Another feather out of your cap?
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 15952 / October 27, 1998
SECURITIES AND EXCHANGE COMMISSION v. BRIAN M. VOLMER, JOHN
R. SWITZER, INTERNATIONAL ALLIANCE TRADING, INC., and SUN
PACIFIC CAPITAL GROUP, INC., Civil Action No. 98-
8698JFL(MCX)(West. Div.)(C.D. Cal. October 27, 1998).
SEC SUES PROMOTERS WHO TOUTED STOCK
ON THE INTERNET AND IN NEWSPAPER ADVERTISEMENTS
In a case that illustrates the migration of illegally
conducted stock touting from traditional print media to the
internet, the Securities and Exchange Commission today
announced that it had filed a civil injunctive action
against four southern California defendants involved in
promoting the stock of microcap issuers. The complaint
alleges that the defendants -- Brian M. Volmer, John R.
Switzer, International Alliance Trading, Inc.
("International Alliance"), and Sun Pacific Capital Group,
Inc. ("Sun Pacific") -- accepted stock and cash payments
from the issuers in exchange for favorable and purportedly
independent reviews published in three newspaper
advertisements and, later, on the internet website
"Investors Edge."
The Commission's complaint, filed in the United States
District Court for the Central District of California,
alleges that Volmer, through his company, International
Alliance, wrote and placed a newspaper advertisement touting
the stock of Cetacean Industries, Inc., a company that
claimed to be engaged in diamond exploration and mining in
Brazil. Crafted to appear as an independent research
report, the advertisement appeared in Investor's Business
Daily on October 17, 20 and 24, 1997. The complaint alleges
that the advertisement failed to disclose that International
Alliance had received options to buy Cetacean shares in
exchange for promoting its stock, in violation of Section
17(b) of the Securities Act of 1933 ("Securities Act").
That provision of the Securities Act requires that anyone
giving publicity to a security in return for compensation
from an issuer or underwriter must disclose the receipt and
amount of that compensation.
In addition, the complaint alleges that, in two
versions of the advertisement, Volmer and International
Alliance knowingly or recklessly misrepresented that
Cetacean's stock had been the subject of a buy
recommendation issued by a prominent, New York-based
investment management firm, when, in fact, that firm had
neither issued a buy recommendation for Cetacean nor
authorized the use of its name in the advertisement. The
complaint also alleges that Volmer and International
Alliance knowingly or recklessly misrepresented that the
issuer had acquired the mineral and mining rights to a
certain Brazilian property, which was described as
containing a minimum of two million carats and yielding
minimum revenues of $40 million. The complaint further
alleges that, acting contrary to their simultaneous buy
recommendation to public investors, Volmer and International
Alliance sold the shares they had received as compensation
from Cetacean, profiting in excess of $64,000. As a result,
the complaint alleges that Volmer and International Alliance
violated the anti-fraud provisions of the federal securities
laws, specifically Section 17(a) of the Securities Act, and
Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder.
The Commission's complaint also alleges that Volmer,
Switzer and Sun Pacific violated Section 17(b) of the
Securities Act in connection with an on-line research report
posted on "Investors Edge," an internet website that Volmer
and his company, Sun Pacific, began operating this year.
Prepared by Volmer and Switzer, Investors Edge has posted
purported research reports touting the stocks of several
microcap issuers, including Juina Mining Corporation, whose
principal assets are the Brazilian diamond operations
previously owned by Cetacean. The complaint further alleges
that the Juina Mining report, which first was posted in or
about July of this year, failed adequately to disclose the
full extent of the compensation that the defendants had
received, directly and indirectly, from the issuer in
exchange for touting its stock.
In its complaint, the Commission seeks an injunction
against the defendants to prevent further violations of the
federal securities laws, disgorgement of undisclosed
compensation, prejudgment interest, and civil penalties.
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 Enforcement Complaint Center on the
Enforcement Division link of the SEC Home Page
<www.sec.gov>. Investors can also mail a report to the SEC
Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth
Street, Washington, D.C. 20549.
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