Securities Exchange Act of 1934
Release No. 50522 / October 13, 2004
Admin. Proc. File No. 3-11634
In the Matter of HAROLD B. GALLISON, JR., TERRENCE J. HUGHES, and DAVID ROSENTHAL, Respondent. |
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ORDER MAKING FINDINGS AND IMPOSING SANCTIONS BY DEFAULT |
SUMMARY
This Order bars Harold B. Gallison, Jr. (Gallison), and Terrence J. Hughes (Hughes) from association with any broker-dealer, and bars Gallison from participating in an offering of penny stock. Gallison and Hughes were previously enjoined from violating the antifraud provisions of the securities laws, based on their involvement in a fraudulent market manipulation scheme.
I. BACKGROUND
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) against Gallison and Hughes on September 7, 2004, pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act).1 The OIP alleges that they were both enjoined in 2002 from violating the antifraud provisions of the federal securities laws, based on their wrongdoing in an offering of Golf Ventures, Inc. (GVI), stock, while associated with broker-dealers. Gallison was served with the OIP on September 20, 2004, and Hughes, on September 11, 2004. Each failed to file an answer, due twenty days after service of the OIP. See 17 C.F.R. § 201.220(b); OIP at 3. A respondent who fails to file an answer to the OIP may be deemed to be in default, and the administrative law judge may determine the proceeding against him. See 17 C.F.R. §§ 201.155(a), .220(f); OIP at 3. Thus, Gallison and Hughes are in default, and the undersigned finds the following allegations in the OIP are true.
II. FINDINGS OF FACT
Gallison and Hughes are permanently enjoined from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. SEC v. Badger, 2:97 CV 0963K (D. Utah Nov. 26, 2002). Their underlying conduct occurred in connection with GVI's stock, which was registered pursuant to Section 12(g) of the Exchange Act and publicly traded on the Over-the-Counter Bulletin Board. GVI is now defunct.
Gallison was associated with a registered broker-dealer, La Jolla Capital Financial Corp., from 1992 to 1999. During 1994 Gallison arranged for the firm to tout and sell GVI stock to its retail customers in return for undisclosed bribe payments to the firm from a GVI representative. GVI stock was a penny stock during a significant portion of this time. Hughes was associated with a registered broker-dealer, Burnett Grey & Co., Inc., from 1992 to 1994. From October 1993 to February 1994 Hughes arranged for the firm to tout and sell GVI stock to its retail customers in return for undisclosed bribe payments to the firm from a GVI representative. GVI was not a penny stock during the time of Hughes's conduct.
III. CONCLUSIONS OF LAW
Gallison and Hughes are each permanently enjoined "from engaging in or continuing any conduct or practice in connection . . . with the purchase or sale of any security" within the meaning of Sections 15(b)(4)(C) and 15(b)(6)(A)(iii) of the Exchange Act. Further, GVI stock was a penny stock within the meaning of Exchange Act Section 3(a)(51) and Rule 3a51-1 during a significant portion of Gallison's conduct, so that he was a "person participating in an offering of penny stock" within the meaning of Exchange Act Section 15(b)(6)(C).
IV. SANCTION
Gallison and Hughes will be barred from association with any broker-dealer. Also, Gallison will be barred from participating in an offering of penny stock.2 These sanctions will serve the public interest and the protection of investors, pursuant to Section 15(b) of the Exchange Act. The sanctions accord with Commission precedent and the sanction considerations set forth in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). The unlawful conduct of each was recurring and egregious, extending over a period of many months. There are no mitigating circumstances.
V. ORDER
IT IS ORDERED that HAROLD B. GALLISON, JR., IS BARRED from association with any broker or dealer and from participating in an offering of penny stock.
IT IS FURTHER ORDERED that TERRENCE J. HUGHES IS BARRED from association with any broker or dealer.
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Carol Fox Foelak
Administrative Law Judge