UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 49980 / July 7, 2004
Admin. Proc. File No. 3-11537
Division of Enforcement Seeks Penny Stock Bars against Richard S. Kern, Donald R. Kern, and Charles Wilkins
The Commission issued an Order Instituting Administrative Proceedings pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 against Richard S. Kern, Donald R. Kern, and Charles Wilkins, based on the final judgment entered against them in Securities and Exchange Commission v. Lybrand, et al., Civ. No. 00-1387 (S.D.N.Y.). The United States District Court for the Southern District of New York entered a final judgment on October 6, 2003 enjoining the Kerns and Wilkins from future violations of Sections 5(a) and 5(c) of the Securities Act of 1933. In addition, the United States District Court for the Southern District of New York entered final judgments of consent on June 28, 2004, enjoining the Kerns and Wilkins from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The Commission's complaint in that action alleged, among other things, that from April 1998 through January 1999, the Kerns and Wilkins participated in a scheme to create artificial trading markets for certain shell corporations, and used manipulative trading practices to drive up the stock prices of the shell corporations for their benefit. In particular, the complaint alleged that the Kerns and Wilkins transferred millions of unregistered shares of the shell corporations' securities to Lybrand to manipulate, and sold unregistered shares to the public. The Kerns and Wilkins realized profits of $5.9 million as a result of their sales of the shell corporations' unregistered securities.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the Kerns and Wilkins an opportunity to dispute these allegations, and to determine whether a penny stock bar is appropriate and in the public interest.
The Commission directed that an administrative law judge shall issue an initial decision in this matter within 210 days from the date of service of the Order Instituting Proceedings.