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U.S. Securities and Exchange Commission

IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION


Securities and Exchange Commission,

Plaintiff,   

v.

CONCENTRAX, INC.
and MARK GIFFORD,

Defendant.   


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Case No.

COMPLAINT

Plaintiff Securities and Exchange Commission ("Commission") alleges as follows:

SUMMARY

1.Concentrax, Inc. ("Concentrax"), is a Houston-based company whose stock was quoted on the Over-The-Counter ("OTC") Bulletin Board and is now quoted on the Pink Sheets. Concentrax is engaged in the business of developing and marketing a vehicle-tracking system. In October and November, 2002, Mark Gifford ("Gifford"), Concentrax's Chairman and Chief Executive Officer, issued four materially false and misleading press releases on behalf of the company. The press releases touted purported agreements between Concentrax and prospective buyers of its "Track-Down" product. In fact, none of the contractual relationships extolled by Gifford existed. Between August and November 2002, while these false press releases were materially impacting the price of Concentrax's stock, Concentrax, under Gifford's direction, conducted a private offering of stock. Through this conduct, Concentrax and Gifford violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

JURISDICTION

2. The investments offered and sold by the Defendants are "securities" under Section 2(1) of the Securities Act [15 U.S.C. § 77b(a)(1)] and Section 3(a)(10) of the Securities Exchange Act [15 U.S.C. § 78c(a)(10)].

3. The Commission brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)], and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], to permanently enjoin Defendants from future violations of the federal securities laws.

4. This Court has jurisdiction over this action, and venue is proper, pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], and Section 27 of the Exchange Act [15 U.S.C. § 78aa].

5. Defendants, directly or indirectly, made use of the means or instruments of transportation and communication, and the means or instrumentalities of interstate commerce, or of the mails, in connection with the transactions, acts, practices and courses of business alleged herein. Certain of the transactions, acts, practices and courses of business alleged herein took place in the Southern District of Texas.

DEFENDANTS

6. Concentrax, Inc. is a Nevada corporation located in Houston, Texas. Concentrax's common stock is registered under Section 12(g) of the Exchange Act [15 U.S.C. § 78l(g). Concentrax was quoted on the OTC Bulletin Board, a service of the NASD, Inc., until the Commission issued a trading suspension on November 22, 2002; after the trading suspension expired on December 9, 2002, the company's stock has been quoted on the Pink Sheets. Concentrax is engaged in the business of developing and marketing a vehicle-tracking system called "Track Down."

7. Mark Gifford age 57, is a resident of Houston, Texas. Gifford is Concentrax's Chairman and Chief Executive Officer. He was responsible for editing and approving Concentrax's press releases. Gifford was also responsible for directing the private offering of Concentrax stock, in part while the false press releases were affecting the price of Concentrax stock.

FACTS PERTAINING EACH OF PLAINTIFF'S CLAIMS

8. While acting in his capacity as an officer of Concentrax, Gifford provided the information for and approved the issuance of Concentrax's press releases dated October 9, October 23, October 31, and November 15, 2002. These press releases were issued through a newswire service into interstate commerce in connection with the purchase and sale of securities. At the time, Concentrax's common shares were quoted on the OTC Bulletin Board.

9. On October 9, 2002, Concentrax announced in a press release that it had "completed a contract to sell its flagship Track-Down product to Houston-based HVAC Mechanical Services." This statement was materially misleading. First, Concentrax had "no contract to sell" its Track-Down product. It had merely entered a pricing agreement with HVAC Mechanical Services. The pricing agreement, however, did not provide that HVAC Mechanical Services was to buy any Track-Down units. Gifford exacerbated the fraudulent statements about the purported relationship with HVAC by adding that another "pending contractual relationship" with an unidentified automobile leasing company was expected to raise the estimated earning per share of Concentrax stock to $0.75. This projection had no reasonable basis.

10. On October 23, 2002, Concentrax issued a materially misleading press release announcing that it had "reached an agreement to sell its flagship Track-Down product to Payless Car Rental, Inc." In fact, Concentrax had no agreement to sell its Track-Down product to "Payless Car Rental, Inc." or Payless Car Rental Systems, Inc. In the October 23 press release, Gifford again aggravated these fraudulent statements by adding that "this sale will bolster our earlier estimated 2003 earnings of $0.75 per share." Again, this earnings-per-share projection had no reasonable basis.

11. On October 31, 2002, Concentrax issued a materially misleading press release announcing that it had "completed an agreement to sell its flagship Track-Down product to Houston-based Kellogg, Brown and Root (KB&R Construction and Equipment) Land Equipment Division." In fact, Concentrax had no agreement to sell the Track-Down product to Kellogg, Brown and Root or any of its divisions.

12. On November 14, 2002, a web-based magazine dedicated to exposing "lemons on the OTC market," published an article stating that Concentrax did not, in fact, have the purported contracts with Payless or Kellogg, Brown and Root. Although the statements in the article were, in fact, accurate, Concentrax and Gifford responded to this report by issuing another misleading press release on November 15, 2002, under the heading, "Concentrax Refutes Inaccurate Statements Made By Web-Based Magazine." Although the November 15 press release did not specifically confirm that the company had the contracts with Payless and Kellogg, Brown and Root, the press release implied that the contracts existed by referring to the article's allegations as "malicious." The press release further claimed that "Concentrax has been steadily building its business by securing purchase orders and sales." In fact, at the time of the release, the company had recorded only one sale, and it had received no purchase orders or sales contracts from any of the companies mentioned in the false and misleading press releases.

13. The press releases issued by Concentrax and Gifford had a material impact on the volume and price of Concentrax stock. After each false press release, there was an immediate upswing in volume and price. Moreover, the combined impact of false statements was significant. The trading volume of Concentrax stock rose from an average of 32,540 for the five trading days prior to October 9, the date of the first false press release, to as high as 900,000 shares during the two weeks following the third false press release. During the same period, the price of Concentrax stock rose from $1.11 on October 8, 2002 to as much as $2.64 during the two week period following the October 31, 2002 false press release.

14. While these events were transpiring, Concentrax offered and sold its stock in a private offering. Between August 23 and November 14, 2002, Concentrax raised $712,900 from 63 investors in a private stock offering conducted pursuant to Regulation D, Rule 506. Approximately 79 percent of the proceeds were raised during the 34 days following the first false press release.

CLAIMS

Violations of Section 17 (a) of the Securities Act by Defendants Concentrax and Gifford

15. Plaintiff Commission repeats and incorporates paragraphs 1 through 14 of this Complaint by reference as if set forth verbatim.

16. Defendants Concentrax and Gifford, in connection with the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, directly and indirectly, have employed schemes and artifices to defraud; made untrue statements of material fact and have omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in acts, practices, courses of business which have operated as a fraud and deceit upon purchasers and sellers.

17. As a part of and in furtherance of their scheme, Defendants Concentrax and Gifford directly and indirectly, prepared, approved, and disseminated press releases which contained untrue statements of material facts and misrepresentations of material facts, and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth in paragraphs 8 through 14 above.

18. Defendants Concentrax and Gifford knowingly or recklessly engaged in the conduct described in this Claim.

19. By reason of the foregoing, Defendants Concentrax and Gifford have violated, and unless enjoined, will continue to violate the provisions of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder by Defendants Concentrax and Gifford

20. Plaintiff Commission repeats and incorporates paragraphs 1 through 14 of this Complaint by reference as if set forth verbatim.

21. Defendants Concentrax and Gifford directly or indirectly, singly or in concert with others, in connection with the purchase and sale of securities, by use of the means and instrumentalities of interstate commerce and by use of the mails, have: (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaged in acts, practices, and courses of business which operate as a fraud and deceit upon purchasers, prospective purchasers, and other persons.

22. As a part of and in furtherance of their scheme, Defendants Concentrax and Gifford directly and indirectly, prepared, approved, and disseminated press releases which contained untrue statements of material facts and misrepresentations of material facts, and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth in paragraphs 8 through 14 above.

23. Defendants Concentrax and Gifford knowingly or recklessly engaged in the conduct described in this Claim.

24. By reason of the foregoing, Defendants Concentrax and Gifford have violated, and unless enjoined, will continue to violate the provisions of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this Court enter a judgment:

1. permanently enjoining Defendant Concentrax, and its agents, servants, employees, attorneys, and those in active concert or participation with it, who receive actual notice by personal service or otherwise, from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;

2. permanently enjoining Defendant Gifford, and his agents, servants, employees, attorneys, and those in active concert or participation with him, who receive actual notice by personal service or otherwise, from violating Sections 10(b) of the Exchange Act and Rule 10b-5 thereunder;

3. ordering Defendant Gifford to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; and

4. granting such other relief as this Court may deem just and appropriate.

Dated this ___ day of May, 2003.

RESPECTFULLY SUBMITTED,

__________________
JEFFREY B. NORRIS
   Attorney-in-Charge
   District of Columbia Bar No. 424258
JOHN R. FAHY
   Texas Bar No. 06773540
U.S. Securities and Exchange Commission
Fort Worth District Office
Burnett Plaza, Suite 1900
801 Cherry Street, Unit #18
Fort Worth, Texas 76102-6882
Tel: (817) 978-6452
Fax: (817) 978-4927

OF COUNSEL

SPENCER C. BARASCH
   Washington, D.C. Bar No. 388886
STEPHEN WEBSTER
   Texas Bar No. 21053700
TIMOTHY S. MCCOLE
   Mississippi Bar No. 10628
U.S. SECURITIES & EXCHANGE COMMISSION
Burnett Plaza, Suite 1900
801 Cherry Street, Unit #18
Fort Worth, Texas 76102-6882

 

http://www.sec.gov/litigation/complaints/comp18144.htm


Modified: 05/20/2003