From today's SEC Digest:
SEC FILES FRAUD CASE AGAINST ITEX CORPORATION
On September 27, the Securities and Exchange Commission filed a civil fraud action in the United States District Court for the District of Oregon against Itex Corporation (Itex), Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris. The Commission's complaint alleges that Itex, a Portland-based barter exchange operator, materially inflated its revenues and earnings in financial statements filed with the Commission and in other disclosures made to investors through a series of suspect, and in many cases sham, barter deals between Itex and various offshore entities controlled by or related to Itex's founder, Terry Neal. The complaint also alleges that Neal, a control person of Itex, orchestrated these transactions and made profits of approximately $6.3 million from sales of Itex stock through a variety of primarily offshore accounts he controlled. Neal was assisted in the fraud scheme by various people who, at the time, were members of Itex management, specifically, Michael Baer, Graham Norris, Joseph Morris and Cynthia Pfaltzgraff.
The complaint alleges that the defendants violated the antifraud provisions of the federal securities laws, certain reporting, internal controls and record-keeping provisions. The complaint alleges that Itex and Neal violated the securities registration provisions of Section 5 of the Securities Act and that Neal violated Sections 13(d) and 16(a) of the Exchange Act of 1934, and Baer violated Section 13(d), by failing to make filings disclosing their beneficial interest and changes in their interest in the securities of Itex.
The Commission is seeking injunctive relief, civil penalties, disgorgement of Neal, Baer and Morris' ill-gotten gains, and officer and director bars against Neal, Baer and Morris. [SEC v. Itex Corporation, Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris, Civ. No. 99-1361, HA, D. Ore.] (LR-16305, AAE Rel. 1175)
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