Pork Four...
77. By reason of the foregoing, defendants SGA Goldstar, Melcher,
Terry, Alpha Securities, and Dunbar Holdings, and each of them, directly or indirectly, have violated, are violating, and unless restrained will violate, Section 17(b) of the Securities Act [15 U.S.C. Section 77q(b)].
CLAIM FOUR
(FALSE AND MISLEADING FILINGS)
VIOLATIONS OF SECTIONS 10(B) AND 13(A)
OF THE EXCHANGE ACT [15 U.S.C. Section 78J(B) AND 78M(A)], AND
RULES 10B-5, 12B-20, 13A-1, 13A-11, AND 13A-13, THEREUNDER
[17 C.F.R. Sections 240.10B-5, 240.12B-20, 240.13A-1, 240.13A-11,AND 240.13A-13]
78. Paragraphs 1 through 71 are hereby realleged and incorporated by reference.
79. By reason of the foregoing, defendants SOE and Huttoe have violated, are violating, and unless restrained will violate Section 10(b) of the Exchange Act [15 U.S.C.
- 18 -
Section 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. Section 240.10b-5]; and SOE has violated, is violating, and unless restrained will violate Section 13(a) of the Exchange Act [15 U.S.C. Section 78m(a)], and Rules 12b-20, 13a-1, 13a-11, and 13a-13, thereunder [17 C.F.R. Sections 240.12b-20, 240.13a-1, 240.13a-11, and 240.13a-13].
CLAIM FIVE
(BOOKS, RECORDS, AND ACCOUNTS; MISREPRESENTATIONS TO AUDITORS)
VIOLATIONS OF SECTIONS 13(B)(2)(A), 13(B)(2)(B)
AND 13(B)(5) OF THE EXCHANGE ACT [15 U.S.C.
Sections 78M(B)(2)(A), 78M(B)(2)(B), AND 78M(B)(5)]
AND RULE 13B2-1 AND 13B2-2 THEREUNDER
[17 C.F.R. Section 240.13B2-1, 240.13B2-2]
80. Paragraphs 1 through 71 are hereby realleged and incorporated by reference.
81. By reason of the foregoing, defendant SOE has violated, is violating, and unless restrained will violate Section 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. Sections 78m(b)(2)(A) and 78m(b)(2)(B)]; and Huttoe has violated, is violating, and unless restrained will violate Section 13(b)(5) [15 U.S.C. Section 78m(b)(5)], and Rules 13b2-1 and 13b2-2, thereunder [17 C.F.R. Sections 240.13b2-1 and 240.13b2-2].
CLAIM SIX
(REPORTING CHANGES IN HOLDINGS)
VIOLATIONS OF SECTION 16(A)
OF THE EXCHANGE ACT [15 U.S.C. Sections 78P(A),
AND RULES 16A-2 AND 16A-3, THEREUNDER
[17 C.F.R. Sections 240.16A-2 AND 240.16A-3].
82. Paragraphs 1 through 71 are hereby realleged and incorporated by reference.
83. By reason of the foregoing, Huttoe has violated, is violating, and unles restrained will violate Section 16(a) of the Exchange Act [15 U.S.C. Sections
78p(a)], and Rules 16a-2 and 16a-3, thereunder [17 C.F.R. Sections 240.16a-2 and 240.16a-3].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court issue Orders:
I.
Permanently enjoining all defendants, and each of them, and their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice by personal service or otherwise, from violating, directly or indirectly, Sections 5(a) and 5(c) of the Securities Act of 1933 [15 U.S.C. Sections 77e(a) and 77e(c)].
II.
Permanently enjoining defendants Huttoe, Huttoe & Assoc., National Trading Services, Word Corp., SGA Goldstar, Melcher, Terry, Alpha Securities, Dunbar Holdings, and SOE, and each of them, and their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice by personal service or otherwise, from violating, directly or indirectly, Section 17(a) of the Securities Act [15 U.S.C. Section 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. Section 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. Section 240.10b-5].
III.
Permanently enjoining defendants SGA Goldstar, Melcher, Terry, Alpha Securities, and Dunbar Holdings, and each of them, and their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice by personal service or otherwise, from violating, directly or indirectly, Section 17(b) of the Securities Act [15
U.S.C. Section 77q(b)].
IV.
Permanently enjoining defendant SOE and its officers, agents,
servants, employees, attorneys, and those persons in active concert or
participation with it who receive actual notice by personal service or
otherwise, from violating, directly or indirectly, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C. Sections 78m(a), 78m(b)(2)(A), 78m(b)(2)(B)], and Rules 12b-20, 13a-1, 13a-11, and 13a-13, thereunder [17 C.F.R. Sections 240.12b-20, 240.13a-1, 240.13a-11, and 240.13a-13].
V.
Permanently enjoining defendant Huttoe and his agents, servants, employees, attorneys, and those persons in active concert or participation with it who receive actual notice by personal service or otherwise, from violating, directly or indirectly, Sections 13(b)(5) and 16(a) of the Exchange Act [15 U.S.C. Sections 78m(b)(5) and 78p(a)], and Rules 13b2-1, 13b2-2, 16a-2 and 16a-3, thereunder [17 C.F.R. Sections 240.13b2-1, 240.13b2-2, 240.16a-2 and 240.16a-3].
VI.
Directing all defendants, other than SOE, and each of them, and their officers, agents, servants, employees, and attorneys, to disgorge all illegal gains, together with prejudgment interest.
VII.
Granting such temporary and preliminary relief as is necessary to assure defendants' compliance with the Court's orders, including: a temporary restraining order; a preliminary injunction; a temporary freeze of defendants' assets and accounts, other than SOE's; the temporary surrender of Huttoe's passport; an order prohibiting the destruction and alteration of documents; an order expediting discovery; an order directing defendants to answer the complaint; and an order directing defendants, other than SOE, to file an Accounting.
VIII.
Granting such other relief as this Court may deem just and proper.
Respectfully submitted,
OF COUNSEL NANCY GRUNBERG, Trial Counsel
D.C. Bar No. 380169
NORAN J. CAMP, Trial Counsel
THOMAS C. NEWKIRK Attorneys for Plaintiff
ERICH T. SCHWARTZ Securities and Exchange Commission
KENNETH R. LENCH P.O. Box 50239, Mail Stop 4-2
PAULA L. KASHTAN Washington, D.C. 20091-0239
ERIC R. WERNER [Courier: 450 5th Street, N.W.,
MS-4-2, Washington, D.C. 20549]
Dated: November 7, 1996 Tel: 202-942-4734 (Grunberg)
Washington, D.C. FAX: 202-942-9581
EXHIBIT 99.3
UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA
________________________________________________
:
SECURITIES AND EXCHANGE COMMISSION, :
450 FIFTH STREET, N.W. :
WASHINGTON, D.C. 20549, :
:
PLAINTIFF, : CIVIL ACTION NO. 96-02543 GK
:
:
V. :
:
CHARLES O. HUTTOE, HUTTOE & :
ASSOCIATES, INC., WORD CORPORATION, :
NATIONAL TRADING SERVICES, :
KAREN PURVIS, TAMMY JO PERKINS, :
JOSEPHINE BROOKS, SGA GOLDSTAR :
RESEARCH INC., THEODORE R. :
MELCHER, JR., SHANNON B. TERRY, :
SYSTEMS OF EXCELLENCE, INC., :
ALPHA SECURITIES LTD., AND :
DUNBAR HOLDINGS LTD., :
:
DEFENDANTS. :
________________________________________________:
ORDER GRANTING PLAINTIFF'S REQUEST FOR TEMPORARY
RESTRAINING ORDER, ASSET FREEZE, AND OTHER RELIEF
This cause comes before the Court upon motion by the Plaintiff Securities and Exchange Commission ("Commission") for the following Orders with respect to Defendants:
1. Temporarily Restraining defendants from violating the federal securities laws;
2. Temporarily freezing assets and accounts of
defendants, other than Systems of Excellence, Inc.;
3. Requiring Charles O. Huttoe to temporarily surrender his passport and refrain from foreign travel pending
identification of accounts;
4. Prohibiting destruction and alteration of documents;
5. Expediting discovery;
6. Expediting the production of bank records subject to 12 U.S.C. Sections 3401, et seq., by delaying notice to the customer, as provided by 12 U.S.C. Section 3409;
7. Directing defendants to answer the Complaint;
8. Directing defendants, other than Systems of
Excellence, Inc., to file an Accounting; and
9. Directing defendants to Show Cause why the Court should not issue a Preliminary Injunction and impose other relief against them.
The Court has considered the Commission's Complaint, Memorandum of Points and Authorities in support of the TRO, and the Declaration of Paula L. Kashtan and exhibits filed therewith, and all other documents and arguments in support of its application for emergency relief ("Application").
The Commission has made a sufficient and proper showing in support of the relief granted herein by: i) presenting a prima facie case of securities laws violations by defendants, and ii) showing a reasonable likelihood that the defendants enjoined herein will continue to violate the federal securities laws in connection with their offer, purchase and sale of SOE stock.
The Court finds good cause to believe that, unless restrained and enjoined by Order of this Court, defendants, other than SOE, will dissipate, conceal or transfer from the jurisdiction of this Court assets which could be subject to an Order of Disgorgement. Accordingly the Court hereby orders as follows:
I.
TEMPORARY RESTRAINING ORDER
IT IS HEREBY ORDERED that, pending determination of the Show Cause Preliminary Injunction hearing,
1. Defendants Charles O. Huttoe, Huttoe & Assoc., National Trading Services, Word Corporation, SGA Goldstar Research, Inc., Theodore R. Melcher, Jr., Shannon B. Terry, Alpha Securities Ltd., Dunbar Holdings Ltd., and Systems of Excellence, Inc., and their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them, and each of them, ARE HEREBY RESTRAINED AND ENJOINED from directly or indirectly, in the absence of an applicable exemption,
a. making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell a security through the use or medium of any prospectus mails or otherwise, or
b. carrying or causing to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or delivery, unless a registration statement is in effect as to such security, or
c. making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement is in effect as to such security, or while the registration statement is the subject of a refusal or stop order or (prior to the effective date of the registration statement) any public proceeding under Section 8 of the Securities Act [15 U.S.C. Section 77h], in violation of Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. Sections 77e(a) and 77e(c)];
2. Defendants Charles O. Huttoe, Huttoe & Assoc., National Trading Services, Inc., Word Corporation, SGA Goldstar Research, Inc., Theodore R. Melcher, Jr., Shannon B. Terry, Alpha Securities Ltd., Dunbar Holdings Ltd., and Systems of Excellence, Inc., and each of them, and their officers, agents, servants, employees, attorneys, and those persons in active
concert or participation with them, and each of them, ARE HEREBY RESTRAINED AND ENJOINED from directly or indirectly, in connection with the offer, purchase, or sale of any securities, by the use of any means, instruments or instrumentalities of transportation or communication in interstate commerce, or of the mails, or of any facility of any national securities exchange,
a. employing any device, scheme, or artifice to defraud, or
b. obtaining money or property by means of any untrue statement of a material fact, or omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or
c. engaging in any transaction, act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in violation of Section 17(a) of the Securities Act [15 U.S.C. Section 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. Section 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. Section 240.10b-5].
3. Defendants SGA Goldstar Research, Inc., Theodore R. Melcher, Jr., Shannon B. Terry, Alpha Securities Ltd., and Dunbar Holdings Ltd., and each of them, and their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them, and each of them, ARE HEREBY RESTRAINED AND ENJOINED from directly or indirectly, using any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any
notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof, in violation of Section 17(b) of the Securities Act [15 U.S.C. Section
77q(b)];
4. Defendant Systems of Excellence, Inc., and its officers, agents, servants, employees, attorneys, and those persons in active concert or participation with it, ARE HEREBY RESTRAINED AND ENJOINED from,
a. Failing to file with the Commission, in accordance with such rules and regulations as the Commission may
prescribe as necessary or appropriate for the proper protection of
investors and to insure fair dealing in the security,
(1) such information and documents (and such copies thereof) as the Commission shall require to keep reasonably current the information and documents required to
be included in or filed with an application or registration
statement filed pursuant to Section 12 of the Exchange Act [15 U.S.C. Section 78l], and
(2) such annual reports (and copies thereof), certified if required by the rules and regulations
of the Commission by independent public accountants, and such quarterly reports (and such copies thereof), as the Commission may prescribe, and
b. filing or causing to be filed with the Securities and Exchange Commission any report required to be filed
pursuant to Section 13(a) of the Exchange Act [15 U.S.C. Section
78m(a)] and the rules and regulations promulgated thereunder, which
contains any untrue statement of material fact, which omits to state
any material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not
misleading, or which omits to disclose any information required to be
disclosed, in violation of Sections 10(b) and 13(a) of the Exchange Act [15 U.S.C. Sections 78j(b) and 78m(a)], and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13, thereunder [17 C.F.R. Sections 240.10b-5, 240.12b-20, 240.13a-1, 240.13a-11, 240.13a-13, 240.13a-13], thereunder.
5. Defendant Systems of Excellence, Inc., and its officers, agents, servants, employees, attorneys, and those persons in active concert or participation with it, ARE HEREBY RESTRAINED AND ENJOINED from,
a. Failing to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of its assets, and
b. Failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that,
(1) transactions are executed in accordance with management's general or specific authorization,
(2) transactions are recorded as necessary (I) to permit preparation of financial statements in
conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets,
(3) access to assets is permitted only in accordance with management's general or specific
authorization, and
(4) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, in violation of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. Sections 78m(b)(2)(A) and 78m(b)(2)(B)].
6. Defendant Charles O. Huttoe and his agents, servants, employees, attorneys, and those persons in active concert or participation with him, ARE HEREBY RESTRAINED AND ENJOINED from,
a. Falsifying or causing to be falsified, any book, record or account subject to Section 13(b)(2)(A) of the Exchange Act, or
b. making or causing to be made a materially false or misleading statement, or
c. omitting to state, or causing another person to omit to state, any material fact necessary to make
statements made, in light of the circumstances under which such statements were made, not misleading, to an accountant in connection with (1) any audit or examination of the financial statements of the issuer required to be made pursuant to the Commission's rules and regulations, or (2) the preparation or filing of any document or report required to be filed with the Commission pursuant to the Commission's rules and regulations, in violation of Section 13(b)(5) of the Exchange Act [15 U.S.C. Section 78m(b)(5)], and Rules 13b2-1 and 13b2-2 thereunder [17 C.F.R. Sections 240.13b2-1 and 240.13b2-2].
7. Defendant Charles O. Huttoe, IS HEREBY RESTRAINED AND ENJOINED FROM, with respect to any non- exempt equity security, when he is directly or indirectly the beneficial owner of more than 10 per centum of any class of such security, or a director or an officer of the issuer of such security, failing to file, at the time of the registration of such security on a national securities exchange or by the effective date of a registration statement filed pursuant to Section 12(g) of the Exchange Act [15 U.S.C. Section 78l(g)], or within ten days after he becomes such beneficial owner,
director, or officer, a statement with the Commission (and, if such security is registered on a national securities exchange, also with the exchange) of the amount of all equity securities of such issuer of which he is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, failing to file with the Commission (and if such security is registered on a national securities exchange, also with the exchange) a statement indicating his ownership at the close of the calendar month and such changes in his ownership as have
occurred during such calendar month, in violation of Section 16(a) of the Exchange Act [15 U.S.C. Section 78p(a)], and Rules 16a-2 and 16a-3 thereunder [17 C.F.R. Sections 240.16a-2 and 240.16a-3].
II.
ASSET AND ACCOUNTS FREEZE
IT IS FURTHER ORDERED that, pending determination of the Order To Show Cause, see IX, below,
A. That the defendants, other than SOE, along with their
directors, officers, agents, servants, employees, attorneys, depositories, banks, and those persons in active concert or participation with any one or more of them, and each of them, BE AND THEY HEREBY ARE RESTRAINED FROM, directly or indirectly, transferring, setting off, receiving, changing, selling, pledging, assigning, liquidating or otherwise disposing of, or withdrawing any assets or property, including cash, free credit balances, fully paid for securities, and/or property pledged or hypothecated as collateral for
loans, legally or beneficially owned by, controlled by, or in the possession of:
1. Charles O. Huttoe,
2. Huttoe & Associates,
3. National Trading Services, Inc.,
4. Word Corporation,
5. Karen Purvis, also known as Karen Purvis Huttoe
6. Tammy Jo Perkins,
7. Josephine Brooks,
8. SGA Goldstar Research, Inc.,
9. Theodore R. Melcher, Jr.,
10. Shannon B. Terry,
11. Alpha Securities Ltd., and
12. Dunbar Holdings Ltd.,
provided, however, that defendant Huttoe may expend up to a maximum of $5,000 each month for reasonable living expenses, $1,000 each month for travel expenses, and a maximum of $5,000 each month beginning on December 1, 1996, for legal expenses. Purvis, Brooks, and Perkins may each expend a maximum of $5,000 per month for living expenses, and may apply to the Court for a reasonable allowance for travel and legal expenses. Any party may petition the Court for modification of these limits in the event of hardship.
B. That any financial or brokerage institution or other person or entity located within the territorial jurisdiction of the United States courts and holding any such funds or other assets, in the name, for the benefit or under the control of Charles O. Huttoe, Huttoe & Associates, National Trading Services, Inc., Word
Corporation, Karen Purvis, also known as Karen Purvis Huttoe, Tammy Jo Perkins, Josephine Brooks, SGA Goldstar Research, Inc., Theodore R. Melcher, Jr., Shannon B. Terry, Alpha Securities Ltd., or Dunbar Holdings Ltd., and which receives actual notice of this order by personal service or otherwise, shall hold and retain within its control and prohibit the withdrawal, removal, transfer, disposition, pledge, encumbrance, assignment, set off, sale, liquidation, dissipation, concealment, or other disposal of any such funds or
other assets.
Such banks and brokerages include, without limitation, the following bank and brokerage accounts, controlled by Huttoe, into which unregistered SOE shares were deposited,
1. M.H. Meyerson & Co., Inc. brokerage accounts in the names of:
a. Karen Purvis, opened March 13, 1996,
b. Josephine Brooks, opened June 5, 1996, and
c. Tammy Jo Perkins, opened May 31, 1996,
2. Commonwealth Associates brokerage account in the name of National Trading Services, Inc., opened August 8, 1995, and
3. J.S. Securities, Inc. brokerage account in the name of National Trading Services, Inc.,
and the following bank accounts, controlled by Huttoe, which then received proceeds from the sales of unregistered SOE shares previously deposited into the above-referenced M.H. Meyerson and Commonwealth brokerage accounts,
4. City National Bank accounts in the names of:
a. Huttoe & Associates, account 5001578052,
b. Huttoe and Brooks, account 5002950802,
c. Huttoe and Purvis, account 5002950828, and
d. Huttoe and Perkins, account 5002950815,
and the following bank accounts controlled by Huttoe, into which the
above-referenced City National Bank account SOE unregistered stock sale proceeds, and the proceeds from the sales of SOE unregistered shares in the J.S. Securities account were then transferred,
5. Patriot National Bank account in the name of National Trading Services, Inc., account 10033254,
and the following bank accounts into which the above-referenced Patriot National Bank account SOE unregistered stock sale proceeds were then transferred,
6. Tyson's National Bank account of Nancy Ellis, account
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