Securities Exchange Act of 1934
Release No. 50566 / October 20, 2004
Admin. Proc. File No. 3-11713
In the Matter of MICHAEL W. SMITH, Respondent. |
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ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS |
I.
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Michael W. Smith ("Respondent" or "Smith") pursuant to Rule 102(e)(3) of the Commission's Rules of Practice.1
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "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 to which the Commission is a party and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III., Paragraph 3, below, which are admitted, Respondent consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.
III.
On the basis of this Order and Respondent's Offer, the Commission finds that:
1. Smith, age 50, is and has been an attorney licensed to practice in the province of Ontario, Canada.
2. ESWW is a Florida corporation based in Telford, Pennsylvania, and formerly located in Markham, Ontario, Canada. At the time of the actions described herein, the company was developing a Canadian-patented catalytic converter that supposedly was less expensive than other catalytic converters because it used no precious metals. ESWW registered its shares with the Commission pursuant to a Form 10-12G filed in August 1999. During the relevant period, its shares were quoted on the OTC Bulletin Board under the symbol ESWW.
3. On June 5, 2002, the Commission filed a complaint against Smith and several other defendants in SEC v. Environmental Solutions World Wide, Inc., et al. (Civil Action No. 1:02CV01575 (D.D.C.)). On August 19, 2004, the court entered a final judgment against Smith, by consent, permanently enjoining him from future violations of Sections 5(a) and 5(c) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act and Rule 10b-5 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1 and 13b2-1 thereunder. Smith was also ordered to pay $125,700 in disgorgement of ill-gotten gains, and $43,388.57 in prejudgment interest. Smith was also ordered to pay a $50,000 civil money penalty. Additionally, the Court barred Smith from serving as an officer or director of a public company.
4. The Commission's complaint alleged, among other things, that the named defendants conducted a $15 million "pump and dump" scheme involving the securities of Environmental Solutions World Wide ("ESWW"). Between at least February 1999 and December 2000, defendant Smith, who served as a defacto officer of ESWW from 1998 through 1999, and several of the named defendants engaged in an aggressive promotional campaign to prime the market for ESWW stock. After issuing 15 million "unrestricted shares" in a sham Rule 504 "private offering," ESWW issued several fraudulent press releases concerning the company's primary product, a catalytic converter that it claimed "dramatically reduces toxic emissions including nitrous oxide," a greenhouse gas believed to be a cause of global warming. In fact, the company had never tested its prototype converter's ability to reduce nitrous oxide. The misleading promotional campaign caused ESWW's price to soar by about 350%. Concurrently, two of the defendants dumped millions of shares they received from the sham Rule 504 offering into the market through numerous nominee accounts.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanction agreed to in Respondent Smith's Offer.
Accordingly, it is hereby ORDERED, effective immediately, that:
Smith is suspended from appearing or practicing before the Commission as an attorney.
By the Commission.
Jonathan G. Katz
Secretary
Endnotes
The Commission, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any attorney . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the Commission, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.