From yesterday's SEC Digest:
SEC SUES FOUR MASSACHUSETTS RESIDENTS FOR UNLAWFUL RESALE OF UNREGISTERED SECURITIES; SEEKS TO RECOVER $7.5 MILLION FOR VICTIMS OF SYSTEMS OF EXCELLENCE FRAUD
The Commission announced that on November 17, 2000 it filed a complaint in the United States District Court for the District of Massachusetts alleging that four Massachusetts residents -- Brian Jackson (Jackson), Jeremiah Hegarty (Mr. Hegarty), Lauri Hegarty (Ms. Hegarty) and Michael Bosse (Bosse) -- resold unregistered shares of Systems of Excellence, Inc. (SOE). The complaint alleges that, collectively, Defendants reaped ill-gotten gains (i.e., net trading profits) in excess of $7.5 million when they resold unregistered SOE securities into an artificially inflated market that was being manipulated by others.
The Commission's complaint alleges that in multiple transactions from February through August 1996, Jackson, Ms. Hegarty and Bosse acquired a total of 4,925,499 newly-issued unregistered shares of SOE common stock in a series of so-called private placements. Without exception, shares acquired in these private transactions with SOE were neither registered, nor exempt from registration. The distribution of unregistered shares was part of a massive fraud perpetrated by SOE, its chairman Charles O. Huttoe (Huttoe) and others. Monies raised through Defendants' private purchases of unregistered securities provided SOE with needed cash and allowed Huttoe and others to carry on the operations of SOE and to further manipulate the market for SOE stock.
Because none of the shares acquired in these various transactions were registered or exempt from registration, Defendants violated the strict liability registration provisions of the federal securities laws when they resold their shares or, in the case of Mr. Hegarty, when he directed the resale of shares held by others. In its complaint, the Commission seeks a permanent injunction against future violations of Sections 5(a) and 5(c) of the Securities Act of 1933, disgorgement with prejudgment interest, and a civil penalty against each Defendant. [SEC v. Brian Jackson, Jeremiah Hegarty, Lauri Hegarty and Michael Bosse, Civil Action No. 00-12388-PBS, D. Mass.] (LR-16804)
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