JOSE F. SANCHEZ, Cal. Bar No. 161362
LISA A. GOK, Cal. Bar No. 147660
DAVID J. VAN HAVERMAAT, Cal. Bar No. 175761
PETER F. DEL GRECO, Cal. Bar No. 164925

Attorneys for Plaintiff
Securities and Exchange Commission
Randall R. Lee, Regional Director
Sandra J. Harris, Associate Regional Director
5670 Wilshire Boulevard, 11th Floor
Los Angeles, California 90036-3648
Telephone: (323) 965-3998
Facsimile: (323) 965-3908

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

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

JURISDICTION AND VENUE

1. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d)(1) and 22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(d)(1), 78u(d)(3)(A), 78u(e) & 78aa. Defendants have, directly or indirectly, made use of the means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange in connection with the transactions, acts, practices and courses of business alleged in this Complaint.

2. Venue is proper in this district 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, because certain of the transactions, acts, practices and courses of conduct constituting violations of the federal securities laws occurred within this district, and certain of the defendants reside or transact business within this district.

SUMMARY

3. This matter involves the unregistered offer and sale of the common stock of two companies by unlicensed broker-dealers Charles Bayne a/k/a Charles Taylor ("Bayne") and Ira Posnansky a/k/a Ira Post ("Posnansky"), acting through Pre-IPO Financial Group, LLC ("Pre-IPO"), a now defunct company jointly owned by Bayne and Posnansky. From February 2000 through July 2001, Bayne and Posnansky, acting with and through Pre-IPO sales agents whom they hired, trained and supervised, offered and sold the stock of IntellectExchange.com, Inc. ("Intellect Exchange") and Medical Online, Inc. ("Medical Online") to almost 150 investors throughout the United States. Pre-IPO sold more than $3.7 million of Intellect Exchange stock and more than $900,000 of Medical Online stock, and made more than $2.4 million in profits. Neither of these offerings were registered with the Commission, nor were Bayne and Posnansky ever registered with the Commission as broker-dealers, as required by the federal securities laws.

4. In the offer and sale of Intellect Exchange securities, Bayne and Pre-IPO sales agents also made material misrepresentations to prospective investors concerning the likelihood that Intellect Exchange would be acquired or would conduct an initial public offering ("IPO"), and the expected value of an acquisition or IPO. Specifically, using a sales script created by Bayne, Pre-IPO sales agents falsely told investors, among other misrepresentations, that Oracle Corporation had offered to acquire Intellect Exchange, that Intellect Exchange had been offered a reverse IPO worth $30 to $100 million, and that Intellect Exchange's stock wasexpected to open at more than $10 per share after the IPO. Bayne knew or was reckless in not knowing that these statements were false or misleading.

5. Bayne and Posnansky, by engaging in the conduct described in this complaint, have violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and (c), and the broker-dealer registration provisions of Section 15(a)(1) of the Exchange Act, 15 U.S.C. § 78o(a)(1). Bayne has also violated the antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), and 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. By this complaint, the Commission seeks injunctions and civil penalties against Bayne and Posnansky, as well as disgorgement and prejudgment interest against Bayne.

THE DEFENDANTS

6. Charles Bayne, age 47, resides in Glendale, California. Bayne was the President and Chief Executive Officer of Pre-IPO as well as a 50% owner of the company. Bayne was responsible for, among other things, training and supervising the sales agents and managers, and creating the sales scripts and written materials used to solicit prospective investors. Bayne has never been registered with the Commission in any capacity.

7. Ira Posnansky, age 56, resides in Los Angeles, California. Posnansky was the Chairman of Pre-IPO as well as a 50% owner of the company. Posnansky was responsible for, among other things, buying investor lead lists, and hiring, training and supervising the sales agents and managers. Posnansky has never been registered with the Commission in any capacity.

THE UNLAWFUL CONDUCT

8. Bayne and Posnansky formed Pre-IPO as a Nevada limited liability corporation headquartered in Los Angeles, California, in February 2000. Pre-IPO ceased operations in the latter half of 2001.

A. Bayne And Posnansky, Through Pre-IPO, Engaged In Various Unregistered Securities Offerings

9. From approximately February 2000 through July 2001, Bayne and Posnansky, acting through Pre-IPO, offered and sold the securities of Medical Online. Pre-IPO sold approximately $906,435 of the securities of Medical Online to about 50 investors throughout the United States.

10. From approximately August 2000 through July 2001, Bayne and Posnansky, acting through Pre-IPO, also offered and sold the securities of Intellect Exchange. Pre-IPO sold a total of $3,742,216 of Intellect Exchange stock to almost 100 investors throughout the United States.

11. With respect to Intellect Exchange, Pre-IPO was involved in two offerings of this company's securities. The first offering sought to raise $10,125,000 through the sale of 7,500,000 shares of Series B convertible preferred stock. The second offering sought to raise $1,162,500 through the sale of 750,000 shares of common stock.

12. Pre-IPO entered into at least two written agreements with Intellect Exchange — one dated July 31, 2000, and the other dated January 8, 2001 — pursuant to which Pre-IPO agreed to introduce Intellect Exchange to potential investors and to help it raise capital.

13. Bayne and Posnansky jointly determined the price at which the stock of Intellect Exchange and Medical Online would be offered for sale, and sold, to the public.

14. Posnansky purchased investor lead lists from lead brokers. The lead lists contained the names of individuals who lived throughout the United States. Pre-IPO sales agents used these lead lists to contact prospective investors by telephone in several states. Pre-IPO sales agents mailed private placement memoranda and other written materials to interested prospective investors.

15. During Pre-IPO's telephone solicitations, some sales agents failed to determine if prospective investors were accredited. Pre-IPO did not provide audited financial statements to unaccredited investors.

16. Upon receipt of payment from investors for either Intellect Exchange or Medical Online shares, Pre-IPO purchased the appropriate number of shares directly from the issuer. Intellect Exchange and Medical Online each issued their stock certificates in Pre-IPO's name. Pre-IPO then forwarded the stock certificates to investors, who signed the certificates and retained custody of them.

17. During the period of Pre-IPO's offerings to the public, there was no registration statement filed or in effect with respect to any offering of securities of Intellect Exchange or Medical Online.

B. Bayne And Posnansky, Through Pre-IPO, Operated As Unlicensed Broker-Dealers

18. As part of Pre-IPO's agreements with Intellect Exchange and Medical Online, Bayne and Posnansky also agreed to purchase directly from Intellect Exchange and Medical Online, for their own account, as many shares of each company's stock as were available, and then offer these same shares to prospective investors.

19. Bayne and Posnansky made their money by selling the shares that Pre-IPO purchased from Intellect Exchange and Medical Online at a price higher than what Pre-IPO had agreed to pay for them. Pre-IPO purchased Intellect Exchange's preferred stock at $0.70 per share and sold it to investors at $1.35 per share. Pre-IPO purchased Intellect Exchange's common stock at $0.80 per share and sold it to investors at $1.55 per share. Pre-IPO purchased Medical Online's common stock at $1 per share and sold it to investors at $1.95 per share. Pre-IPO made$1,910,288 from its sale of Intellect Exchange stock, and $491,807 from its sale of Medical Online stock.

20. By engaging in the business of buying and selling securities, Bayne and Posnansky acted as broker-dealers and, as such, needed to be registered with the Commission. Neither Bayne, Posnansky, nor Pre-IPO has ever been registered as a broker-dealer with the Commission.

C. Bayne and Pre-IPO Sales Agents Made Fraudulent Misrepresentations In Connection With The Intellect Exchange Offerings

21. During Pre-IPO's offer and sale of Intellect Exchange securities, Bayne and the sales agents he controlled made material misrepresentations concerning the prospects for an acquisition of or an IPO by Intellect Exchange, and the expected value of an acquisition or IPO.

22. Bayne created a sales script used by Pre-IPO's sales agents to solicit prospective investors that contains at least two material misrepresentations. This sales script states in relevant part that: "Oracle wanted to buy Intellect Exchange and was turned down." This statement is false. Oracle never offered to buy Intellect Exchange and, because such an offer had never been made, Intellect Exchange never had the opportunity to accept or decline Oracle's purported offer. Bayne knew or was reckless in not knowing that this statement was false or misleading.

23. The sales script further states that: "Intellect Exchange has already been offered a reverse IPO worth $30 to $100 million. They turned it down." This statement also is false. Intellect Exchange was never offered a reverse IPO worth $30 to $100 million and, because such an offer had never been made, Intellect Exchange never had the opportunity to accept or decline the purported offer. Bayne knew or was reckless in not knowing that this statement was false or misleading.

24. In addition, the sales script contains at least two statements concerningIntellect Exchange that Bayne had no reasonable basis to believe were true or accurate. The sales script states in relevant part that: "The stock [of Intellect Exchange] is expected to open above $10 a share and is projected to go considerably higher." The sales script also states: "We are excited to have a company to fund [i.e., Intellect Exchange] as strong as eBay." Neither of these statements had any basis in fact. Indeed, neither Bayne nor anyone else from Pre-IPO ever consulted with Intellect Exchange or any third-party analyst to attempt to verify the accuracy or reasonableness of these statements.

25. Pre-IPO sales agents also misled prospective investors to believe that Intellect Exchange was soon going public. Bayne himself told at least one investor in July 2002 that she would triple her money when Intellect Exchange went public. Intellect Exchange, however, was never in a position to go public. Intellect Exchange has never filed an S-1 registration statement with the Commission, which is a requirement for an IPO.

FIRST CLAIM FOR RELIEF
UNREGISTERED OFFER AND SALE OF SECURITIES

Violations of Sections 5(a) and 5(c) of the Securities Act (Against Bayne and Posnansky)

26. The Commission realleges and incorporates by reference ¶¶ 1 through 25 above.

27. Defendants Bayne and Posnansky, and each of them, by engaging in the conduct described above, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce or of the mails, to offer to sell or to sell securities, or to carry or cause such securities to be carried through the mails or in interstate commerce for the purpose of sale or for delivery after sale.

28. No registration statement has been filed with the Commission or has been in effect with respect to the offerings alleged herein.

29. By engaging in the conduct described above, each of the defendants violated, and unless restrained and enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c).

SECOND CLAIM FOR RELIEF
FRAUD IN THE OFFER OR SALE OF SECURITIES

Violations of Section 17(a) of the Securities Act (Against Bayne)

30. The Commission realleges and incorporates by reference ¶¶ 1 through 25 above.

31. Defendant Bayne, by engaging in the conduct described above, directly or indirectly, in the offer or sale of securities by the use of means or instruments of transportation or communication in interstate commerce or by use of the mails:

a. with scienter, employed a device, scheme, or artifice to defraud;

b. obtained money or property by means of an untrue statement of a material fact or by omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or

c. engaged in a transaction, practice, or course of business which operated or would operate as a fraud or deceit upon the purchaser.

32. By engaging in the conduct described above, defendant Bayne violated, and unless restrained and enjoined will continue to violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).

THIRD CLAIM FOR RELIEF
FRAUD IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder (Against Bayne)

33. The Commission realleges and incorporates by reference ¶¶ 1 through 25 above.

34. Defendant Bayne, by engaging in the conduct described above, directly or indirectly, in connection with the purchase or sale of a security, by the use of means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange, with scienter:

a. employed a device, scheme, or artifice to defraud;

b. made an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

c. engaged in an act, practice, or course of business which operated or would operate as a fraud or deceit upon other persons.

35. By engaging in the conduct described above, defendant Bayne violated, and unless restrained and enjoined will continue to violate, 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.

FOURTH CLAIM FOR RELIEF
FAILURE TO REGISTER AS A BROKER-DEALER

Violations of Section 15(a)(1) of the Exchange Act (Against Bayne and Posnansky)

36. The Commission realleges and incorporates by reference ¶¶ 1 through 25 above.

37. Defendants Bayne and Posnansky, and each of them, by engaging in the conduct described above, directly or indirectly, made use of the mails or means or instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of securities, without being registered as brokers or dealers in accordance with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b).

38. By engaging in the conduct described above, defendants Bayne and Posnansky violated, and unless restrained and enjoined will continue to violate, Section 15(a)(1) of the Exchange Act, 15 U.S.C. § 78o(a)(1).

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court:

I.

Issue findings of fact and conclusions of law that the defendants committed the alleged violations.

II.

Issue judgment, in a form consistent with Fed. R. Civ. P. 65(d), permanently enjoining defendant Bayne and his officers, agents, servants, employees and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the order by personal service or otherwise, and each of them, from violating Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a)(1) of the Exchange Act and Rule 10b-5 thereunder.

III.

Issue judgment, in a form consistent with Fed. R. Civ. P. 65(d), permanently enjoining defendant Posnansky and his officers, agents, servants, employees and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the order by personal service or otherwise, and each of them, from violating Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act.

IV.

Order defendant Bayne to disgorge all ill-gotten gains from his illegal conduct, together with prejudgment interest thereon.

V.

Order defendants Bayne and Posnansky to pay civil penalties under Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).

VI.

Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.

VII.

Grant such other and further relief as this Court may determine to be just and necessary.

DATED: June __, 2003

http://www.sec.gov/litigation/complaints/comp18172.htm