Debra Patalkis (DP 0664)
IN THE UNITED STATES DISTRICT COURT
Securities and Exchange Commission,
AMPLIDYNE, INC. and DEVENDAR S. BAINS
Civ. No. 03 Civ. ____ ( )
Plaintiff Securities and Exchange Commission ("SEC") alleges:
1. This case concerns fraudulent statements made by Amplidyne, Inc. ("Amplidyne") and its CEO, Devendar S. Bains ("Bains") (collectively the "Defendants"). Amplidyne's headquarters and principal place of business are located at 59 La Grange St., Raritan, New Jersey, 08869. Bains resides at 75 Wescott Rd., Hillsborough, New Jersey, 08844. On September 9, 1999, Amplidyne, at Bains' direction, issued a press release announcing its purported entry into the high-speed wireless Internet access market. The press release stated that Amplidyne had developed and was offering for sale a new set of products to provide high-speed Internet access many times faster than certain existing services. The press release was materially false and misleading because Amplidyne did not have this new set of products available to offer for sale. In fact, at the time of the press release, Amplidyne had only obtained one of the three principal components of the new set of products. Furthermore, Amplidyne could not legally offer to sell or even market the new set of products under Federal Communications Commission ("FCC") regulations.
2. As news of the alleged new set of products became know to investors, Amplidyne's stock price skyrocketed. On September 9, 1999, the day the release was disseminated, the company's stock price more than tripled, closing at $10.125. By the close of the market on September 10, 1999, Amplidyne's stock price rose to $12.25, representing a two-day increase of $9.125, and an increase of more than 290 percent, over its closing price of $3.125 on September 8, 1999.
3. On September 14, 1999, Bains continued the fraud by making materially false and misleading statements concerning Amplidyne's new set of products on CNBC's "Squawk Box" program. During the show, Bains falsely stated that the new set of products had been successfully field-tested over a 50-mile distance. In reality, Amplidyne had not even obtained the principal components for its new set of products, had not conducted field-tests, and there was no evidence that the products would work as Bains claimed.
4. By engaging in the conduct described herein, Defendants violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5] and, unless permanently enjoined, will continue to engage in such acts and practices and courses of business of similar purport and object.
5. The SEC seeks a judgment permanently enjoining the Defendants from future violations pursuant to Sections 21(d) and (e) of the Exchange Act [15 U.S.C. §§ 78u(d) and (e)]. The SEC also brings this action seeking civil monetary penalties against Bains, pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].
6. This Court has jurisdiction pursuant to Sections 21(d)(1), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d)(1), 78u(e) and 78aa].
7. Defendants directly or indirectly used the means or instrumentalities of interstate commerce or the mails, or the facilities of a national securities exchange, in connection with this illegal conduct.
8. Amplidyne is a Delaware corporation headquartered in Raritan, New Jersey. It designs, manufactures, and sells ultra linear power amplifiers and related subsystems to the wireless, local loop and satellite uplink telecommunications market. At the time of the facts alleged in this complaint, Amplidyne's common stock traded on the NASDAQ SmallCap Market ("NASDAQ") under the symbol AMPD. It currently trades on the OTC Bulletin Board under the symbol "AMPD.OB," after having been delisted from the NASDAQ on January 14, 2003. Amplidyne's common stock is registered with the SEC pursuant to Section 12(g) of the Exchange Act.
9. Devendar S. Bains, age 52, is Amplidyne's Chief Executive Officer, Chairman, President, and Treasurer.
10. Plaintiff SEC repeats and realleges Paragraphs 1 through 9 above.
11. In 1999, numerous Internet Service Providers, and cable and telephone companies were investing in new ways to offer their subscribers a faster alternative to dial-up telephone Internet access.
12. The three primary alternatives to dial-up telephone access were Digital Subscriber Line ("DSL"), cable, and wireless. Unlike DSL and cable, wireless Internet service uses radio frequency technology that allows an Internet connection without requiring a physical connection to each computer.
13. In April 1999, Amplidyne decided to use its radio frequency and amplifier technology to enter the high-speed wireless Internet access market. Amplidyne planned on using its amplifier technology to create a turnkey wireless Internet system. As conceived, this system required Amplidyne to obtain and assemble three primary components: (1) a bi-directional amplifier to be developed and refined by Amplidyne; (2) a Wave Access radio made by Lucent Technologies Inc. ("Lucent"); and (3) a direct sequence radio, produced by Eumitcom Technology Inc. ("Eumitcom"), a Taiwanese company.
14. In April 1999, Bains met with representatives of Lucent to discuss the possibility of using Lucent's Wave Access radio in its new wireless Internet system. By August 1999, Bains had received verbal assurances from a Lucent representative that Amplidyne could purchase and resell its Wave Access radio as part of Amplidyne's new wireless system. At this time, however, Bains had not obtained the radio from Lucent and had not entered into any written purchase agreement with Lucent. In fact, Amplidyne did not enter into a purchase agreement with Lucent until October 1999.
15. On or about September 8, 1999, Amplidyne completed the final design of its bi-directional amplifier. At this time, however, Amplidyne still did not have in its possession, nor had it integrated with its amplifier, the two other necessary components for the wireless Internet system the Lucent radio and the direct sequence radio produced by Eumitcom.
16. On September 9, 1999, despite lacking these two key components, Amplidyne issued a press release, written and approved by Bains, announcing that Amplidyne was now offering a new wireless Internet system. The press release was entitled: "Amplidyne Introduces High-Speed Wireless Internet Access, 35 Times Faster than 56K Dial Up Service." The press release stated that Amplidyne "has just announced a new set of products, to offer high-speed wireless Internet access." The release further described the products as "new technology" and emphasized that: (i) Amplidyne's new set of products "operates much faster than" certain other services; (ii) is "high speed in both directions, unlike other services presently in operation;" and (iii) the introduction of these new products "is an excellent achievement."
17. The market reacted swiftly and positively to the press release. On September 9, 1999, the company's stock price rose to $10.125 from $3.125 the previous day, an increase of over 200 percent. By the close of the market on September 10, 1999, Amplidyne's stock price had increased to $12.25, a two-day increase of $9.125, or more than 290 percent, compared to its closing price on September 8, 1999. Trading volume in Amplidyne stock also dramatically increased, rising from 211,500 shares traded on September 8, 1999 to more than 17 million shares traded on September 10, 1999.
18. The September 9, 1999 press release was materially false and misleading because Amplidyne had not even obtained two of the three essential components that comprised the new set of products it was offering for sale and did not have a new set of products ready for the market. The company was weeks, if not months, away from being able to assemble the new set of products, field- test it, demonstrate it and ship it to customers.
19. Bains knew or was reckless in not knowing that the press release was false and misleading. Among other things, he was intimately involved with trying to obtain the necessary parts for the wireless Internet system. As a result, he knew or was reckless in not knowing that on September 9, 1999, Amplidyne did not have two of the three necessary components for the new set of products described in the press release. In addition, Bains knew or was reckless in not knowing that the new set of products had not been field-tested. Furthermore, he knew or was reckless in not knowing that the company could not legally offer to sell or even market the new set of products under FCC regulations [47 C.F.R § 2.803]. In fact, Amplidyne did not even apply for a mandatory FCC Equipment Authorization until May 4, 2000 and did not receive authorization until August 8, 2000, nearly 11 months after the press release was disseminated.
20. Following the issuance of the press release, Bains made at least one additional false and misleading statement concerning Amplidyne's new set of products. On September 14, 1999, on CNBC's "Squawk Box," Bains unequivocally and falsely stated that the new set of products had been field-tested and worked at a distance of 50 miles, and that Amplidyne was ready to sell it.
21. Bains' statements on CNBC were materially false and misleading since, as of September 14, 1999, Amplidyne had never integrated the principal components of the system, had not field-tested it and did not have a finished set of products available to sell to the market.
22. Paragraphs 1 through 21 are realleged and incorporated herein by reference.
23. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit the making of materially false and misleading statements in connection with the purchase or sale of securities. A person violates these provisions by intentionally or recklessly making material misstatements or omissions in Commission filings, press releases, or in other statements disseminated to investors.
24. By reason of the foregoing, Defendants violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5].
Plaintiff SEC requests judgment:
(i) permanently enjoining Defendants from violating 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];
(ii) ordering defendant Bains to pay civil monetary penalties under Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; and
(iii) granting such other relief as the Court may deem just and appropriate.
Dated: May 21, 2003
Debra Patalkis (DP 0664)
Paul R. Berger
Richard W. Grime
Glenn S. Gentry
Brian J. Dunn
Robert G. Kondrat
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0800
Telephone: (202) 942-4863 (Grime)
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