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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. 43670 / December 5, 2000

ADMINISTRATIVE PROCEEDINGS
FILE NO. 3-10149

In the Matter of

WILLIAM J. NORDVIK,
JON F. WILLIAMS, AND
JOHN G. WRIGHT, JR.,

Respondents.



ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AGAINST JON F. WILLIAMS.

I.

On February 22, 2000, the Securities and Exchange Commission ("Commission") instituted public administrative and cease-and-desist proceedings pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against respondent Jon F. Williams ("Williams" or "Respondent") to determine whether he willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and, if so, what remedial sanctions, if any, were appropriate.

In response to the institution of these proceedings, Williams has submitted an Offer of Settlement ("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 in which the Commission is a party, and without admitting or denying the findings herein, except as to the jurisdiction of the Commission over him and the subject matter of the proceeding, which are admitted, Williams consents to the entry of the findings and remedial sanctions set forth below.

II.

On the basis of this Order and the Offer, the Commission makes the following findings:

A. Nature of Proceeding

This matter involves the use of matched trades to buy and sell stock in Orlando Super Card, Inc. ("Orlando"), an over-the-counter ("OTC") Bulletin Board stock, in a scheme similar to check kiting. These matched trades created an appearance of active trading in Orlando stock and incrementally increased the price of the stock. Orlando was a small company that never had more than $20,000 in assets. Orlando sold phone cards and discount vacation packages. From May 1997 through the beginning of August 1997, Williams and respondent John G. Wright, Jr.("Wright") used Orlando stock to transfer debit balances in Canadian brokerage accounts by buying and selling Orlando stock through a series of matched trades. Because the Canadian firms allowed customers several weeks to pay for their stock purchases, Williams and Wright were able to "borrow" money by running significant debit balances in the accounts by taking advantage of this delay in settlement. At the time Williams and Wright obtained the Orlando stock, they already owed money to several Canadian brokerage firms for prior purchases. When one brokerage firm required payment, Williams and Wright would sell Orlando stock from that account to another account he controlled, and would then use the proceeds from the sales to pay off the first brokerage firm. When the second firm required payment, they would sell Orlando stock to a third account he controlled and would pay off the second firm. These matched trades created the appearance of active trading in Orlando stock. It also slowly pushed up the price of Orlando stock because the U.S. market makers, serving as intermediaries for these trades, sold the stock at higher prices than the price at which they had bought it. By early August 1997, Orlando, with less than $20,000 in assets, had a market capitalization of $9.7 million. The price of Orlando stock plummeted in mid-August 1997 when Williams' trading activities ceased.

B. Respondent

Williams was, at all relevant times, a purported investment banker who owned GSG Financial, which in turn owned Global Strategies Group ("Global"), a now defunct small brokerage firm headquartered in San Francisco. Global was registered with the Commission as a broker-dealer and Williams was associated with Global. In 1993, the NASD fined Williams $13,500 for violations of the Rules of Fair Practice. In 1996, the NASD fined Williams and Global $18,000 for net capital violations. In 1997, the California Commissioner of Corporations barred Williams from any position of employment, management, or control of any broker-dealer or investment

C. Other Relevant Persons and Entities

  1. Wright was, at all relevant times, also a purported investment banker who was self-employed as a consultant.

  2. Orlando was, at all relevant times, a Minnesota corporation whose common stock was quoted on the OTC Bulletin Board from May 21, 1997 until trading was suspended by the Commission on November 3, 1997. Orlando was in the business of selling phone cards and vacation packages. Orlando has 2,377,500 shares of common stock outstanding, 1,175,000 shares of which were issued pursuant to a Regulation D, Rule 504 offering, and the remainder of which were restricted pursuant to Rule 144. Orlando no longer has any business operations.

D. Williams' "Debit Kiting" And Matched Trades

  1. Williams violated the antifraud provisions of the federal securities laws by orchestrating a series of matched trades in which he and respondent Wright bought and sold Orlando stock in various brokerage accounts they controlled. By the end of the summer of 1997, Williams and Wright had over one million shares of Orlando stock -- over 80 percent of the freely trading shares.

  2. Williams and Wright put the Orlando stock into Canadian brokerage accounts that they controlled. Williams and Wright had been able to "borrow" money from the Canadian brokerage firms by running significant debit balances in their accounts, collateralized by stock positions. They were able to do this because the firms only required them to settle their accounts every few weeks. Williams and Wright took advantage of the delay in settlement to engage in a scheme similar to check kiting. When one brokerage firm required payment, Williams and Wright would sell Orlando stock from that account to another account they controlled, and they would use the proceeds from the sale to pay off the first brokerage firm. When the second firm required payment, they would sell Orlando stock to a third account they controlled and would pay off the second firm.

  3. In the two-month period between June 6, 1997 and August 7, 1997, Williams and Wright ordered at least 20 sets of matched trades of Orlando stock, involving at least 385,600 shares. Their trades were complex, involving a number of intermediaries. For example, on June 17, 1997, Williams and Wright caused one of their companies, Catawba, Ltd. ("Catawba"), with a brokerage account at one Canadian firm ("firm one"), to sell 38,000 shares to another of their companies, Crocker Management Group, Inc. ("Crocker"), with a brokerage account at another Canadian firm ("firm two"). Catawba first sold 38,000 shares to firm one for firm one's trading account. Firm one then sold the shares to a U.S. market maker, which bought the shares into its inventory. The U.S. market maker then sold the shares to firm two, which bought the shares into its trading account. Firm two then sold the shares to Crocker on the same day. Williams knew, or was reckless in not knowing, that his matched trades would incrementally increase the price of Orlando stock. During this period, the price of Orlando stock increased from $1.25 to as high as $4.09. At all relevant times, Orlando's common stock qualified as a "penny stock," as defined by Exchange Act Rule 3a51-1.

III.

In view of the foregoing, the Commission finds that Williams violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Accordingly, IT IS ORDERED THAT Williams cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

By the Commission.

Jonathan G. Katz
Secretary

http://www.sec.gov/litigation/admin/34-43670.htm


Modified:12/06/2000