sec.gov
2. SECURITIES AND EXCHANGE COMMISSION v. GEORGE BADGER, GOLF COMMUNITIES OF AMERICA, INC., f.k.a. GOLF VENTURES, INC., DUANE MARCHANT, STEPHEN SPENCER, KARL BADGER, MARION SHERRILL, HARMON S. HARDY, LA JOLLA CAPITAL CORPORATION, HAROLD B. GALLISON, JR., TERRY HUGHES, MARVIN SUSEMIHL, DAVID ROSENTHAL, ANDREW SEARS, and WILLIAM SLONE; United States District Court for the District of Utah; 2: 97 CV 963K
2. SEC v. Badger, et al.
The Commission's Complaint, filed in Salt Lake City, Utah, alleges as follows:
During the period from early 1993 through early 1996, defendant George Badger directed a scheme to manipulate the market for securities issued by defendant Golf Communities of America, Inc., f.k.a. Golf Ventures, Inc.(GVI) by bribing registered broker-dealers and some individual registered representatives to sell GVI stock to unsuspecting retail customers, and causing GVI to file false periodic reports with the Commission and to issue false press releases to the public. GVI is a Utah corporation primarily engaged in developing a golf course known as Red Hawk International Golf & Country Club (the Red Hawk Project).
Badger and his son, defendant Karl Badger, arranged to have bribes paid in the form of cash payments or free GVI securities to registered representatives and broker-dealers. In October 1993, GVI paid a $10,000 "consulting fee" to Burnett Grey & Co., at the time a registered broker- dealer, in exchange for Burnett Grey directing its brokers to sell GVI stock to its retail customers. That agreement was negotiated by Badger and defendant Marion Sherrill, the then-President of Burnett Grey. In December 1993, after Sherrill left Burnett Grey, defendant Harmon S. Hardy, the majority shareholder of Burnett Grey, agreed with Badger to continue to sell GVI stock to its retail customers. As additional compensation for Burnett Grey's selling efforts, Badger later arranged for a block of GVI shares to be transferred to Burnett Grey so that Burnett Grey could meet its "net capital" requirements and continue to operate as a broker-dealer.
During the period from October 1993 through February 1994, defendant Terry Hughes and other brokers employed by Burnett Grey caused their customers to purchase approximately 48,000 shares of GVI stock for approximately $340,000, pursuant to the agreement between GVI and Burnett Grey.
After Burnett Grey went out of business in early 1994, defendant Marvin Susemihl introduced Badger to defendant Harold Gallison, the President of defendant La Jolla Capital Financial Corp. (La Jolla Capital), a registered broker-dealer, where Susemihl was a registered representative. Susemihl and Gallison negotiated an arrangement whereby GVI paid La Jolla Capital approximately $35,000 as a phony "consulting fee" in exchange for La Jolla Capital directing its brokers to sell GVI stock to La Jolla Capital's retail customers. During the period from May 1994 through August 1994, La Jolla Capital representatives, including Hughes and Susemihl, arranged the purchase of approximately 63,000 shares of GVI stock at an aggregate price of approximately $498,000, pursuant to the agreement between GVI and La Jolla Capital.
Badger and Karl Badger paid bribes to defendants David Rosenthal, Andrew Sears, and William Slone, registered representatives associated with other broker-dealers, who sold GVI stock to their retail customers in exchange for the payments received from Badger and Karl Badger.
Finally, during 1995 and 1996, GVI failed to disclose in various public filings and announcements that Badger controlled GVI, making nearly all important decisions regarding GVI's business activities. In addition, GVI made material misstatements and omitted critical facts concerning its principal business -- the development of a residential golfing and recreational community, the Red Hawk Project, on undeveloped land in southwestern Utah. For example, in late October and early November 1996, GVI announced that Granite Construction Corp. (Granite) had "completed 85% of the mass dirt movement" associated with the Red Hawk Project, "should complete onsite sewer installation by Wednesday, Oct. 30," and that Granite had completed installation of certain sewer lines. In fact, Granite walked off the job in late October 1996, after completing less than 50% of its scheduled work, because GVI had run out of money to pay Granite.
Defendants Duane Marchant and Stephen Spencer served as GVI's President and Chief Financial Officer, respectively, at the time that GVI engaged in these false and misleading disclosures.
Based on the foregoing, the Commission alleges in its complaint that Badger, GVI, Marchant, Spencer, Karl Badger, Sherrill, Hardy, La Jolla Capital, Gallison, Susemihl, Hughes, Slone, Rosenthal, and Sears violated the general antifraud provisions of the federal securities laws. In addition to the relief the Commission is seeking in all these actions, in this particular action, the Commission seeks a permanent bar against Badger, Marchant, and Spencer from serving as an officer or director of any public company.
In April 1997, Badger pled guilty in the United States District Court for the Southern District of New York to a four-count information alleging: (i) conspiracy to commit securities fraud, wire fraud, money laundering and commercial bribery; (ii) securities fraud; (iii) criminal contempt; and (iv) perjury. |
