Initial Decision of an SEC Administrative Law Judge
In the Matter of
In the Matter of
FREEDOM GOLF CORPORATION
May 15, 2003
|APPEARANCES:||Robert K. Levenson for the Division of Enforcement, Securities and Exchange Commission
Gaylen P. Johnson, President and Chief Executive Officer, for Respondent Freedom Golf Corporation
|BEFORE:||Carol Fox Foelak, Administrative Law Judge|
This Initial Decision revokes the registration of the stock of Freedom Golf Corporation, based on its repeated failure to file required periodic reports with the Commission.
A. Procedural Background
The Securities and Exchange Commission (Commission) instituted this proceeding, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act), on April 7, 2003, with an Order Instituting Proceedings (OIP). Pursuant to leave granted by the undersigned and 17 C.F.R. § 201.250, the Division of Enforcement (Division) filed a Motion for Summary Disposition on May 7, 2003. By unpublished Order of May 7, the undersigned ordered Respondent Freedom Golf Corporation (Freedom Golf) to file any response by May 14. Freedom Golf did not respond. The administrative law judge is required by 17 C.F.R. § 201.250(b) to act "promptly" on a motion for summary disposition.
This Initial Decision is based on: (1) the Division's Motion for Summary Disposition; and (2) Freedom Golf's Answer to the OIP, dated May 1, 2003. There is no genuine issue with regard to any fact that is material to this proceeding. Any other facts contained in Freedom Golf's Answer have been taken as true, pursuant to 17 C.F.R. § 201.250(a). All arguments and proposed findings and conclusions that are inconsistent with this decision were considered and rejected.
B. Allegations and Arguments of the Parties
The OIP alleges that Freedom Golf failed to file an Annual Report (Form 10-K or 10K-SB) for the fiscal year ended September 30, 2002, and failed to file a Quarterly Report (Form 10-Q or 10-QSB) for the quarter ended December 31, 2002.1 Thus, the OIP alleges, Freedom Golf violated Exchange Act Section 13(a) and Rules 13a-1 and 13a-13. The OIP also alleges that, during February and March 2000, Freedom Golf published revenue and earnings projections that lacked any reasonable basis and failed to disclose that it was financially distressed. Thus, the OIP alleges, Freedom Golf violated Exchange Act Section 10(b) and Rule 10b-5.
In its Answer, Freedom Golf admits that it failed to file the Annual and Quarterly Reports. It explains its failure by citing lack of funds and advice of counsel not to raise additional funds pending resolution of its legal problems. It denies that it published misleading projections or otherwise violated Exchange Act Section 10(b) and Rule 10b-5.
The Division seeks, pursuant to Exchange Act Section 12(j), revocation of the registration of Respondent's stock that was effected pursuant to Exchange Act Section 12(g). The Division, noting Freedom Golf's denial that it committed fraud, argues that revocation is warranted by reason of its admitted reporting violations.
II. FINDINGS OF FACT
Freedom Golf is a Nevada corporation whose securities have been registered with the Commission since November 1999 pursuant to Section 12(g) of the Exchange Act. Its principal place of business is in Englewood, Colorado. Freedom Golf failed to file an Annual Report for the fiscal year ended September 30, 2002, and failed to file a Quarterly Report for the quarter ended December 31, 2002. Answer at 2. Freedom Golf lacked sufficient funds to pay for an audit and for the filings, and it continues to lack funds. Answer at 2.
In light of Freedom Golf's denial, and pursuant to 17 C.F.R. § 201.250(a), the allegation that Freedom Golf made misleading revenue and earnings projections is unproven.
III. CONCLUSIONS OF LAW
By failing to file its required Annual and Quarterly Reports, Freedom Golf violated Exchange Act Section 13(a) and Rules 13a-1 and 13a-13. The charge that Freedom Golf violated Exchange Act Section 10(b) and Rule 10b-5 will be dismissed as unproven.
The Division requests revocation of the registration of Freedom Golf's stock. This sanction will serve the public interest and the protection of investors, pursuant to Section 12(j) of the Exchange Act. It accords with Commission precedent and sanction considerations set forth in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), and with the sanctions imposed in similar cases in which corporations violated Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 by failing to file required Quarterly and Annual Reports. See Hamilton Bancorp, Inc., 79 SEC Docket 2680 (A.L.J. Feb. 24, 2003); see also WSF Corp., 77 SEC Docket 1831 (A.L.J. May 8, 2002).
Freedom Golf violated a crucial provision of the Exchange Act. The purpose of the periodic reporting requirements is to publicly disclose current, accurate financial information about an issuer so that investors may make informed decisions:
The reporting requirements of the Securities Exchange Act of 1934 is the primary tool which Congress has fashioned for the protection of investors from negligent, careless, and deliberate misrepresentations in the sale of stock and securities. Congress has extended the reporting requirements even to companies which are "relatively unknown and insubstantial."
SEC v. Beisinger Indus. Corp., 552 F.2d 15, 18 (1st Cir. 1977) (quoting legislative history).
Freedom Golf's violations were recurrent, egregious, and deprived the investing public of current and accurate financial information on which to make informed decisions. Freedom Golf's admitted lack of funds makes the likelihood of future violations a foregone conclusion. Insofar as Freedom Golf blames its violations on lack of funds and advice of counsel not to raise funds due to legal problems, it has failed to recognize the wrongful nature of its conduct or provide any assurances against future violations.
V. PROCEDURAL ORDER
IT IS ORDERED that the prehearing conference scheduled for May 23, 2003, IS CANCELLED.
IT IS ORDERED that, pursuant to Section 12(j) of the Exchange Act, 15 U.S.C. § 78l(j), the REGISTRATION of the stock of Freedom Golf Corporation IS REVOKED.
IT IS FURTHER ORDERED that this administrative proceeding, insofar as it alleges that Freedom Golf Corporation violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, IS DISMISSED.
This order shall become effective in accordance with and subject to the provisions of 17 C.F.R. § 201.360. Pursuant to that rule, a petition for review of this Initial Decision may be filed within twenty-one days after service of the Decision. It shall become the final decision of the Commission as to each party who has not filed a petition for review pursuant to 17 C.F.R. § 201.360(d)(1) within twenty-one days after service of the Initial Decision upon him, unless the Commission, pursuant to 17 C.F.R. § 201.360(b)(1), determines on its own initiative to review this Initial Decision as to any party. If a party timely files a petition for review, or the Commission acts to review as to a party, the Initial Decision shall not become final as to that party.
Carol Fox Foelak
Administrative Law Judge
1 Forms 10-KSB and 10-QSB may be filed, in lieu of Forms 10-K and 10-Q, by a company that is a "small business issuer." See 17 C.F.R. § 228.10(a).
|Home | Previous Page||