UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 8161 / December 11, 2002
SECURITIES EXCHANGE ACT of 1934
Release No. 46987 / December 11, 2002
File No. 3-10843
In the Matter of
|ORDER MAKING FINDINGS AND IMPOSING A CEASE-AND-DESIST ORDER AND REMEDIAL SANCTIONS
The Securities and Exchange Commission ("Commission") deems it appropriate to accept the Offer of Settlement ("Offer") submitted by Rodona Garst ("Garst" or "Respondent") pursuant to Rule 240(a) of the Rules of Practice of the Commission, 17 C.F.R. § 201.240(a), for the purpose of settlement of this public cease-and-desist proceeding instituted by the Commission against her on July 24, 2002, pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act").
Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and, without admitting or denying any of the findings contained herein, except as to the jurisdiction of the Commission over her and over the subject matter of these proceedings, which is admitted, Garst consents to the entry by the Commission of this Order.
On the basis of this Order and the Offer submitted by Garst, the Commission finds that:
- Rodona Garst is a Tennessee resident. She is the president and sole employee of Premier Marketing, a Tennessee corporation that performs direct marketing services.
- Between approximately September 1999 and May 2000, Garst disseminated large numbers of unsolicited "spam" e-mail messages touting four stocks. A third party, Mark E. Rice ("Rice"), wrote the messages and reviewed them before their dissemination. All of the messages contained complete or partial copies of recent press releases, including fraudulent press releases previously issued by two of the companies. The spams also contained baseless stock price projections. Many of the spams purported to be "strong buy" recommendations, and several purported to be misdirected "hot stock tips" intended for a friend of the sender, e.g., "Hey Tim, I followed the advice of these guys last time."
- Rice, who was acting as an underwriter, paid Garst $1,500 per million e-mail messages she sent. Shortly after dissemination of the messages, Rice sold large amounts of stock of three of the four companies. After disseminating the spam e-mails, Garst sold stock in three of the companies, which she had previously obtained through open market purchases, for profits of $3,343.
- The messages written by Rice and disseminated by Garst contained numerous false and misleading statements, concerning, among other things, the companies' products, revenue sources and business relationships with third parties, and the stock-picking track record and trading intentions of the person(s) sending the e-mail messages. Rice and Garst knew, or were reckless in not knowing, that these statements were false. Among other things, Rice violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 1
- Garst initially gave false sworn testimony to the Commission staff about her role regarding the e-mail messages. Garst later recanted her previous testimony.
- Garst was a cause of Rice's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by disseminating e-mails that contained false and misleading statements, which are described in Paragraph III. A. through III. D., above.
- Garst violated Section 17(b) of the Securities Act by giving publicity to three of the companies without disclosing the compensation she received from the third party who was acting as an underwriter regarding these companies.
Respondent Garst has submitted an Offer of Settlement in which, without admitting or denying the findings herein, she consents to the Commission's entry of this Order, which: (1) makes findings, as set forth above; (2) orders Garst to cease and desist from committing or causing any violation, or any future violation, of certain provisions of the federal securities laws, as set forth below; and (3) orders Garst to pay disgorgement, plus reasonable interest, of $15,673.
On the basis of the foregoing, the Commission deems it appropriate to accept Respondent's Offer.
- IT IS ORDERED, pursuant to Section 21C of the Exchange Act and Section 8A of the Securities Act, that Garst cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 17(b) of the Securities Act.
- IT IS ORDERED that Garst shall pay disgorgement of $13,543, representing her profits from the sale of stock and certain touting fees, plus reasonable interest of $2,130; and that Garst shall pay the full amount of $15,673 to the United States Treasury, as follows: (1) $5,224 shall be due and payable within (30) days of the entry of the Order; (2) $5,224, plus post-judgment interest through the date of payment calculated at the rate of interest set forth in Rule 600(b) of the Commission's Rules of Practice [17 C.F.R. § 201.600(b)], shall be due and payable in full on or before 6 months from the entry of the Order; and (3) $5,224, plus post-judgment interest through the date of payment calculated at the rate of interest set forth in Rule 600(b) of the Commission's Rules of Practice [17 C.F.R. § 201.600(b)], shall be due and payable in full on or before one year from the entry of the Order. Interest shall continue to accrue on all funds owed until they are paid. Such payments shall be: (1) made by United States postal money order, certified check, bank cashier's check, or bank money order; (2) made payable to the Securities and Exchange Commission; (3) delivered to the Office of Financial Management, Securities and Exchange Commission, 450 Fifth Street, N.W., Mail Stop 0-3, Washington, D.C. 20549; and (4) submitted under cover letter which identifies Garst as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Michael R. MacPhail, Deputy Assistant Regional Director, Securities and Exchange Commission, 1801 California Street, Suite 1500, Denver, CO 80202.
By the Commission.
Jonathan G. Katz
|1 ||On February 22, 2002, the Commission filed an action in federal district court captioned SEC v. Mark E. Rice et al., Civ. No. H:02CV00636 (S.D. Tex.), alleging violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Regulation M, Rule 101.|