SEC Charges 82 Individuals and Companies in 26 Actions Involving
More Than $12 Million in Second Nationwide
Microcap Fraud Sweep
Washington, DC, August 3, 1999 -- The Securities and
Exchange Commission today announced the filing of 26 enforcement
actions against 82 defendants and respondents across the country
for engaging in fraudulent microcap schemes from which they
profited by more than $12 million and cost investors untold
millions. This is the SEC's second nationwide sweep targeted at
microcap fraud.
SEC Director of Enforcement Richard H. Walker said, "Today's
microcap fraud sweep demonstrates that the Commission will
continue to bring maximum resources to bear in cleaning up the
microcap market. This market is too vital to our nation's small
businesses to allow it to be spoiled by a corrupt few. Today's
sweep caps off a successful string of actions over the last few
years where, working with the NASD, federal, state and local
authorities, we have locked the gate of some of the most
notorious boiler rooms including Stratton Oakmont, A.S. Goldmen,
A.R. Baron and Sterling Foster. Together, we have made great
progress and we will not let up in our efforts until the job is
done."
Today's actions take aim at all of the participants in a
microcap fraud -- from the dealmakers who orchestrate
manipulations, to the salespeople in boiler rooms who help carry
them out. Issuers, officers, directors, promoters, accountants,
attorneys, broker-dealers (both introducing and clearing firms),
and transfer agents were rounded up in these enforcement actions.
In four cases, investors were lured into the market for a
manipulated stock by false information communicated on the
Internet.
Importantly, the actions include stiff sanctions against
accountants and attorneys who create and file the necessary
documents and put their professional stamp of approval on a
fraud.
Selected Case Summaries
Today's cases include the following schemes:
* In a classic pump-and-dump, defendants brought a California
airline public through a merger with a public shell company.
Although the airplanes never took off, the stock price did
through bogus trades and false statements in press releases and
an Internet newsletter. After pumping up the price to $5,
defendants operated an unregistered broker-dealer to solicit
investors to purchase stock defendants were dumping. Defendants
unloaded 1 million shares before the price collapsed back to less
than 20 cents. Four defendants had prior records, ranging from
multiple felony convictions to a SEC injunction and a NASD bar.
(SEC v. Durante)
* Husband and wife officers of a California company stole
offering proceeds of $900,000 to pay for personal expenses and
vacations in Hawaii, New York and Europe. The couple also
realized profits of $400,000 by selling stock while in possession
of material nonpublic information about the company's fraudulent
accounting practices. (SEC v. American Telephone + Data )
* Ten brokers in the New York and Chicago branch offices of a
broker-dealer targeted retired customers and engaged in classic
boiler-room sales practice fraud. At least 77 customers lost
over $800,000 while the brokers collected over $250,000 in
commissions. Typical of the defrauded customers is an 81-year
old retiree whose wife is suffering from Alzheimers disease.
(SEC v. Barzilay)
* A Bolivian mining company without basis inflated its assets
by assigning a $40 million value to Bolivian mineral properties
that had been acquired in a sham transaction. Respondents issued
press releases and other material with false statements about
these assets and other aspects of the company. Respondents dumped
their stock onto the market, reaping nearly $4 million. (In the
Matter of Dynamic American Corp.)
A chart summarizing all of the actions brought today is
available by calling 202-942-0020.
The Commission had previously suspended trading in the stock
of three issuers involved in today's actions (American Telephone
+ Data, Comparator Systems, and PanWorld International) for a
single ten-day period based on the dissemination of false and
misleading information about the companies. The Commission's
suspension of trading stopped the ongoing manipulations and
placed an additional burden on broker-dealers to update their
files with accurate information about the companies before they
resumed or began quoting the securities. Since the Commission's
first microcap fraud sweep in September 1998, it has suspended
trading in the stock of 19 microcap issuers.
These enforcement actions are part of the Commission's four-
pronged approach to attacking microcap fraud: enforcement,
inspections, investor education, and regulation. For information
about the SEC's response to microcap fraud and the litigation
releases for each of these cases, visit the SEC's Microcap Fraud
Information Center at www.sec.gov/news/extra/microcap.htm.
The SEC acknowledges the valuable assistance of the National
Association of Securities Dealers in a number of these cases.
SEC Encourages Investors to Get the Facts
Information is an investor's best tool for investing wisely
and avoiding fraud. But many microcap companies do not file
reports with the SEC, making it difficult to get the facts about
the company's management, products, services, and finances. When
reliable information is scarce, fraudsters can easily spread
false information about microcap companies--especially on the
Internet--making profits for themselves while creating losses for
unsuspecting investors.
"Get the facts before you invest--don't risk losing your
life savings to fraud," said Nancy M. Smith, Director of the SEC
Office of Investor Education and Assistance. "Sometimes, just
one phone call to your state securities regulator to check out
brokers and investments can save you from losing money."
Before investing in microcap stocks:
* Call your state securities regulator and ask whether the
broker and the firm are licensed and if there's a record of
complaints or fraud.
* Independently check the truth of every statement about the
company--especially in a press release or newsletter.
* Don't fall for promises of quick profits or guaranteed
returns, or be pressured to invest before you investigate.
* Get a free copy of the SEC brochure, "Microcap Stock: A
Guide for Investors" at www.sec.gov or by calling toll-free 1-800-
732-0330.
"Microcap Stock: A Guide for Investors"
<<www.sec.gov/consumer/microbro.htm>> explains how to find
information about companies, what to watch out for, and where to
turn if you run into trouble. For more practical tips on how to
invest wisely and avoid investment fraud, visit the SEC's Web
site at www.sec.gov.
List of Cases and SEC Contacts:
1. SEC v. American Telephone + Data, Inc. (contact Richard
Sauer 202-942-4777)
2. In the Matter of Gerald Hinshaw, CPA (contact Richard Sauer
202-942-4777)
3. In the Matter of American Telephone + Data, Inc. (contact
Richard Sauer 202-942-4777)
4. SEC v. Janson Capital (contact Spencer Barasch 817-978-6425)
5. SEC v. Barzilay (contact Jeannette Lewis 312-353-7410)
6. In the Matter of DelMar Financial Services (contact Brian
Ochs 202-942-4740)
7. In the Matter of Dynamic American Corp. (contact Daniel Shea
or Donald Hoerl 303-844-1030)
8. In the Matter of Jethro J. Barlow (contact Daniel Shea or
Donald Hoerl 303-844-1030)
9. SEC v. Lambert D. VanderTuig (contact Sandra Harris 323-965-
3962)
10. In the Matter of Fastlane Footwear (contact Sandra Harris
323-965-3962)
11. SEC v. First Entertainment Inc. (contact Daniel Shea or
Donald Hoerl 303-844-1030)
12. In the Matter of Morton B. Lempel (contact Daniel Shea or
Donald Hoerl 303-844-1030)
13. In the Matter of Jeffrey W. Berns (contact Daniel Shea or
Donald Hoerl 303-844-1030)
14. In the Matter of G. Bradley Taylor (contact Daniel Shea or
Donald Hoerl 303-844-1030)
15. In the Matter of Nicholas Catalano (contact Daniel Shea or
Donald Hoerl 303-844-1030)
16. SEC v. Kanakaris Communications, Inc. (contact Daniel Shea
or Donald Hoerl 303-844-1030)
17. In the Matter of National Stock Transfer, Inc. (contact
Daniel Shea or Donald Hoerl 303-844-1030)
18. In the Matter of Richmark Capital Corp. (contact Spencer
Barasch 817-978-6425)
19. SEC v. Edward A. Durante (contact Helane Morrison 415-705-
2450)
20. SEC v. Richard H. Steinberg (contact Daniel Shea or Donald
Hoerl 303-844-1030)
21. In the Matter of Energy Equities, Inc. (contact Daniel Shea
or Donald Hoerl 303-844-1030)
22. SEC v. Arete Industries, Inc. (contact Daniel Shea or Donald
Hoerl 303-844-1030)
23. In the Matter of Michael Reilly (contact Daniel Shea or
Donald Hoerl 303-844-1030)
24. In the Matter of John Kenna (contact Daniel Shea or Donald
Hoerl 303-844-1030)
25. In the Matter of Steven James Cook (contact Daniel Shea or
Donald Hoerl 303-844-1030)
26. SEC v. North American Corporate Consultants (contact Sandra
Harris 323-965-3962)
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