UNITED STATES OF AMERICA
|In the Matter of
LAMBERT D. VANDER TUIG
|ORDER ENTERING DEFAULT,
MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS ORDER INSTITUTING PUBLIC
This Proceeding was initiated by the Securities and Exchange Commission ("Commission") with an Order Instituting Public Administrative Proceeding Pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Order Instituting Proceedings"), on June 13, 2000. Based on the Order Instituting Proceedings and the files and records of this proceeding, I find that:
A. On June 13, 2000, the Office of the Secretary of the Commission ("Secretary") served by certified mail the Order Instituting Proceedings on Respondent Lambert D. Vander Tuig ("Vander Tuig").
B. The Secretary received a return receipt card signed and dated by Respondent Vander Tuig indicating that he received the Order Instituting Proceedings on June 16, 2000.
C. Respondent Vander Tuig has failed to answer or otherwise respond to the Order Instituting Proceedings within the time required by Rule 220 of the Commission's Rules of Practice, 17 C.F.R. § 201.220.
D. By motion dated July 20, 2000, and draft order dated July 28, 2000, the Division of Enforcement ("Division") moved for entry of default against Respondent Vander Tuig pursuant to Rule 155(a) of the Commission's Rules of Practice, 17 C.F.R. § 201.155(a). No opposition to the Division's motion for default or draft order has been filed and the time for filing an opposition has expired. Respondent is therefore in default.
In the Order Instituting Proceedings, the Division alleged that:
A. Vander Tuig, age forty-one, held Series 7, 63, and 65 licenses and worked as a registered representative with various brokers and dealers from 1988 through 1996. Vander Tuig was employed as a registered representative with Everen Securities, Inc. from December 9, 1994, to July 2, 1996, and with Hagerty, Stewart & Associates, Inc. from July 2, 1996, to September 5, 1996.
B. A Final Judgment of Permanent Injunction and Other Relief ("Final Judgment") was entered in the United States District Court for the Central District of California against Vander Tuig on March 27, 2000, pursuant to the Commission's motion for entry of judgment by default. The Final Judgment permanently enjoins Vander Tuig from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and requires Vander Tuig to pay disgorgement in the amount of $61,305 plus prejudgment interest, and to pay $61,305 in civil penalties. SEC v. Lambert D. Vander Tuig, Civil Action No. 99-7900 RAP (RCx) (C.D. Cal.).
C. The Commission's Complaint in the action referenced in paragraph II.B alleges that Vander Tuig engaged in an unregistered offering of the stock of Fastlane Footwear, Inc. ("Fastlane" or "the company"), a Michigan corporation located in Jackson, Michigan which designs, manufactures and markets licensed casual footwear. Specifically, the Complaint alleges that in December 1995 Vander Tuig agreed to help Fastlane's president raise capital for the company through the offer of common stock. To that end, the Complaint alleges that Fastlane's president delivered to Vander Tuig 1.2 million shares of common stock for distribution to investors. Furthermore, the Complaint alleges that, pursuant to Vander Tuig's direction, most of the shares were issued to and registered in the names of five nominees and then placed in five accounts in the names of the nominees at Equitrade Securities Corporation, a broker-dealer located in southern California. The Complaint further alleges that Vander Tuig had complete control over the Fastlane shares in these accounts and that he routinely issued instructions to the broker-dealer to buy and sell shares out of the accounts. According to the Complaint, between December 1995 and September 1996, Vander Tuig, using these five nominee accounts, sold approximately 493,000 shares of Fastlane stock to more than seventy investors in several states raising approximately $1,322,442 for the company. The Complaint alleges that none of the shares sold by Vander Tuig was sold pursuant to a registration statement filed with the Commission.
D. In addition to the allegations that Vander Tuig conducted an unregistered offering of Fastlane stock, the Commission's Complaint also alleges that Vander Tuig manipulated the market for the stock. Specifically, the Complaint alleges that, between June 26, 1996 and July 8, 1996, Vander Tuig manipulated the price of Fastlane stock, artificially raising the price of the stock 56%, from its initial sale price of $3.12 per share to $4.88 per share. By using his nominees, the Complaint alleges that Vander Tuig dominated and controlled the market for Fastlane stock, accounting for over 96% of the 126,404 shares traded during the relevant period. According to the Complaint, Vander Tuig drove up the price of the stock by falsely representing to investors that they were purchasing stock in the aftermarket of an initial public offering. Furthermore, the Complaint alleges that between July 2, 1996 and July 8, 1996, Vander Tuig knowingly engaged in four fraudulent "wash sale" transactions (transactions that involve no change in beneficial ownership) between two of the five nominee accounts. The Complaint alleges that Vander Tuig executed the wash sales to inflate the stock's price and create artificial volume.
E. After inflating the price of Fastlane stock, the Complaint alleges that Vander Tuig proceeded to dump the stock, selling 103,767 shares from his nominee accounts to investors at prices ranging from $3.12 to $4.88 per share for a total of $385,058. The price of the stock subsequently dropped, reaching its 52-week low of $1.25 per share on October 30, 1996.
In view of the foregoing, pursuant to Rule 155(a) of the Commission's Rules of Practice, 17 C.F.R. § 201.155(a), I find Respondent Vander Tuig in default in this proceeding and determine that the Division's allegations against Respondent Vander Tuig are true.
Accordingly, IT IS ORDERED that pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934, Respondent Lambert D. Vander Tuig is barred from association with any broker or dealer.1
James T. Kelly
Administrative Law Judge
| Section 19(h) of the Exchange Act also authorizes the Commission to bar a person from association with a member of a registered securities association or of a national securities exchange in certain circumstances. As noted above, paragraph III.B of the Order Instituting Proceedings invoked Section 19(h) as a source of potential remedial action here. However, on July 28, 2000, the Division requested only the narrower relief granted by this Order, and not the full range of possible sanctions. See Division's Proposed Order Entering Default, Making Findings and Imposing Remedial Sanctions.
By analogy to Federal Rule of Civil Procedure 54(c), I am constrained to grant relief no broader than that sought by the Division on July 28, 2000. See 10 Charles A. Wright et al., Federal Practice and Procedure § 2663, at 172 (1983) ("[A]t any point in a case a defendant is entitled to determine his maximum liability, as fixed by the ad damnum as it stands at that point in the case, and decide whether to proceed further. If defendant chooses not to proceed, liability cannot be increased."). The U.S. Court of Appeals for the Ninth Circuit, which has appellate venue over this proceeding, has been particularly strict in its interpretation of Rule 54(c). See Fong v. United States, 300 F.2d 400, 413 (9th Cir. 1962).
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