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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act of 1934
Release No. 41966 / September 30, 1999

Administrative Proceeding
File No. 3-10071

 
______________________________
                              :
     In The Matter Of         : ORDER INSTITUTING PUBLIC
                              : ADMINISTRATIVE PROCEEDINGS
       David E. Houge,        : PURSUANT TO SECTIONS 15(b)(6)
                              : AND 19(h) OF THE SECURITIES
        Respondent.           : EXCHANGE ACT OF 1934,
                              : MAKING FINDINGS, AND IMPOSING
                              : REMEDIAL SANCTIONS
______________________________                              

I.

The Securities and Exchange Commission ("Commission") deems it appropriate, in the public interest and for the protection of investors that a public administrative proceeding pursuant to Sections 15(b)(6) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") be, and hereby is, instituted against respondent David E. Houge ("Houge").

II.

In anticipation of the institution of these proceedings, Houge has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding, and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings set forth herein, except as to the entry of the permanent injunction set forth in paragraph III. F. below, and the jurisdiction of the Commission over him and over the matters set forth in this Order Instituting Public Administrative Proceedings Pursuant to Sections 15(b)(6) And 19(h) Of The Securities Exchange Act Of 1934, Making Findings, And Imposing Remedial Sanctions ("Order"), which he admits, Houge consents to the entry of the findings and the imposition of the sanctions set forth in this Order.

III.

On the basis of this Order and Offer, the Commission finds that:

A. Houge is 52 years-old and was a resident of Nyack, New York at all relevant times.

B. Houge was an undisclosed owner and control person of First National Equities, Inc. ("First National"), a registered broker-dealer which is now defunct, from approximately May to December 1997.

C. Legend Sports, Inc. ("Legend") was at all relevant times a non-reporting company, whose stock was registered with the Commission pursuant to Section 15(d) of the Exchange Act. Legend's common stock was traded over the counter and quoted on the OTC Bulletin Board. The common stock of Legend was not registered or approved for registration upon notice of issuance on a national securities exchange, nor was such security authorized, or approved for authorization upon notice of issuance, for quotation on an automated quotation system sponsored by a registered securities association, nor was such security issued by a registered investment company. During certain times relevant to this matter, the price of Legend common stock was less than five dollars per share. At no time relevant to this matter did Legend have net tangible assets in excess of $2,000,000 nor average revenue of $6,000,000 for a three year period.

D. Orlando Super Card, Inc. ("Orlando") was at all relevant times a non-reporting company, whose stock was registered with the Commission pursuant to Section 15(d) of the Exchange Act. Orlando's common stock was traded over the counter and quoted on the OTC Bulletin Board. The common stock of Orlando was not registered or approved for registration upon notice of issuance on a national securities exchange, nor was such security authorized, or approved for authorization upon notice of issuance, for quotation on an automated quotation system sponsored by a registered securities association, nor was such security issued by a registered investment company. During certain times relevant to this matter, the price of Orlando common stock was less than five dollars per share. At no time relevant to this matter did Orlando have net tangible assets in excess of $2,000,000 nor average revenue of $6,000,000 for a three year period.

E. City Services Corp. ("City Services") was at all relevant times a non-reporting company, whose stock was not registered with the Commission pursuant to Section 15(d) of the Exchange Act. City Service's common stock was not publicly traded. The common stock of City Services was not registered or approved for registration upon notice of issuance on a national securities exchange, nor was such security authorized, or approved for authorization upon notice of issuance, for quotation on an automated quotation system sponsored by a registered securities association, nor was such security issued by a registered investment company. During all times relevant to this matter, the price of City Services common stock was less than five dollars per share. At no time relevant to this matter did City Services have net tangible assets in excess of $2,000,000 nor average revenue of $6,000,000 for a three year period.

F. On June 16, 1999, the Commission filed a complaint in the United States District Court for the Eastern District of New York, SEC v. David E. Houge, 99 Civ. 3378 (NG) against Houge. On July 8, 1999, the Court entered a Partial Final Consent Judgment of Permanent Injunction and Other Relief as to Houge, that: (1) permanently enjoined Houge from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and, as a controlling person, against violations of Section 15(c) of the Exchange Act and Rules 10b-3 and 15c1-2 thereunder; and (2) barred Houge from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Houge consented to the entry of the Partial Final Consent Judgment of Permanent Injunction and Other Relief against him without admitting or denying the allegations in the Complaint.

G. The Commission's complaint alleged, among other things, that:

1) From in or around May 1997 until December 1997 Houge and others acted as undisclosed owners and control persons of First National;

2) From in or around May 1995 through November 1997, Houge and others orchestrated the manipulations of three publicly traded micro-cap stocks, Auxer, Legend and Orlando by: (a) artificially increasing the bid price for the stock through his domination of the publicly traded stock; (b) concealing his control of the publicly traded stock by acquiring and holding the stock in various brokerage accounts in nominee names; and (c) artificially supporting the market prices of Auxer, Legend and Orlando stock by making undisclosed cash payments to registered and unregistered salespeople associated with various broker-dealers, including First National, for recommending Auxer, Legend and Orlando stock to retail customers;

3) From May 1995 until December 1995, Houge acquired Auxer securities through a purported private placement with the intention of reselling them to the public and then resold those shares into the market, while no registration statement was in effect as to those securities; and

4) From in or around November 1997 until March 1998, Houge and others participated in a fraudulent private placement offering in City Services, in which public investors were solicited to purchase nonexistent securities through a variety of fraudulent means. Houge, as an officer of City Services, withdrew investors' funds from a corporate bank account and cashed investors' checks and distributed these funds to those registered and unregistered salespeople associated with First National and another broker-dealer for recommending City Services securities to retail customers.

 

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to accept Houge's Offer and to impose the sanctions which are set forth in the Offer.

Accordingly, IT IS HEREBY ORDERED that:

1. Effective immediately, Houge be, and hereby is, barred from association with any broker or dealer; and

2. Effective immediately, Houge be, and hereby is, barred from participating in any offering of penny stock, including: (i) acting as a promoter, finder, consultant, agent or issuer for purposes of the issuance of 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
Secretary

http://www.sec.gov/litigation/admin/34-41966.htm


Modified:09/30/1999