More details on the scam->SECURITIES AND EXCHANGE COMMISSION CHARGES 13 INDIVIDUALS AND DALLAS BROKER-
DEALER WITH SCHEME TO MANIPULATE STOCK OF FREEDOM SURF, INC.
On September 30, 2002, the Commission filed a civil injunctive action in
the United States District Court for the District of Utah alleging a
scheme, from July 2000 through November 2000, to manipulate the public
trading market for stock issued by Freedom Surf, Inc., a Nevada
corporation then headquartered in Huntington Beach, California. The
complaint alleges that Mervyn A. Phelan, Sr. of Laguna Beach,
California, currently Chairman and CEO of Senior Care Industries, now
known as U.S. West Homes, located in Laguna Beach, California, along
with co-defendants Bo Phelan and Craig Brown, sent 345,000 shares of
Freedom Surf stock at no cost to Allen Z. Wolfson, a resident of Salt
Lake City, who is currently under indictment for unrelated criminal
conspiracy and securities fraud charges. The SEC's simultaneous
administrative action, which is stayed pending the outcome of the
criminal trial, alleges that Wolfson controlled a substantial portion of
the free-trading securities for five public companies; caused trades to
be executed to give the appearance of demand for the stock; and paid
bribes to brokers for causing their retail customers to purchase the
securities. See In the Matter of Allen Z. Wolfson, et al., Securities
Exchange Act Release No. 42940, June 14, 2000.
The current complaint further alleges that Wolfson directed brokers
Kevin Kirkpatrick of Salt Lake City and Robert Pozner of Hackensack, New
Jersey, to artificially bid up the price of Freedom Surf stock from $5
to $40 in approximately two months. Wolfson and his son David Wolfson
also directed Kirkpatrick to effect manipulative trades between Wolfson-
controlled accounts in the U.S., and accounts in Canada controlled by
Wolfson associate and co-defendant John Chapman. The complaint further
alleges that on October 24, 2000, when the stock price was at or near
its height, and pursuant to a pre-existing arrangement with defendants
Angelo Paul Koupas and Kyle Rowe, principals of defendant Salomon Grey,
a Dallas broker-dealer, Wolfson sold 25,000 Freedom Surf shares Salomon
Grey at a 50% discount from the current "market price," or for $6.125
per share. Salomon Grey sold over 27,000 shares of Freedom Surf to
retail customer accounts, including over 17,000 shares at excessive
markups of over 100 percent.
In the complaint, the Commission seeks injunctions against all
defendants, and alleges, against various defendants, violations of
Sections 5(a) and (c), and 17(a) of the Securities Act of 1933 and
Sections 10(b) and 15 (c)(1) of the Securities Exchange Act of 1934 and
Rules 10b-5 and 15c1-2 thereunder. The Commission also seeks to order
an accounting, disgorgement of ill-gotten gains, prejudgment interest,
civil money penalties, and, against certain defendants, officer and
director and penny stock bars. [SEC v. Allen Z. Wolfson, et al., Civil
Action No. 2:02CV-1086 TC, USDC D. Utah] (LR-17755) |
