UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 41941 / September 29, 1999
File No. 3-10048
: ORDER INSTITUTING PUBLIC
: ADMINISTRATIVE PROCEEDINGS
In the Matter of : PURSUANT TO SECTION 15(b)
: THE SECURITIES EXCHANGE
CHARLES D. LEDFORD, : ACT OF 1934, MAKING FINDINGS,
: AND IMPOSING PENNY STOCK BAR
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be instituted against Charles D. Ledford ("Ledford" or "Respondent") pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act").
In anticipation of the institution of these proceedings, Ledford has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. 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 him and over the subject matter of these proceedings, and the matters set forth in paragraphs II.1. and II.3. below, and the entry of the injunction set forth in paragraph II.5. below, which are admitted, Ledford consents to the entry of this Order Instituting Public Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Penny Stock Bar (the "Order"), by the Commission.
Accordingly, IT IS HEREBY ORDERED that proceedings pursuant to Section 15(b) of the Exchange Act be, and hereby are, instituted.
On the basis of this Order and the Respondent's Offer, the Commission finds that:
1. Charles D. Ledford is the former president, director, Chief Financial Officer and Chief Executive Officer of ECO2, Inc. ("ECO2"), a Delaware corporation.
2. ECO2's common stock was a "penny stock" within the meaning of Sections 15(b)(6) and 3(a)(51) of the Exchange Act and Rule 3a51-1 thereunder. During at least 1995 through 1997, Ledford caused ECO2 to issue false and misleading press releases to the public in an effort designed to artificially inflate the stock price of ECO2 and to attract additional investors in ECO2 stock.
3. On February 12, 1999, the Commission filed a complaint in the United States District Court for the Northern District of Florida, SEC v. Charles D. Ledford, Case No. 1.99cv27-SPM (N.D. Fla. February 12, 1999), against Respondent (the "Complaint"). Among other things, the Complaint charged Respondent with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
4. The Commission's Complaint alleged, among other things, as follows:
a) Ledford is the former president, director, Chief Financial Officer and Chief Executive Officer of ECO2, a Delaware corporation. ECO2 was a development stage company incorporated in Delaware in 1991 and, until February 1997, was headquartered in Hawthorne, Florida. Ledford maintained practically exclusive control over ECO2 throughout the relevant time period.
b) ECO2 was established to provide solid waste tire management services to governmental, commercial and industrial entities, primarily through the sale of a "tire recovery system" developed and patented by Ledford. The tire recovery system utilized a pyrolysis process to recycle scrap tires into oil, carbon black, steel and methane gas by-products.
c) Ledford, through the company, purportedly intended to build and sell the tire recovery systems and to market the by-products of the recovery process. In fact, no tire recovery systems were ever sold by ECO2, which realized only limited income from the sale of scrap rubber and tipping fees.
d) ECO2's common stock was quoted on National Association of Securities Dealers, Inc.'s ("NASD") Over-the-Counter Bulletin Board since October 22, 1992. The NASD delisted ECO2 on May 23, 1997.
e) From at least 1995 to 1997, Ledford caused the company to issue false and misleading press releases to the public regarding negotiations between ECO2 and various entities for the purchase of ECO2's tire recovery systems, and at least one press release regarding present and future revenues of an ECO2 subsidiary, ECO Jet Systems, Inc. ("ECO Jet"). Ledford authorized all the false and misleading press releases. He was either directly quoted on the releases and/or was listed on the press releases as the point of contact regarding the releases. These material misrepresentations and omissions were deliberately designed to artificially inflate the stock price of ECO2, and attract additional investors in ECO2 stock.
f) On March 9, 1995, Ledford caused ECO2 to issue a press release announcing that senior officials of the South Korean Environmental Protection Agency were "studying a proposal to build a tire recycling plant using ECO2 pyrolysis technology." This press release was false because no such discussions had taken place with the South Korean Ministry of Environment or its subsidiary, the Korea Recovery and Reutilization Corporation, which was undertaking a tire recycling project with another U.S. company.
g) On March 27, 1995, Ledford caused the company to issue a press release announcing that the ECO2 representatives had engaged in serious discussions with representatives of U.S. Sugar Corporation ("U.S. Sugar") and Dade County Department of Solid Waste ("Dade County") for the sale of several tire recovery systems and that ECO2 "expect[ed] serious negotiations to begin in April." This press release was false because no such discussions ever took place between ECO2 and representatives of either U.S. Sugar or Dade County.
h) Similarly, on March 30, 1995, Ledford caused the company to issue a press release announcing that the State of Arizona Department of Solid Waste Management ("State of Arizona") had "begun negotiations with ECO2, Inc. to acquire several tire recycling pyrolysis plants at a cost of $5.3 million each." Ledford further stated that representatives of ECO2 had been "working with" executives at the State of Arizona for at least one year. In fact, there is no Arizona Department of Solid Waste Management. Rather, the Arizona Department of Environmental Quality ("ADEQ") exercises regulatory oversight of the waste tire facilities through its solid waste section, and no discussions or negotiations have ever taken place between ECO2 and representatives of ADEQ.
i) On April 3, 1995, Ledford caused the company to issue a press release announcing that Walt Disney World ("WDW") had "entered into negotiations with ECO2, Inc. to acquire one or two tire recycling systems at a cost of $5.3 million each." Ledford further stated that ECO2 had been "working with" representatives of WDW for at least six months. This press release was false because no discussions or negotiations between representatives of ECO2 and WDW ever took place.
j) On July 31, 1996, Ledford caused the company to issue a press release announcing that ECO2 had "received a signed sales contract from the Moscow Ministry of Finance ["MMF"] for the purchase of the first full-production ECO2 Tires-To-Energy Resource System." This press release was false because, inter alia, the MMF denied having entered any contracts with ECO2.
k) Ledford also caused ECO2 to issue false and misleading press releases concerning the volume of business and projected sales of its wholly-owned subsidiary, ECO Jet. In May, 1996, Ledford claimed that "[i]n a few short months, the Company has begun to build a dealer network and already [had] orders for $1,500,000 in jet ski sales." Ledford also projected anticipated sales of $32 million for the year 1997. Ledford overstated the orders for jet skis by nearly 45%. Moreover, there was no basis in fact for Ledford's $32 million projection for 1997 given the fact that ECO Jet was seriously undercapitalized, a fact Ledford failed to disclose in the press releases.
5. On June 21, 1999, without admitting or denying any of the allegations contained in the Commission's Complaint, except as to jurisdiction, Respondent consented to the entry of a final judgment of permanent injunction. On September 23, 1999, the Court permanently enjoined Respondent from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.
6. As a result of the conduct described in Section II, Ledford participated in an offering of penny stock.
On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Respondent's Offer.
Accordingly, it is ordered that:
Ledford be, and hereby is, barred from participating in any offering of a penny stock, including i) acting as a promoter, finder, consultant, or other person who engages in actions with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock; or ii) inducing or attempting to induce the purchase or sale of any penny stock.
By the Commission.
Jonathan G. Katz