CIVIL ACTION AGAINST NET WORLD MARKETING, INC., ET AL.
On November 7, Judge Wesley Brown, U.S. District Judge for the District of Kansas, Wichita Division, issued various emergency orders sought by the U.S. Securities and Exchange Commission (the Commission) to halt a securities fraud scheme that targeted victims throughout the Untied States, by various means, including the Internet. According to the Commission's complaint, the defendants raised over $1.3 million from at least 1,000 investors by selling unregistered securities of microcap companies. As part of their scheme, the Defendants caused the securities of two companies to be publicly traded, and then used the Internet, press releases and certain offering materials to distribute false information in an effort to inflate the share price of these companies.
The named Defendants and Relief Defendant are:
. Edward B. Williamson III (Williamson), age 53, a securities recidivist, is a resident of Wichita, Kansas, and the owner and controlling officer of Defendant Fifth Avenue Communications, Inc. and Relief Defendant AGE Investment Company. Williamson is also an officer, director or undisclosed person of New Horizons, Andros Hotel and Casino, Inc., and Net World Marketing, Inc.
. Fifth Avenue Communications, Inc. (Fifth Avenue), is a domestic business corporation formed in 1996 within the State of New York, but operated by Williamson from Wichita, Kansas. A purported public relations firm, Fifth Avenue operates an Internet website known as www.stocksfifthavenue.com which is registered to Williamson.
. Net World Marketing, Inc. (Net World), is a Nevada corporation formed in 1997 with its only officer being Williamson's wife, Georganna Williamson. Net World claims to operate an Internet shopping mall. Edward Williamson is an authorized signatory for a Net World bank account. . Andros Hotel and Casino, Inc. (Andros), is a Nevada corporation. Andros claims to own two tracts of undeveloped land located in the Caribbean. Its headquarters is an office in Wichita, Kansas that is also utilized by Net World and Fifth Avenue.
. AutoAuction.com, Inc. (AutoAuction), is a Nevada corporation. The Fifth Avenue website claims that AutoAuction operates Internet car auctions.
. AGE Investment Company (AGE), is named solely as a relief defendant. It is located in the same Wichita, Kansas office as Williamson and the other corporate Defendants. Williamson is the sole officer of AGE, and the AGE bank records indicate that AGE received $307,806 of Net World investor proceeds for no apparent consideration.
In its lawsuit, filed today, the Commission sought and the Court granted emergency orders: (1) freezing the assets of the Defendants; (2) freezing the assets of Relief Defendant AGE, received, directly or indirectly, from the activities described in the Commission's complaint; (3) requiring the Defendants and Relief Defendant to furnish an accounting of monies raised from investors; (4) prohibiting the destruction of documents; (5) authorizing expedited discovery; and (6) appointing a receiver to recover assets for the benefit of investors.
The Commission's lawsuit alleges that from at least April of 1997 to the present, Defendant Williamson organized a fraudulent scheme involving the Defendants, who singularly or in concert, fraudulently sold $1.3 million of securities to over 1000 investors nationwide. The lawsuit alleges that the Defendants provided investors with false and misleading information, and failed to disclose information that was material. During the course of the securities sales, investors were not informed of the key role Williamson played with the Defendant companies. This nondisclosure was significant because of Williamson's extensive criminal and regulatory history which includes: a 1997 wire fraud conviction for attempting to bribe Federal Bureau of Investigation (FBI) agents posing as stock brokers; expulsion from the financial services industry by the National Association of Securities Dealers in 1993; a 1992 conviction for felony theft of funds from his elderly mother; and a 1967 conviction for murder. In connection with his 1997 wire fraud conviction, the Commission, on June 13, 2000, ordered Williamson to cease-and-desist from committing securities fraud and barred him from participation in penny stock offerings.
Additionally, the investors were falsely told that the proceeds from these offerings would be used by the companies for legitimate business purposes. The lawsuit alleges that the approximately one-half of the $1 million raised in the Net World offering, alone, was siphoned off and misappropriated by Williamson and other persons and entities connected with him
Following the unregistered sales of common stock of Andros, Net World and New Horizons, Defendants caused the stock of Andros and AutoAuction to be publicly traded, as penny stocks, through listings on the Pink Sheets. The Defendants then attempted to manipulate the value of the securities by disseminating false information via the Internet and press releases.
The SEC's complaint charges that Defendants violated Section 17(a) of the Securities and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Further, the complaint charges that Defendant Williamson failed to comply with the terms of the Commission's June 13, 2000 Order Making Findings, Imposing Remedial Sanctions and Imposing a Cease-and-Desist Order, In the Matter of Edward B. Williamson III, which ordered that Williamson cease-and-desist from violations of 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and also barred him from participating in penny stock offerings. In addition to the emergency relief set out above, the Commission is seeking preliminary and permanent injunctions, disgorgement and civil penalties against all Defendants, and disgorgement from the Relief Defendant. Additionally, The Commission is seeking an Order requiring Defendant Williamson to comply with the terms of the prior order issued by the Commission, as set forth in the Commission's Compliant, and an Order barring him from acting as an officer or director of a public company.
The Commission wishes to acknowledge the assistance of the State of Kansas in this matter. The case was investigated jointly by the Commission and the Office of the Kansas Securities Commission.
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 SEC Home Page www.sec.gov. Investors can also mail a report to SEC's Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth Street, N.W., Washington, D.C. 20549. [SEC v. Net World Marketing, Inc., New Horizons Airways, Inc., AutoAuction.com, Inc., Andros Hotel and Casino, Inc., Fifth Avenue Communications, Inc, and Edward B. Williamson III, Defendants; and Age Investment Company, Relief-Defendant, Civil Action
No. 00-1459WEB; USDC/KS/WICHITA DIVISION] (LR-16794)
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