Re: In the Matter of Baillargeon; In the Matter of Core Communications
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 7597 / October 27, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9764
____________________________________
:
In the Matter of : ORDER INSTITUTING PUBLIC
: PROCEEDINGS PURSUANT TO
DONALD A. BAILLARGEON, : SECTION 8A OF THE SECURITIES
individually and d/b/a : ACT OF 1933, MAKING FINDINGS,
EMERGING COMPANY REPORT, : AND IMPOSING A CEASE-AND-
: DESIST ORDER
Respondent. :
____________________________________:
I.
The Securities and Exchange Commission ("Commission") deems
it appropriate to institute public cease and desist proceedings
against Donald A. Baillargeon ("Baillargeon"), individually and
doing business as Emerging Company Report ("ECReport"), pursuant
to Section 8A of the Securities Act of 1933 ("Securities Act").
In anticipation of the institution of these proceedings,
Baillargeon has submitted an Offer of Settlement ("Offer"), which
the Commission has determined to accept. Solely for the purpose
of these proceedings and any other proceedings brought by or on
behalf of the Commission or in which the Commission is a party,
and without admitting or denying the findings herein, except that
Baillargeon admits the Commission's jurisdiction over him and
over the subject matter of these proceedings, Baillargeon has
consented to the entry of this Order Instituting Public
Proceedings Pursuant to Section 8A of the Securities Act of 1933,
Making Findings and Imposing a Cease-and-Desist Order ("Order")
and to the imposition of the cease-and-desist order set forth
below.
II.
On the basis of this Order and the Offer submitted by
Baillargeon, the Commission finds that:
A. Donald A. Baillargeon, a resident of Los Angeles,
California, has produced a cable television show called
"Emerging Company Report," an ECReport web page, and an
ECReport newsletter (collectively, the "ECReport Media")
from 1997 to the present. Baillargeon is solely responsible
for the content of the ECReport Media.
B. In addition to producing it, Baillargeon is also a co-
anchor of the ECReport television show. That show runs on a
weekly basis and is re-broadcast four times each week.
"Emerging Company Report" is shown on more than 140 cable
television systems in more than 125 cities.
C. From at least May 1997 through September 1998,
Baillargeon committed or caused violations of Section 17(b)
of the Securities Act in that, by the use of means or
instruments of transportation or communication in interstate
commerce or by use of the mails, he published, gave
publicity to, or circulated notices, circulars,
advertisements, newspapers, articles, letters, investment
services, or communications which, though not purporting to
offer a security for sale, described securities 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.
D. As part of and in furtherance of such conduct and
activities, Baillargeon publicized more than fifty
securities in the ECReport Media. Baillargeon sold to the
issuers of these securities "guest appearance packages,"
which included a ten-minute guest appearance for the issuer
on one ECReport television program, one-minute "vignettes"
of the guest appearance on the next three programs, and
updates on the issuer's stock price on the next thirteen
programs. The package also typically included a company
profile in two issues of the ECReport newsletter and three
months of internet site promotion and linking from the
ECReport web page. For some issuers, Baillargeon also
agreed to provide a national press release via Business
Wire.
E. As part of and in furtherance of such conduct and
activities, Baillargeon received, directly or indirectly,
compensation ranging from $2500 to $17,000 for each guest
appearance package sold. Baillargeon did not disclose in
the ECReport Media the amount of money he had received from
the issuers to publicize their companies and stock.
F. As part of and in furtherance of such conduct and
activities, Baillargeon also received, directly or
indirectly, compensation in the form of stock from two
issuers publicized in the ECReport Media. Baillargeon did
not disclose in the ECReport Media that he had received,
directly or indirectly, compensation in the form of stock,
nor did he disclose the type, amount, or value of the stock
he received.
III.
In view of the foregoing, the Commission finds that it is
appropriate to impose the sanctions specified in the Offer.
Accordingly, IT IS ORDERED, pursuant to Section 8A of the
Securities Act, that Baillargeon cease and desist from committing
or causing any violation and any future violation of Section
17(b) of the Securities Act.
By the Commission.
Jonathan G. Katz
Secretary
=====
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT of 1933
Release No. 7598 / October 27, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9765
:
:
In the Matter of: :
: ORDER INSTITUTING
: PROCEEDINGS PURSUANT TO
CORE COMMUNICATIONS : SECTION 8A OF THE
GROUP, INC. AND : SECURITIES ACT OF 1933,
JOSHUA Z. LEVINE, : MAKING FINDINGS, AND
: IMPOSING A CEASE-AND-
Respondents. : DESIST ORDER
:
:
:
I.
The Securities and Exchange Commission ("Commission") deems
it appropriate that public administrative proceedings be
instituted pursuant to Section 8A of the Securities Act of 1933
("Securities Act") against Core Communications Group, Inc.
("Core") and Joshua Z. Levine ("Levine").
II.
In anticipation of the institution of these proceedings,
Core and Levine have submitted Offers of Settlement ("Offers"),
which the Commission has determined to accept. Solely for the
purpose of these proceedings, and any other proceedings brought
by or on behalf of the Commission or to which the Commission is a
party, and without admitting or denying the Commission's findings
contained herein, but admitting the jurisdiction of the
Commission over them and the subject matter of this proceeding,
Core and Levine consent to the entry of the findings and the
imposition of the cease-and-desist order set forth herein.
III.
On the basis of this Order and the Offers, the Commission
makes the following findings:
A. FACTS [1]
1. Respondents
Levine, age 39, resides in New York City, New York. He is
the president of Core.
Core is a New York corporation with offices in Great Neck,
New York. Core was incorporated in March 1992 with Levine as its
president and majority shareholder.
2. Background
a. Formation of Core
In March 1992, Levine incorporated Core Technology Group,
Inc. to publish a business newsletter concerning technology
companies in the Long Island, New York region. In 1994, Levine
ceased publication of the newsletter, changed the name of the
business to Core Communications Group, Inc., and changed the
nature of its business to investor relations. Since 1994, Core
has had nine investor relations clients, to whom it has provided
a range of investor relations services.
b. Core's Web Site
In June 1997, Levine set up a web site for Core, which was
titled Next Wave Stocks (www.nextwavestocks.com) ("Next Wave").
Levine styled the web site as an "on-line magazine" containing
information about electronics, information, and biopharmaceutical
companies.
3. Core's Reports Did Not Disclose Its Receipt Of Fees
Since at least November 1996, Core has published reports on
seven investor relations clients that have publicly traded
securities. The companies were Nord Pacific Limited ("Nord"),
Robotic Vision Systems, Inc. ("Robotic"), Inflazyme
Pharmaceuticals Ltd. ("Inflazyme"), AMBI, Inc. (formerly Applied
Microbiology, Inc.)("AMBI"), CVD Equipment Corporation ("CVD"),
Imark Technologies, Inc. ("Imark"), and InSite Vision, Inc.
("InSite"). Each report resembled a third party's research
report. Each report had "Next Wave Stocks" as its masthead
banner, with the subheading, "Intellectual Capital for the
Professional Investor." The reports' masthead identified Next
Wave as a publication of Core, which was described as "a
financial communication and equity research firm." Levine wrote
five of the seven reports, and co-authored the other two. For
the two that he co-authored, he retained final approval within
Core of what would be published. All seven reports portrayed the
companies favorably. Although the reports disclosed that Core
might receive fees for acting as investor relations counsel, none
of the seven reports disclosed the amount of fees that Core and
Levine received from the companies pursuant to compensation
arrangements. Levine mailed six of the reports to persons and
entities on Core's mailing list, which included stockbrokers,
analysts, venture capitalists, portfolio managers, investment
bankers, media outlets, and private investors.
b. Internet Reports
After its creation in June 1997, Levine had the seven
written reports posted on the Next Wave web site. The contents
of the Internet reports were virtually identical to the written
reports. The web site did not disclose the amount of fees that
Core and Levine received from the companies pursuant to
compensation arrangements.
4. Core's Receipt Of Fees From Issuers
a. Nord
Between October 1994 and July 1997, Core had an investor
relations agreement with Nord, a mining company whose American
Depository Receipts are quoted on NASDAQ. The agreement provided
that Core would receive $3,500 per month for investor relations
services. Under the agreement, Core received a total of $115,500
from Nord. In February 1997, Levine wrote a two page Next Wave
report concerning Nord. Levine mailed the report to several
thousand persons and entities on Core's mailing list. After the
Next Wave web site was created in June 1997, Levine also had the
report posted there.
b. Robotic
Between February 1995 and July 1998, Core had a series of
investor relations agreements with Robotic, a manufacturer of
"machine vision" equipment whose stock is quoted on NASDAQ. The
agreements provided that Core would receive between $1,500 and
$5,000 per month for investor relations services. Under these
agreements, Core received a total of $143,500 from Robotic. In
September 1997, Levine wrote a two page Next Wave report
concerning Robotic. Levine mailed the report to approximately
5,000 to 6,000 persons and entities on Core's mailing list. Also
in September 1997, Levine had the text of this report posted on
the Next Wave web site.
**FOOTNOTES**
[1]: The findings are not binding on anyone other than the
Respondents.
c. Inflazyme
Between June 1996 and January 1997, Core had an investor
relations agreement with Inflazyme, a pharmaceutical company
whose stock is quoted on the Vancouver Stock Exchange and the OTC
Bulletin Board. The agreement provided that Core would receive
$4,500 per month, and 80,000 options to purchase Inflazyme common
stock, to vest at the rate of 6,500 per month. During this
period, Core received a total of $36,000 from Inflazyme, but did
not receive the options. In November 1996, Levine wrote a four
page Next Wave report concerning Inflazyme. Levine mailed the
report to approximately 5,000 to 6,000 persons and entities on
Core's mailing list. After the Next Wave web site was created in
June 1997, Levine also had the report posted there.
d. AMBI
Between September 1995 and March 1997, Core had an investor
relations agreement with AMBI, a pharmaceutical company whose
stock is quoted on NASDAQ. The agreement provided that Core
would receive $3,500 per month, and 35,000 warrants to purchase
AMBI common stock. From March 1996 to March 1997, Core received
a monthly fee that ranged from $2,100 per month to $4,200 per
month. Between September 1995 and March 1997, Core received a
total of $52,400 from AMBI, along with 40,000 warrants (the
original 35,000 and a bonus of 5,000). In January 1997, Levine
wrote a four page Next Wave report concerning AMBI. Levine
mailed the report to approximately 5,000 to 6,000 persons and
entities on Core's mailing list. After the Next Wave web site
was created in June 1997, Levine also had the report posted
there.
e. CVD
In October 1997, Core entered into an agreement with CVD, a
manufacturer of chemical vapor deposition systems whose stock is
quoted on the OTC Bulletin Board. Under the agreement, Core was
to produce a Next Wave company profile and to include CVD in the
Next Wave on-line magazine. Core's fee for this service was
$2,500. Between February 1998 and August 1998, Core had an
investor relations agreement with CVD. The agreement provided
that Core would receive $4,000 per month, and 12,000 options to
purchase CVD common stock, to vest at the rate of 2,000 per
month. Between October 1995 and August 1998, Core received
$24,000 from CVD, but did not receive the warrants. In November
1997, Levine wrote a two page Next Wave report concerning CVD.
Levine provided this report to CVD, which included it in a
mailing to shareholders that it mailed. Also in November 1997,
Levine had the report posted on the Next Wave web site.
f. Imark
Between February 1998 and August 1998, Core had an investor
relations agreement with Imark, an Internet service provider
whose stock is quoted on NASDAQ. The agreement provided that
Core would receive $3,000 per month, and 30,000 warrants to
purchase Imark common stock, with 10,000 to vest at the rate of
1,000 per month starting in February 1998, and the remaining
20,000 to vest upon Core's completion of certain tasks, such as
posting a report concerning Imark on the Next Wave web site.
From February 1998 through the present, Core has received a total
of $3,000 from Imark (the first monthly payment), but has not
received the warrants. In March 1998, Levine co-authored a four
page Next Wave report concerning Imark. Levine mailed the report
to approximately 3,500 persons and entities on Core's mailing
list. Also in March 1998, Levine had the text of this report
posted on the Next Wave web site.
g. InSite
Since April 1998, Core has had an investor relations
agreement with InSite, which develops genetic tools for
diagnosing and treating glaucoma, and whose stock is quoted on
the American Stock Exchange. The agreement provides that Core
would receive $4,500 per month for the first three months, $5,500
per month for the second three months, and $6,000 per month for
the last three months. The agreement also provides that, in July
1998, InSite would evaluate Core's performance and consider the
issuance of stock options to Core. Since April 1998, Core has
received a total of $30,000 from InSite. In June 1998, Levine
co-authored a four page Next Wave report concerning InSite.
Levine mailed the report to approximately 3,500 persons and
entities on Core's mailing list. Also in June 1998, Levine had
the text of this report posted on the Next Wave web site.
B. LEGAL DISCUSSION
Section 17(b) of the Securities Act makes it unlawful for
any person:
to publish . . . or circulate any notice, circular,
advertisement . . . 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 . . . without fully
disclosing the receipt, whether past or prospective, of such
consideration and the amount thereof.
Levine and Core published favorable reports concerning seven
issuers via mailings and on Core's Internet web site. The
mailings and the web site did not disclose that Levine and Core
had agreements with the issuers pursuant to which they received
fees, and did not disclose the amounts of these fees.
Accordingly, Levine and Core violated Section 17(b) of the
Securities Act. See, e.g., United States v. Amick, 439 F.2d 351,
364-65 (7th Cir.), cert. denied, 404 U.S. 823 (1971); Wall Street
Publishing Institute, Inc., 851 F.2d 365 (D.C. Cir. 1988); SEC v.
Huttoe, C.A. No. 96-2453 (GK) Memorandum Opinion (D.D.C., filed
September 14, 1998) (vague allusions to possible financial
interest insufficient to satisfy Section 17(b)); In re
Continental Capital & Equity Corp., Securities Act Release No.
7267; Exchange Act Release No. 36886 (Feb. 26, 1996) (disclaimer
of possible receipt of compensation inadequate when actual
agreement existed and compensation paid).
Based on the foregoing, the Commission finds that Levine and
Core committed violations of Section 17(b) of the Securities Act.
IV.
In view of the foregoing, the Commission deems it
appropriate to accept the Offers submitted by Levine and Core and
to issue the cease-and-desist order specified in the Offers.
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 8A of
the Securities Act, that Core Communications Group, Inc. and
Joshua Z. Levine cease and desist from committing or causing any
violation and any future violation of Section 17(b) of the
Securities Act.
By the Commission.
Jonathan G. Katz
Secretary |
