AP article on SEXI case:
SEC sues another four in Systems of Excellence case; recovers $400,000
By Marcy Gordon, Associated Press, 2/15/2001 17:51
WASHINGTON (AP) Federal regulators are pressing on with their four-year pursuit of a complex stock manipulation scheme involving the defunct Systems of Excellence Inc., suing another four people on Thursday and recovering some $400,000 in settlements with three of them.
The Systems of Excellence case was the first in which the Securities and Exchange Commission alleged stock manipulation using the Internet. The company, which made video teleconferencing equipment, eventually entered bankruptcy liquidation proceedings. Its offices were in McLean, Va., and Coral Gables, Fla.
The SEC has recovered nearly $15 million from defendants over the four years of its investigation.
On Jan. 30 the SEC sued 10 people, including the only person to go to prison for an Iran-Contra conviction and a former secretary of state of Rhode Island, for their alleged roles in the scheme.
The SEC alleged in its new civil lawsuit that the four the company's corporate secretary, an accountant, a medical doctor and a retired investor made $1.7 million in profits in 1996 by unlawfully selling Systems of Excellence shares ''into an artificially inflated market that was being manipulated by others.''
The suit, filed in federal court in Washington, also charged three of the defendants with insider trading, saying they knew significant information about Systems of Excellence that hadn't been made public at the time they sold the shares. They are former corporate secretary Maria Iacovelli, 35, of San Diego; Richard Morrisey, 50, of Marietta, Ga., who allegedly did accounting work for the company in exchange for shares; and Dr. Jerry Thornthwaite, 51, of Henderson, Tenn., who is said to have provided marketing services in exchange for shares.
The fourth defendant, Marvin Kogod, 72, of Boca Raton, Fla., was named only for alleged unlawful sales of company shares.
In agreeing to settlements, Iacovelli, Thornthwaite and Kogod neither admitted to nor denied the SEC's allegations. The SEC determined that Iacovelli and Thornthwaite were unable to pay fully the restitution and civil fines the agency was seeking and therefore waived the bulk of them.
Under the agreements, Iacovelli, Thornthwaite and Kogod are paying $45,000, $83,500 and $283,372 in restitution, respectively. The three also agreed to refrain from future violations of federal securities laws.
The case against Morrisey is still pending.
Attorneys for Kogod and Morrisey didn't immediately return telephone calls seeking comment.
Thornthwaite's attorney, Mario Delgado, and Iacovelli's lawyer, Erik Kitchen, declined comment.
The SEC has said that in the Systems of Excellence scheme, the head of the company manipulated the market for its stock by issuing false, favorable press releases about the company, then selling his shares into an inflated market. The agency also has accused the publisher of an Internet stock newsletter of writing about the company on nearly 100 occasions, almost always in a highly promotional tone, to pump up the stock price.
People who received Systems of Excellence stock allegedly began selling the shares as the price rose due to investor interest sparked by the promotions.
The company's former chairman, Charles O. Huttoe, pleaded guilty in 1996 to criminal charges of violating securities laws and engaging in money laundering, and he received a 46-month prison sentence.
On the Net:
Securities and Exchange Commission: sec.gov
boston.com |
