Re: SEC v. Taxin; SEC v. Tribble; SEC v. Volmer
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 15955 / October 27, 1998
SECURITIES AND EXCHANGE COMMISSION v. EDWARD B. TAXIN and
THE TAXIN NETWORK, 98 Civ. 7661 ( KMW) (S.D.N.Y.)
The Commission filed suit in federal court in New York
yesterday against the host of a radio infomercial show, Ed
Taxin. Taxin also publishes an investment newsletter on his
website, Taxin.com. Taxin's show, "The Financial Hour,"
airs on six stations across the country, including New York,
and is broadcast from Taxin's Shrewsbury, New Jersey
residence. The Commission charged Taxin and the Taxin
Network with promoting stocks on the Financial Hour and his
newsletter, Investors Chronicle, without disclosing that he
is compensated for the touts, as follows. The Taxin Network
(owned by Taxin's wife, Joanne Pagano) has agreements with
numerous small-cap companies, including Envoy Communications
Group, Inc., PTC Group, Inc., Sungold Gaming International
Inc., Telepad Corp., VentureTech, Inc., and Wolf Industries,
Inc. These companies or their agents have paid the Taxin
Network at least $200,000 in cash or stock for promotional
services, including exposure on the Financial Hour and in
the Investors Chronicle. On the Financial Hour, Taxin
introduces a series of guests, including promoters from
investor-relations firms and officers of the companies.
Taxin joins with his guests in their rosy predictions for
the companies they represent, mixing in Wall Street patter
to convey the impression of objective financial reporting.
Taxin introduces the promoters as Wall Street notables and
stock-pickers, disguising their relationship with the
companies they represent.
The compensation received by the Taxin Network is not
adequately disclosed on the radio show or in the newsletter.
The only disclosure on the radio show is generally that the
guests (or some of the guests) have paid a fee to appear on
the show or that Taxin owns shares in some of the companies
discussed. Taxin's internet site contained no disclosure at
all of the compensation until Taxin was contacted by the
Commission's staff; the new disclosure is not adequate. The
Commission, seeking a permanent injunction and penalties,
alleges that Taxin and the Taxin Network are in violation of
Section 17(b) of the Securities Act of 1933, which requires
that all such compensation, and its amount, be fully
disclosed.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
S.E.C. v. Francis Tribble and Sloane Fitzgerald
Civil Action No. 98-8699 (RVX ) (C.D. Cal. October 27, 1998).
Litigation Release No. 15959/ October 27, 1998
SEC Fines Internet Stock Promoter Responsible for Massive
Spam Campaign
The Securities and Exchange Commission filed a civil
action in federal district court against Francis A. Tribble,
a stock promoter, and Sloane Fitzgerald, Inc., a public
relations firm which Tribble owns, alleging that Tribble and
Sloane Fitzgerald touted two microcap stocks over the
Internet without disclosing contractual arrangements with
the issuers of those stocks to pay stock and cash
compensation for those promotional efforts. The Complaint
alleges that Tribble, through Sloane Fitzgerald, entered
into contractual agreements with Eventemp Corporation and
JT's Restaurants, Inc. to promote their companies and
securities over the Internet and elsewhere for stock and
cash compensation. According to the complaint, between
November 1997 and August 1998, Tribble disseminated several
million Internet e-mails, known as "spams;" designed and
maintained several Internet websites; and distributed an
online investment newsletter, each of which recommended
investment in Eventemp or JT's Restaurants common stock,
without making legally sufficient disclosure of Tribble's
compensation arrangements with those issuers. Without
admitting or denying the allegations in the complaint,
Tribble and Sloane Fitzgerald have consented to be enjoined
from violating Section 17(b) of the Securities Act of 1933,
and Tribble has consented to pay a civil penalty of $15,000.
The Complaint alleges that Tribble sent out millions of
spams to Internet users touting the potential earning power
of Eventemp and JT's Restaurants stock. Many of the spams
purported to be from independent stock promoters such as
"HotStock," "Net-Vest," and "Cyber-Stock," which were
actually only names Tribble invented. Tribble's spams also
referred readers to a variety of Internet websites which he
built, containing additional information about the companies
he was touting and recommendations to buy their stock.
Finally, in August 1998, Tribble wrote an online investment
newsletter touting JT's Restaurants and distributed it over
the Internet to 200 subscribers whom he had solicited
through previous Internet e-mails and websites.
In conducting this Internet promotional campaign, the
Complaint alleges, Tribble failed fully to disclose that he
had a vested interest in an increase in the price of the
stocks he was touting, or that he would be compensated by
the companies he was touting in cash or securities of those
companies. Tribble's activities violated Section 17(b) of
the Securities Act of 1933, which makes it unlawful for any
person to recommend stock for consideration, whether past or
prospective, without disclosing the fact, nature, and amount
of that consideration.
Investors are advised to read the SEC's "Cyberspace"
Alert before purchasing any investment promoted on the
Internet. The free publication, which alerts investors to
the telltale signs of online investment fraud, is available
on the Investor Assistance and Complaints link of the SEC's
Home page on the World Wide Web <www.sec.gov>. It can also
be obtained by calling 800-SEC-0330." Investors are
encouraged to report suspicious Internet offerings (or other
suspicious offerings) via e-mail to <enforcement@sec.gov>.
A user-friendly form to assist you in making a report is
available at the Enforcement Complaint Center, Mail Stop 8-
4, 450 Fifth Street, Washington, D.C. 20549."
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 15952 / October 27, 1998
SECURITIES AND EXCHANGE COMMISSION v. BRIAN M. VOLMER, JOHN
R. SWITZER, INTERNATIONAL ALLIANCE TRADING, INC., and SUN
PACIFIC CAPITAL GROUP, INC., Civil Action No. 98-
8698JFL(MCX)(West. Div.)(C.D. Cal. October 27, 1998).
SEC SUES PROMOTERS WHO TOUTED STOCK
ON THE INTERNET AND IN NEWSPAPER ADVERTISEMENTS
In a case that illustrates the migration of illegally
conducted stock touting from traditional print media to the
internet, the Securities and Exchange Commission today
announced that it had filed a civil injunctive action
against four southern California defendants involved in
promoting the stock of microcap issuers. The complaint
alleges that the defendants -- Brian M. Volmer, John R.
Switzer, International Alliance Trading, Inc.
("International Alliance"), and Sun Pacific Capital Group,
Inc. ("Sun Pacific") -- accepted stock and cash payments
from the issuers in exchange for favorable and purportedly
independent reviews published in three newspaper
advertisements and, later, on the internet website
"Investors Edge."
The Commission's complaint, filed in the United States
District Court for the Central District of California,
alleges that Volmer, through his company, International
Alliance, wrote and placed a newspaper advertisement touting
the stock of Cetacean Industries, Inc., a company that
claimed to be engaged in diamond exploration and mining in
Brazil. Crafted to appear as an independent research
report, the advertisement appeared in Investor's Business
Daily on October 17, 20 and 24, 1997. The complaint alleges
that the advertisement failed to disclose that International
Alliance had received options to buy Cetacean shares in
exchange for promoting its stock, in violation of Section
17(b) of the Securities Act of 1933 ("Securities Act").
That provision of the Securities Act requires that anyone
giving publicity to a security in return for compensation
from an issuer or underwriter must disclose the receipt and
amount of that compensation.
In addition, the complaint alleges that, in two
versions of the advertisement, Volmer and International
Alliance knowingly or recklessly misrepresented that
Cetacean's stock had been the subject of a buy
recommendation issued by a prominent, New York-based
investment management firm, when, in fact, that firm had
neither issued a buy recommendation for Cetacean nor
authorized the use of its name in the advertisement. The
complaint also alleges that Volmer and International
Alliance knowingly or recklessly misrepresented that the
issuer had acquired the mineral and mining rights to a
certain Brazilian property, which was described as
containing a minimum of two million carats and yielding
minimum revenues of $40 million. The complaint further
alleges that, acting contrary to their simultaneous buy
recommendation to public investors, Volmer and International
Alliance sold the shares they had received as compensation
from Cetacean, profiting in excess of $64,000. As a result,
the complaint alleges that Volmer and International Alliance
violated the anti-fraud provisions of the federal securities
laws, specifically Section 17(a) of the Securities Act, and
Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder.
The Commission's complaint also alleges that Volmer,
Switzer and Sun Pacific violated Section 17(b) of the
Securities Act in connection with an on-line research report
posted on "Investors Edge," an internet website that Volmer
and his company, Sun Pacific, began operating this year.
Prepared by Volmer and Switzer, Investors Edge has posted
purported research reports touting the stocks of several
microcap issuers, including Juina Mining Corporation, whose
principal assets are the Brazilian diamond operations
previously owned by Cetacean. The complaint further alleges
that the Juina Mining report, which first was posted in or
about July of this year, failed adequately to disclose the
full extent of the compensation that the defendants had
received, directly and indirectly, from the issuer in
exchange for touting its stock.
In its complaint, the Commission seeks an injunction
against the defendants to prevent further violations of the
federal securities laws, disgorgement of undisclosed
compensation, prejudgment interest, and civil penalties.
Investors are advised to read the SEC's "Cyberspace"
Alert before purchasing any investment promoted on the
Internet. The free publication, which alerts investors to
the telltale signs of online investment fraud, is available
on the Investor Assistance and Complaints link of the SEC's
Home Page on the World Wide Web <www.sec.gov>. It can also
be obtained by calling 800-SEC-0330. Investors are
encouraged to report suspicious Internet offerings (or other
suspicious offerings) via e-mail to <enforcement@SEC.gov>.
A user-friendly form to assist you in making a report is
available at the Enforcement Complaint Center on the
Enforcement Division link of the SEC Home Page
<www.sec.gov>. Investors can also mail a report to the SEC
Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth
Street, Washington, D.C. 20549.
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