Harold F. Harris, the former executive vice president and director of U.N. Dollars Corporation ("UNDR"), an issuer of unregistered penny stock, and Ronald E. Crews, UNDR’s former chairman, chief executive officer, and president, appeal from the June 1, 2005 decision of an administrative law judge. The law judge found that Harris and Crews had been permanently enjoined from violating the antifraud and securities registration provisions of the federal securities laws.1/
The law judge barred Harris and Crews from participating in any penny stock offering. To the extent we make findings, we base them on an independent review of the record, except with respect to those findings not challenged on appeal.
II.
Background. On October 11, 2001, the Commission filed a civil injunctive action in the Southern District of New York charging Harris, Crews, UNDR, and others with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, 2/ Section 10(b) of the Securities Exchange Act of 1934, 3/ and Rule 10b-5 thereunder. 4/ The Commission's complaint alleged that, during 1999 and 2000, the defendants illegally sold unregistered UNDR shares and engaged in a fraudulent scheme to manipulate the market for UNDR securities in order to inflate artificially the price of the stock.
The District Court rejected the first defense because the statutory safe harbor does not apply to Commission enforcement actions, or to penny stocks, .
sec.gov
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 53122 A/ January 13, 2006
Admin. Proc. File No. 3-11573
sec.gov
The District Court rejected the first defense because the statutory safe harbor does not. apply to Commission enforcement actions, or to penny stocks, ...
[...]
Respondents' characterization of these statements as protected, forward-looking statements under the statutory safe harbor provisions of the Securities Act and the Exchange Act is inapposite since issuers of penny stock are specifically excluded from the safe harbor protection of those provisions. 24/ Also, the safe harbor protects a speaker fromliability for forward-looking statements only in private actions, not in enforcement actions brought by the Commission.
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