, which, though rife with falsehoods and misrepresentations, could form the basis for listing its shares for trading on the NASDAQ “electronic exchange” or a Commission-registered exchange.
3. Commencing in January 1998, and continuing to the present day, Smith orchestrated a scheme to improperly sell unregistered shares of Great White into the OTC market directly through secret nominee brokerage accounts, including accounts maintained for Smith's son-in-law, Kenneth Ursrey (“K.Ursrey”), and through putative private transactions with parties that he knew, or should reasonably have known, would distribute such shares into the OTC market. During this same period, Great White and Smith, directly and through a network of investor services providers, publicly made false, misleading and incomplete statements of material fact in press releases, promotional brochures, postings to Great White's Internet website, and in the Form 10-SB filed with the Commission. These fraudulent statements concern, among other things, Great White's financial condition, business prospects, and share ownership, and have been used by the defendants to encourage and induce numerous victims to purchase the company's shares through Commission-registered broker-dealers in the public OTC market.
4. Great White and Smith raised at least $10.8 million from January 1998 to the present day through the fraudulent distribution of unregistered securities described herein. Smith has, directly, and by diversions of the unlawful proceeds of this illegal distribution through family members and others, converted at least $3.5 million of this sum to his own uses, and has also used at least $1 million of this sum to make a fraudulent “dividend” payment to shareholders, in a blatant “Ponzi” payment.
5. The Commission seeks immediate, preliminary and permanent injunctive relief to halt Great White and Smith's fraudulent distribution of unregistered securities; an immediate asset freeze, to prevent Great White, Smith, K.Ursrey, and others from further wasting investors funds; the appointment of a receiver pendente lite to marshal and safeguard Great White's assets for the benefit of its shareholders; and a repatriation order requiring Great White, at the discretion of the receiver pendente lite, and Smith to return all their assets to the jurisdiction of this Court. Additionally, the Commission seeks other equitable relief, specifically, an accounting and disgorgement of ill-gotten gains with prejudgment interest, and statutory civil penalties.
JURISDICTION AND VENUE
6. This Court has jurisdiction over this action pursuant to Section 20(d) and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77t(d) and § 77v(a)], Sections 21(d), 21(e) and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d), 77u(e) and 78aa]. The defendants' violations of the federal securities laws were effected through use of the means and instrumentalities of interstate transportation and communication, and the U.S. Mail, and Great White has filed a Form 10-SB with the Commission. Venue is appropriate pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77t(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa]. All of the defendants' violations of the Securities Act and the Exchange Act involve contracts or agreements with, or transactions in the securities of, Great White, which maintains its principal office in Waco, Texas. Smith and K.Ursrey both maintain their residences in Waco, Texas.
7. The common stock of Great White constitutes a “security,” as that term is defined in Section 2(a)(1) of the Securities Act, and Section 3(a)(10) of the Exchange Act. Great White's shares have been quoted on the NASDAQ OTC Bulletin Board since January 9, 1998, and currently are quoted in that medium. The company's stock is, and has been, traded between and among numerous Commission-registered broker-dealers throughout the United States in the OTC market, and distributed through these broker-dealers to the public.
DEFENDANTS
8. Great White is a Nevada corporation, with its principal offices in Waco, Texas, and purports to be an international distributor of marine watercraft and recreational vehicles, and related products.
9. Smith, age 57, is a resident of Waco, Texas, and is the president, chief executive officer and chairman of the board of directors of Great White. Smith directs and controls Great White's business activities, including, specifically, those activities that have violated the federal securities laws as charged herein.
RELIEF-DEFENDANT
10. K. Ursrey, age 44, is Smith's son-in-law and is Great White's facility manager. K. Ursrey knowingly permitted Smith to open and control brokerage accounts in his name through which certain of the violative transactions described herein were conducted.
STATEMENT OF FACTS RELEVANT TO ALL COUNTS
GREAT WHITE'S BUSINESS AND FRAUDULENT DISCLOSURES TO THE PUBLIC
11. In October 1997, Smith effected a merger between a Texas corporation he controlled and Tigershark Enterprises, Inc., a Nevada “shell” corporation with no business or assets, but with purportedly publicly tradable shares. The Nevada corporation immediately appointed Smith to his various positions as an officer and director, and, in May 1998, changed its name to Great White; Smith has directed and controlled Tigershark's or Great White's business activities since the merger and his appointment as an officer and director.
12. Almost immediately, commencing in February 1998, Smith began issuing and disseminating press releases and promotional brochures, and, in April 1998, making postings to Great White's Internet website, both directly and through a network of investor relations providers. These promotional materials and postings falsely touted Great White's earnings; made misrepresentations concerning its business prospects, specifically, its contracts and distribution agreements with suppliers; and made false or misleading statements as to its issuance of shares and ownership thereof. |
