thesubway.com profiled by SEC
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18286/August 13, 2003
SECURITIES AND EXCHANGE COMMISSION v. DAVID GANE, JEFFREY D. WELSH, SOUTHERN FINANCIAL SERVICES, INC., SOUTHERN WASTE, INC., DBA STRATEGIC INVESTORS GROUP, CHARLES T. TAMBURELLO, AND CAPITAL RESEARCH GROUP, INC., Civil Action No. 03-61533-CIV-SEITZ (S.D. Fla.)
COMMISSION CHARGES FORMER HEAD OF DICOM IMAGING SYSTEMS, INC. AND FIVE FLORIDA PROMOTERS IN FRAUDULENT STOCK MANIPULATION
On August 13, 2003, the Securities and Exchange Commission ("Commission") filed civil charges in federal district court in Miami, Florida against the former president of Dicom Imaging Systems, Inc. (OTCBB: DCIM), and five Florida stock promoters, alleging that they used the Internet, press releases, spam e-mails, and televised interviews to commit securities fraud through baseless financial projections and the stock promoters' "scalping." Scalping is the practice of recommending the purchase of a stock to the general public while selling the stock at or near the same time. The Commission's complaint also alleges that the promoters touted Dicom's stock but did not disclose all of the compensation they were to receive pursuant to signed agreements.
The Commission's complaint names the following defendants:
David Gane, D.D.S., age 49, of White Rock, British Columbia, Canada. Gane was Dicom's president, CEO, and a member of the board of directors. Dicom was a provider of dental imaging software from 1999 to 2001 but has ceased operations.
Jeffrey D. Welsh, age 53, of Boca Raton, Florida. Welsh wrote investment opinions about Dicom.
Southern Financial Services, Inc. ("SFS"), a Florida financial consulting firm run by Welsh that issued investment opinions.
Southern Waste, Inc., dba Strategic Investors Group ("SIG"), a Florida financial public relations firm run by Welsh that issued investment opinions.
Charles T. Tamburello, age 30, of Weston, Florida. Tamburello wrote investment opinions about Dicom.
Capital Research Group, Inc. ("CRG"), a Florida investor relations firm run by Tamburello, which operates www.thesubway.com website. CRG issued investment opinions about Dicom.
The Commission's complaint alleges that Gane had Dicom hire the stock promoters in June and November 1999 to tout Dicom's stock in return for compensation. Gane supplied the promoters with Dicom's financial projections for the next three years: $24.7 million in revenues and $19.7 million in earnings. Two of the promoters, Welsh and Tamburello, each wrote investment opinions that described Dicom as an investment and set progressively higher targets for its stock price. Welsh issued his investment opinions through SFS and SIG, while Tamburello issued his investment opinions through CRG. In January 2000, Dicom announced that it was restating its financial results for the third quarter of fiscal 1999 from a gain to a loss. Nevertheless, the stock promoters continued to repeat the projections in their investment opinions and set even higher targets for Dicom's stock price. In addition, Gane, who had approved the announcement about the restatement, publicly announced even higher three-year revenue projections in January 2000, $50 million and $60 million, during interviews broadcast on television and over the Internet. Dicom's stock price increased from $5.08 per share, when trading began in November 1999, to a high of $36 in March 2000.
The Commission's complaint also alleges that the stock promoters failed to disclose all of the compensation they were to receive under the agreements signed with Dicom and that they engaged in scalping, resulting in their receipt of over $1.1 million in trading proceeds.
The Commission seeks to enjoin Gane, Welsh, SFS, SIG, Tamburello, and CRG from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and to enjoin Welsh, SFS, SIG, Tamburello, and CRG from future violations of Sections 17(a) and 17(b) of the Securities Act of 1933. The Commission also seeks civil penalties against each of the defendants and disgorgement of ill-gotten gains with prejudgment interest from Welsh, SFS, SIG, Tamburello, and CRG. Finally, the Commission seeks a court order permanently barring Gane from serving as an officer or director of a public company.
SEC Complaint in this matter
sec.gov
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