Yesterday the SEC filed civil charges against ZERO and Muller. In addition to the litigation release given below, the SEC has also provided a copy of the complaint online. The complaint can be found at sec.gov.
The litigation release:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17283 / December 19, 2001
SECURITIES AND EXCHANGE COMMISSION V. SAVE THE WORLD AIR, INC., JEFFREY ALAN MULLER, AND BILLY BLACKWELDER, Civil Action No. 01 CV 11586 (Judge Daniels) (S.D.N.Y.)
On December 19, 2001, the Securities and Exchange Commission ("SEC") filed civil charges in federal district court in New York, New York, against Save the World Air, Inc. ("STWA"), Jeffrey Alan Muller ("Muller"), and Billy Blackwelder ("Blackwelder"), alleging that they engaged in a fraudulent scheme to manipulate the market for stock in STWA, a public company controlled by Muller. The Defendants used the Internet to facilitate the fraud.
The defendants named in the Commission's action are:
STWA, a Nevada corporation headquartered in Australia with its principal offices in New York, New York. STWA's business purportedly involves the manufacture, licensing, and distribution of a device called the "Zero Emission Fuel Saver" ("ZEFS") device. According to STWA's public statements, the ZEFS device reduces emissions and improves fuel economy in motor vehicles. Until July 20, 2000, when the SEC temporarily suspended trading, STWA's stock was quoted on the over-the-counter bulletin board ("OTCBB") under the ticker symbol ZERO. Currently, STWA's common stock is quoted on the pink sheets.
Muller, who is Australian and a resident of Queensland, Australia. He served as the president and CEO of STWA.
Blackwelder, who is a resident of San Diego, California. Blackwelder served as a marketing consultant for STWA beginning in or about July 2000.
The SEC's complaint alleges that from at least February 1999 through at least April 2001, STWA and Muller carried out a fraudulent promotional campaign using press releases, Internet postings, an elaborate Internet website, and televised media events to disseminate false and materially misleading information about STWA's product and commercial prospects. STWA's and Muller's actions led to the artificial inflation of the price and trading volume of STWA stock, causing its market capitalization to be as much as $218,728,062. The promotional information distributed by STWA and Muller included: (1) announcements of significant licensing agreements and other important business developments, and (2) announcements concerning public automotive demonstrations that purportedly proved or would prove that the ZEFS materially reduces emissions and improves fuel economy in motor vehicles. In fact, the purported licensing agreements and other purported business events simply did not exist, and the ZEFS demonstrations did not prove that the ZEFS actually worked as represented. At the same time he publicly promoted STWA, Muller privately sold millions of shares of restricted STWA stock that, if sold at then-prevailing market prices, would have provided him with over $9 million in personal profits. He concealed these sales by failing to disclose in Commission filings, as required, any changes in his beneficial ownership in STWA. Finally, STWA and Muller made at least nine SEC filings that contain false financial statements and disclosures. For example, STWA reported $125,000 in revenue for the sale of a license that in fact it never sold, thus causing its revenues (which otherwise never were reported to be more than $10,000 throughout the entire relevant period) to be materially overstated.
The complaint further alleges that Blackwelder engaged in at least part of the manipulative scheme. He prepared and arranged to have issued at least one false press release announcing a major licensing deal, when in fact no such deal existed. Blackwelder also posted positive messages on Raging Bull, an Internet message board, without making required disclosures about compensation he received from STWA for his promotional activities.
The complaint charges STWA and Muller with violations of the antifraud and reporting provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933 ("Securities Act"); Sections 10(b), 13(a), and 13(b) of the Securities Exchange Act of 1934 ("Exchange Act"); and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder. The complaint also alleges that Muller violated Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder. The complaint charges Blackwelder with violations of the antifraud provisions, Section 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder.
In a separate proceeding, the SEC issued a cease-and-desist order on consent against former STWA promoter Dennis Wilson of Longwood, Florida. Wilson, whom the Commission found to have made Internet postings touting STWA without making required disclosures concerning his compensation for such activity, agreed, without admitting or denying the Commission's findings, to cease and desist from committing violations of Section 17(b) of the Securities Act.
For tips on how to avoid Internet investment schemes, visit sec.gov.
For more information about Internet fraud, visit sec.gov.
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SEC Complaint in this matter.
sec.gov |
