2. Cruttenden Roth Incorporated
Cruttenden Roth Incorporated (which has changed its name to Roth Capital Partners, Inc.) is registered with the Commission as a broker-dealer, and maintains an office in Newport Beach, California.
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
Securities Act of 1933
Release No. 7951 / February 9, 2001
Securities Exchange Act of 1934
Release No. 43947 / February 9, 2001
Administrative Proceeding
File No. 3-9208
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In the Matter of
JOHN L. BANACH, et al.
Respondents.
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ORDER MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS
AS TO TARIQ SAMAD KHAN
I.
On December 23, 1996, the U.S. Securities and Exchange Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 against Tariq Samad Khan ("Khan"), among others. Khan has submitted an Offer of Settlement for the purpose of disposing of the issues raised by this proceeding.
Khan consents to the entry of this Order Making Findings and Imposing Remedial Sanctions ("Order") solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and prior to hearing and without admitting or denying the findings set forth herein. The Commission has determined that it is appropriate and in the public interest to accept the Offer of Settlement from Khan, and accordingly is issuing this Order.
II.
FACTS
Based on the foregoing, the Commission finds that:1
A. Respondents
1. John L. Banach aka J. Leo Lawson
John L. Banach, who changed his name from J. Leo Lawson and from J. Lewicki is a resident of Calgary, Alberta, Canada. During the relevant time period, Lawson was the president and chief executive officer of Enrotek Corporation.
2. 381143 Alberta Ltd.
381143 Alberta Ltd. was a Canadian corporation which maintained an office in Calgary, Alberta, Canada during the relevant time period.
3. Robert Thomas Clawson
Robert Thomas Clawson is a resident of Long Beach, California. During the relevant time period, Clawson was a registered representative at Cruttenden Roth. Clawson was not charged with any criminal conduct.
4. Trent David Gribben
Trent David Gribben was a resident of Irvine, California. During the relevant time period, Gribben was a registered representative at First American Biltmore Securities. In connection with the matters described in this Order, among other things, Gribben pled guilty to one count of conspiracy to commit securities fraud, and was subsequently sentenced to one year and one month of incarceration in U.S. v. Nance, et al., Case No. CR-S-96-271 (D. Nev. 1996).
5. Tariq Samad Khan
Tariq Samad Khan is a resident of Anaheim, California. During the relevant time period, Khan was a registered representative at Cruttenden Roth. Khan was not charged with any criminal conduct.
6. Terry Lee Lewis
Terry Lee Lewis was a resident of Irvine, California. During the relevant time period, Lewis was a registered representative, as well as a branch manager, at First American Biltmore Securities. In connection with the matters described in this Order, among other things, Lewis pled guilty to one count of conspiracy to commit securities fraud, and was subsequently sentenced to one year and one month of incarceration in U.S. v. Nance.
7. Ronald Troy Mikulka
Ronald Troy Mikulka is a resident of Newport Beach, California. During the relevant time period, Mikulka was a registered representative at First American Biltmore Securities, Inc. and later an employee and minority owner of Woodbridge & Associates. In connection with the matters described in this Order, among other things, Mikulka pled guilty to one count of conspiracy to commit securities fraud, and was subsequently sentenced to a period of three years of probation in U.S. v. Nance.
8. Reagan Burton Richmond
Reagan Burton Richmond is a resident of Tustin, California. During the relevant time period, Richmond was a registered representative at Cruttenden Roth Inc. In connection with the matters described in this Order, among other things, Richmond pled guilty to one count of conspiracy to commit securities fraud, and was subsequently sentenced to a period of six months of home detention and four years of probation in U.S. v. Richmond, Case No. 98-447(ILG) (E.D.N.Y. 1998).
9. Randle William Villa
Randle William Villa was a resident of Lake Forest, California. During the relevant time period, Villa was an assistant to, and functioned as, a registered representative at First American Biltmore Securities. Villa was not charged with any criminal conduct.
10. Kevin Lee Woodbridge
Kevin Lee Woodbridge is a resident of San Clemente, California. Woodbridge paid various brokers to sell shares of Enrotek Company, as well as stock in other companies during the relevant time period. In connection with the matters described in this Order, among other things, Woodbridge pled guilty to securities fraud under Section 10b of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and was subsequently sentenced to a period of one year and one day of incarceration in U.S. v. Nance.
11. Woodbridge & Associates
Woodbridge & Associates was a California corporation with offices in Newport Beach, California during the relevant time period. Kevin Woodbridge was its president, chief executive officer and majority owner.
B. Other Relevant Individuals and Entities
1. Enrotek Corporation
Enrotek Corporation is a Nevada Corporation which maintained offices in Calgary, Alberta Canada during the relevant time period. Enrotek's only significant asset consists of a parcel of undeveloped land near Lisbon, Portugal. Enrotek's common stock was registered with the Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and traded in the over-the-counter markets. The price of Enrotek stock has always been less than $5.00 per share. Therefore, Enrotek stock is considered penny stock for the purpose of Section 15(b)(6) of the Exchange Act [17 C.F.R. §240.3a51-1(f)].
2. Cruttenden Roth Incorporated
Cruttenden Roth Incorporated (which has changed its name to Roth Capital Partners, Inc.) is registered with the Commission as a broker-dealer, and maintains an office in Newport Beach, California.
3. First American Biltmore Securities, Inc.
First American Biltmore Securities was registered with the Commission as a broker-dealer, and maintained an office in Costa Mesa, California during the relevant time period.
4. Dennis Williams
Dennis Williams was a resident of Las Vegas, Nevada and paid various brokers to sell stock in various companies during the relevant time period.
C. The Fraudulent Scheme
1. During the period from September 1991 through December 1992, Respondents Banach, Clawson, Gribben, Khan, Lewis, Mikulka, Richmond, Villa, Woodbridge, Woodbridge & Associates and 381143 Alberta Ltd. participated in a scheme whereby Banach, Woodbridge and Williams caused Clawson, Gribben, Khan, Lewis, Mikulka, Richmond and Villa, among others, to sell Enrotek common stock to their customers in return for secret payments which were not disclosed to their customers.
2. On or about September 25, 1991, Banach on behalf of 381143 Alberta Ltd., and Woodbridge, on behalf of Woodbridge & Associates, entered into an agreement, which provided that Woodbridge was to establish an over-the-counter market for Enrotek stock and use his best efforts to cause the stock to trade at specified target prices and at specified volumes. As part of the scheme, Woodbridge was to sell Enrotek stock for 381143 Alberta Ltd.
3. During the period from about the date of the agreement through December 31, 1992, Banach, indirectly, and Williams, Woodbridge and, in one instance, Mikulka, directly, made payments of money to registered representatives at First American Biltmore Securities and Cruttenden Roth, including respondents Clawson, Gribben, Khan, Lewis, Mikulka, Richmond and Villa, in exchange for purchases by their customers of Enrotek stock.
4. Banach, Woodbridge and Mikulka, as well as Williams, solicited registered representatives to participate in payment arrangements and verified the purchases made by customers. The respondents Banach and Alberta and other affiliates of Enrotek, on behalf of Enrotek, arranged for funds to be made available to make the payments to the registered representatives and Banach authorized specific payments.
5. These respondents neither disclosed the payments nor caused disclosure of the payments to be made to the customers to whom recommendations to purchase Enrotek stock were made or the customers who purchased such stock.
6. As a result of certain of these and other acts, respondents Gribben, Lewis, Mikulka and Woodbridge were indicted in U.S. v. Nance, and respondent Richmond was indicted in U.S. v. Richmond, which were criminal proceedings in the U.S. District Court for the District of Nevada and the Eastern District of New York, respectively.
7. In U.S. v. Nance, respondent Gribben pled guilty to one count of conspiracy to commit securities fraud, and was sentenced to one year and one month of incarceration; respondent Lewis pled guilty to one count of conspiracy to commit securities fraud, and was sentenced to one year and one month of incarceration; respondent Mikulka pled guilty to one count of conspiracy to commit securities fraud, and was sentenced to a period of three years of probation; and respondent Woodbridge pled guilty to securities fraud and was sentenced to a period of one year and one day of incarceration. In U.S. v. Richmond, respondent Richmond pled guilty to one count of conspiracy to commit securities fraud, and was sentenced to a period of six months of home detention and four years of probation.
III.
FINDINGS
Section 17(a) of the Securities Act of 1933 provides that "it shall be unlawful for any person in the offer or sale of securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly (1) to employ any device, scheme or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (3) to engage in any transaction, practice or course of business which operates or would operate as a fraud or deceit upon the purchaser."
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, prohibit any person from using any means or instrumentality of interstate commerce, the mail or any facility of any national security exchange "(1) to employ any device, scheme or artifice to defraud, (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (3) to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security."
Based on the above, the Commission finds that Khan willfully violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
IV.
ORDER
Accordingly, IT IS HEREBY ORDERED that, Khan:
A. be, and hereby is, barred from association with any broker or dealer, and from participating in any offering of penny stock.
B. pay disgorgement in the amount of $12,000, plus prejudgment interest in the amount of $13,500;
C. pay a civil money penalty of $12,000;
D. pay the disgorgement, interest and civil money penalty as follows: $1,500 within ten (10) days of the entry of the Order, and six payments of $6,000 each, on March 15, 2001, April 15, 2001, May 15, 2001, June 15, 2001, July 15, 2001 and August 15, 2001, by U.S. Postal money order, certified check, bank cashier's check, or bank money order, made payable to the Securities and Exchange Commission, and shall transmit the payment either by hand-delivery or certified mail (return receipt requested) to: The Office of the Comptroller, U.S. Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop 0-3, Alexandria, VA 22312, under cover of a letter that identifies the respondent and the name and file number of this proceeding. A copy of the cover letter and of the form of payment shall be simultaneously transmitted to Scott W. Friestad, Assistant Director, Division of Enforcement, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0708.
By the Commission.
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Jonathan G. Katz
Secretary
Footnote
1 The findings herein are made pursuant to Khan's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.
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Last update: 02/14/2001 |
