Here's the Washington Post article:
SEC Sues McLean-Based
Systems of Excellence
$10 Million Suit Alleges Company,
Former Chairman and Others
Manipulated Stock
By Jerry Knight
Washington Post Staff Writer
Friday, November 8 1996; Page C11
The Washington Post
The Securities and Exchange Commission yesterday filed a $10
million civil lawsuit alleging securities fraud against Systems of
Excellence Inc. of McLean, its former chairman Charles O.
Huttoe and several of his relatives and business associates.
The complaint contends that "a massive and ongoing market
manipulation [was] orchestrated by Huttoe" who, the SEC alleges,
issued false press releases to run up the price of the company's
stock, filed false reports with the SEC and "bribed" a stock
market newsletter to recommend that investors buy the company's
shares.
The lawsuit filed in U.S. District Court in Washington alleged that
after driving up the price of the stock last summer, Huttoe issued
millions of shares of unregistered securities to family members and
associates, who made more than $10 million "by dumping their
own Systems of Excellence stock on unwitting investors."
John Fedders, a Washington attorney who represents Huttoe and
his relatives, said yesterday they had just received the suit and
were studying it. "Mistakes have been made and Mr. Huttoe is
attempting to resolve the difficulties," Fedders said.
After a court hearing yesterday, U.S. District Judge Gladys
Kessler said she would grant a request by the SEC to freeze the
assets and bank accounts of Huttoe and several other defendants
in the case, and require them to give the SEC an accounting of
their financial transactions. She also granted an SEC request to
require Huttoe to give up his passport.
In the lawsuit, the SEC asked the court to order Huttoe and
others named in the case to repay investors the $10 million that the
SEC said was earned by manipulating the price of the stock.
Cynthia Gramer, who has handled public relations for Systems of
Excellence, did not return a phone call yesterday seeking comment
on the SEC lawsuit. Huttoe relinquished his post as chairman of
the firm on Oct. 30, and turned control over to its president,
Kenneth Walther, who is not a defendant in the case. Calls to the
firm's office were not returned.
Systems of Excellence shares are traded under the symbol SEXI
on the "pink sheets," a service that handles stocks of companies
too small to qualify for listing on the Nasdaq Stock Market. The
shares sold for as much as $4.625 a share in June, and were
quoted yesterday afternoon at 17 cents a share.
The stock is widely followed on computer bulletin boards for
investors and has been heavily traded, with more than 3.9 million
shares changing hands one day, a securities researcher familiar
with the company said.
Formerly based in Coral Gables, Fla., Systems of Excellence
moved its headquarters to McLean about a month ago after
acquiring two Washington companies, ICMX Federal Systems
Inc. of Fairfax, a video teleconferencing company, and Lazer Tek
Designs of Alexandria, which makes glass sculptures.
Before its name change last April, the company was called
Software of Excellence and was in the business of selling
computer software to dentists, according to Bloomberg Business
News service.
The SEC suspended trading in the company's stock on Oct. 7,
after the company's auditors discovered the firm had issued 36.5
million shares of stock between February and August without
registering the shares with the SEC, as required by federal
securities laws. At the time, the company's financial reports
showed it had about 10 million shares outstanding.
The SEC complaint alleges that Huttoe gave unregistered shares
to his wife, his mother, his niece and business associates and
companies he controlled. Unregistered stock cannot be traded.
The SEC complaint alleges Huttoe created phony registration
statements for the shares and gave them to the company that
processes sales of SEXI shares, making it appear the shares were
eligible for trading.
According to the SEC lawsuit, Huttoe issued unregistered stock to
the owners of SGA Goldstar Research Inc., a Nashville
newsletter, and "bribed SGA with stock to recommend Systems
of Excellence to subscribers."
SGA and its two principals, Theodore R. Melcher Jr. and
Shannon B. Terry, were named as co-defendants in the securities
fraud lawsuit. Melcher and Terry did not return phone calls
yesterday asking for comment on the case.
c Copyright 1996 The Washington Post Company
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