IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

COMPLAINT

Plaintiff Securities and Exchange Commission ("Commission") alleges for its Complaint the following:

SUMMARY

1. This matter involves a fraudulent scheme conducted by defendant Nathan A. Chapman, Jr., in connection with the June 2000 initial public offering ("IPO") of, and subsequent secondary market trading in, the common stock of eChapman.com, Inc. (now eChapman, Inc. or "ECMN"), a public company controlled by Chapman. ECMN is the parent company of a registered broker-dealer, The Chapman Company ("TCC") and a registered investment adviser, Chapman Capital Management, Inc. ("CCM"), both of which are also controlled by Chapman. In an effort to rescue ECMN's collapsing IPO, Chapman, defendant Earl U. Bravo, Sr., a senior officer, and defendant Daniel Baldwin, Jr., a TCCregistered representative, used Chapman's captive broker-dealer and investment advisory firms to make unauthorized ECMN IPO purchases for customer accounts, backdate ECMN IPO trades and place close to one-third of the IPO shares in the account of a CCM advisory client, and manipulate the market for ECMN stock after the IPO.

2. ECMN's price fell steadily from its $13 per share IPO price and never recovered. Faced with huge losses, Chapman used the IPO proceeds to manipulate the sagging market for ECMN. Rather than use the proceeds for the stated purpose of creating a family of Internet-based financial services companies, Chapman and Bravo, through TCC, used IPO proceeds to buy hundreds of thousands of ECMN shares in the months following the offering. As a result, ECMN was left without funds to implement the business strategies that ECMN had represented to investors were the reasons for the IPO. In further efforts to stem the losses, Chapman, Bravo, and others propped up ECMN's trading price by discouraging CCM's advisory clients and TCC's brokerage customers from selling their ECMN stock. The defendants concealed their fraud with false and misleading statements regarding the use of the IPO proceeds in quarterly and annual reports filed with the Commission, prepared and signed by Chapman and defendant Demetris B. Brown, ECMN's Chief Financial Officer. The fraud that Chapman orchestrated cost investors, including public pension funds, millions of dollars.

3. As a result of the conduct described in this Complaint, Chapman, Bravo, Baldwin, Brown, eChapman, Inc., The Chapman Company and Chapman Capital Management, Inc. have violated and, unless restrained and enjoined by this Court, will continue to violate Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, thereunder.

4. As a result of the conduct described in this Complaint, eChapman, Inc. has violated, and Chapman and Brown have aided and abetted violations of and, unless restrained and enjoined by this Court, will continue to violate Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 13a-1, 13a-13 and 12b-20, 17 C.F.R. §§ 240.13a-1, 240.13a-13 and 240.12b-20, thereunder.

5. As a result of the conduct described in this Complaint, Chapman Capital Management, Inc. has violated, and Chapman and Bravo have aided and abetted violations of and, unless restrained and enjoined by this Court, will continue to violate Sections 206(1), 206(2) and 206(3) of the Investment Advisers Act of 1940 ("Advisers Act"), 15 U.S.C. §§ 80b-6(1), 80b-6(2) and 80b-6(3).

JURISDICTION AND VENUE

6. The Commission brings this action pursuant to Section 20(b) of the Securities Act, 15 U.S.C. § 77t(b), Section 21(d) of the Exchange Act, 15 U.S.C. § 21(d), and Sections 209(d) and 209(e) of the Advisers Act, 15 U.S.C. §§ 80b-9(d) and 80b-9(e), to enjoin such acts, transactions, practices and courses of business, obtain disgorgement and civil penalties, and for other appropriate relief.

7. This court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and Section 214 of the Advisers Act, 15 U.S.C. § 80b-14.

8. Certain of the acts, practices and courses of business constituting the violations alleged herein occurred within the District of Maryland and elsewhere, and were effected, directly or indirectly, by making use of the means and instruments of transportation or communication in interstate commerce, or the means and instrumentalities of interstate commerce, or the mails, or the facilities of anational securities exchange.

DEFENDANTS

9. Nathan A. Chapman, Jr., age 45, is a resident of Clarksville, Maryland. Chapman has been the President, Chairman of the Board of Directors, and the majority shareholder of ECMN since its inception. At all times material to the events described in this Complaint, Chapman was also the President, Chairman of the Board and Chief Compliance Officer of both registered entities, TCC and CCM, as well as CCM's Chief Investment Officer. Chapman holds various securities licenses.

10. eChapman, Inc. ("ECMN"), headquartered in Baltimore, Maryland, was incorporated in Maryland on May 14, 1999, under the name eChapman.com, Inc. Chapman is the majority shareholder of this public company. ECMN provides brokerage, investment advisory, and insurance services through three wholly-owned subsidiaries. On June 20, 2000, ECMN's shares began trading on the NASDAQ National Market. They currently trade on the over-the-counter bulletin board. ECMN is the parent company of defendants The Chapman Company and Chapman Capital Management, Inc.

11. The Chapman Company ("TCC") has been registered with the Commission as a broker-dealer since February 6, 1987. At all times material to the events described in this Complaint, TCC made a market in ECMN and, through Chapman and Bravo, placed quotations for ECMN on the NASDAQ system.

12. Chapman Capital Management, Inc. ("CCM") has been registered with the Commission as an investment adviser since August 29, 1988. At all times material to the events described in this Complaint, CCM acted as the investment adviser to the DEM-MET Trust.

13. Earl U. Bravo, Sr., age 55, is a resident of Baltimore, Maryland. At all times material to the events described in this Complaint, Bravo was the Senior Vice President, Secretary, Assistant Treasurer and a member of the Board of Directors of ECMN. Bravo was also the Chief Operating Officer, Senior Vice President, Secretary, Assistant Treasurer, and head of equity trading of TCC, as well as the Secretary and Assistant Treasurer of CCM. Bravo holds various securities licenses, and is a registered OTC equity trader.

14. Demetris B. Brown, age 47, is a resident of Woodstock, Maryland. Brown began his employment at TCC as the Chief Financial Officer in November 1998. From June 20, 2000 until he resigned on July 20, 2002, Brown was the Chief Financial Officer, Treasurer and Assistant Secretary of ECMN, TCC and CCM. He is a Certified Public Accountant registered in Maryland.

15. Daniel Baldwin, Jr., age 46, is a resident of Randallstown, Maryland. He is a Senior Vice President, Institutional Sales for TCC. As a registered representative, Baldwin holds various securities licenses.

RELATED PERSON AND ENTITY

16. DEM-MET Trust (the "Trust") was a tax-exempt pooled trust for qualified employee benefit plans and certain governmental plans designed to provide investment diversification by using minority-owned sub-advisers. CCM, investment adviser to the Trust, selected and monitored the sub-advisers. As of June 20, 2000, the Trust had three investors: Maryland State Retirement and Pension System ("Maryland Pension"), Bankers Trust Company Pension Plan, and Alliant Energy Corporation. As of June 30, 2000, shortly after the ECMN IPO, the Trust had approximately $327.6 million in assets,with Maryland Pension as the largest investor with approximately $242.5 million in assets. On February 5, 2002, CCM liquidated the Trust after the three investors withdrew their funds.

17. Alan B. Bond, age 41, is currently incarcerated. He served as a sub-adviser to the

Trust through his company, Albriond Capital Management, LLC ("Albriond"), from January 1997 until August 2001. On June 10, 2002, Bond was convicted by a jury in federal district court in New York of six counts of fraud in a "cherry picking" scheme through which he defrauded three pension funds, including investors of the Trust. On October 11, 2002, Bond pleaded guilty to ten counts of conspiracy, investment advisory fraud and tax evasion for taking part in a separate scheme in which he received kickbacks totaling more than $6 million from 1993 to 1998 from commissions paid to brokers to whom he had steered his clients' investments. On February 11, 2003, he was sentenced to more than 12 years in prison and ordered to pay $6.6 million in restitution. Bond and Albriond are also defendants in a separate Commission civil injunctive action.

FACTS

Background

18. At all times material hereto, defendants ECMN, TCC and CCM acted by and through defendants Chapman, Bravo, Baldwin and Brown.

19. Chapman founded each of the defendant companies and has served as the President, Chairman of the Board and director of each. During the period described in this Complaint, Chapman controlled the companies and made most major decisions, but largely left daily operations to subordinates, the most senior of whom was Bravo.

20. In the mid-1990's, Chapman's business strategy was to manage portfolios that would invest in companies controlled by members of the "Domestic Emerging Markets" ("DEM") community, defined as African-Americans, Asian-Americans, Hispanic-Americans and women. As part of the strategy, Chapman, through CCM, recruited investment managers that met the DEM profile to act as sub-advisers to the DEM-MET Trust.

21. In 1998, Chapman took two companies public through IPO's, Chapman Holdings, Inc. ("CMAN"), then the parent company of TCC, and Chapman Capital Management Holdings, Inc. ("CMGT"), then the parent company of CCM. The two IPO's netted approximately $12,121,000. In November 1999, Chapman owned approximately 73 percent of the outstanding shares of CMAN and CMGT.

22. In 1999, Chapman's salary and bonus from his companies totaled $366,667. In 2000, he received $553,300 in salary and bonus; in 2001, his salary and bonus were $320,158. In addition, in 2000 and 2001, he received a monthly "business development" allowance of $10,000, totaling $240,000 for those two years, as well as reimbursement for travel-related expenses.

23. At all times material to the events described in the Complaint, Bravo ran the day-to-day operations of the business, particularly TCC, the broker-dealer. As Chief Operating Officer and head of equity trading at TCC, Bravo supervised all operations, including the trading desk, retail and institutional equity sales, the operations department, syndicate functions and customer service. He supervised the retail and institutional brokers, and reviewed all order tickets. Bravo received salary and bonus of $155,000 in 1999; $178,474 in 2000 (including a $50,000 bonus); and $167,000 in 2001.

24. In the summer of 1999, Chapman decided to create a new public company that would take advantage of the growing influence of the Internet and provide a broad array of online financial services. The new company, ECMN, was to be formed by merging Chapman's two existing public companies, and TCC was to be the lead underwriter for the IPO.

25. In November 1999, ECMN filed an initial registration statement with the Commission for an IPO of 3,333,333 shares of its common stock with a price range of $14 to $16 per share. According to the registration statement, the purpose of the offering was to bring together the financial services capabilities of TCC, CCM and a related insurance company, while taking advantage of the opportunities afforded by the growth of the Internet. In addition, ECMN was to create a website, eChapman.com, to offer financial services, including online trading, together with a variety of what was described as lifestyle, educational and cultural content appealing to the DEM community.

26. Each share of the existing public companies was to be converted into approximately two shares of ECMN. Chapman structured the merger so that he would own approximately 63 percent of the shares of the new public company, ECMN, after the IPO. An unsuccessful IPO would cause Chapman financial and reputational losses.

The Pressure to Generate Interest in the IPO

27. Beginning in mid-1999, Chapman organized an underwriting syndicate to conduct the IPO. TCC was not only the lead underwriter for the offering, but with an allotment of 310,000 shares to sell, was the largest underwriter as well. According to the prospectus, seven other broker-dealers had agreed to underwrite the offering. In reality, three of the supposed underwriting partners never agreed to or did participate in the offering, although Chapman attempted to create the appearance that each had agreed to participate.

28. Chapman never called on any underwriter to take any of the agreed-upon shares pursuant to their contractual commitment because of the damage it would have caused to his reputation. Ultimately Chapman, through TCC, took almost all of the ECMN shares. Of the supposed syndicate members, two purchased a total of 80,000 shares of the IPO.

29. As part of his efforts to promote the IPO, Chapman invited retail and institutional customers of TCC to numerous road shows around the country and instructed TCC's registered representatives to contact potential investors to solicit interest in the offering.

30. As TCC's Chief Operating Officer, Bravo supervised the registered representatives' efforts to sell the ECMN IPO to their customers. From December 1999 until June 2000, Bravo, with Chapman's occasional attendance, met regularly with the TCC registered representatives to push the IPO.

31. At Chapman's direction, Bravo created and maintained a list of non-binding "indications of interest," which he provided to Chapman daily. The purpose of taking indications of interest is to assess the demand for the offering and whether the size or pricing of the offering should be increased or reduced.

32. Bravo kept a large board in the office ranking TCC brokers by the number of indications of interest they received. Many brokers felt pressured to sell the ECMN IPO and obtain as many indications of interest as possible, which continued until the IPO closed on June 20, 2000.

33. By early 2000, it had become difficult to market an IPO of an Internet-related company. On March 9, 2000, the NASDAQ Composite reached a closing high of 5048.62; and thereafter it began a steady decline. By late May, it had fallen 37 percent. By June 15, 2000, when the ECMN registration statement went effective, the index was down 24 percent from its March high.

34. By early June 2000, despite Chapman's and Bravo's efforts, TCC had obtained indications of interest for only 1,068,927 shares. In addition, the underwriting syndicate assembled through TCC had committed to sell only 222,450 shares. These indications of interest were 2,041,956 shares short of the 3,333,333 shares originally proposed to be offered.

35. The lack of interest forced Chapman not only to decrease the size and pricing of the offering over time, but also to push back the offering date. However, even with the reduced size of the offering, Chapman had difficulty attracting investors.

36. Chapman acknowledged the difficulties to the Boards of CMAN and CMGT on June 13, 2000, just days before the ECMN IPO became effective, when he sought authorization to further reduce the number of shares offered and the public offering price. As reflected in the minutes, Chapman told the Boards that the complexity of the merger had delayed the IPO, with the result that ECMN was "marketing its IPO into a less than favorable market climate for business-to-consumer e-commerce companies." Moreover, the complicated nature of the transaction — merging two existing companies to form a third company structured on an Internet platform — further chilled investor interest in the IPO.

37. In addition to staking his professional reputation and personal fortune on a successful IPO of his own company, Chapman needed the IPO proceeds to shore up the existing public companies, which were not doing well. In its year-end audited financial statements for 1998 and 1999, CMAN reported net losses of $872,000 and $442,000, respectively, and $461,000 for the three months ended March 31, 2000. CMGT also had reported net losses for 1998 and 1999 of $106,000 and $853,000, respectively, and a profit of $51,000 for the first three months of 2000. Because of concerns about revenue, just prior to the offering, Chapman had ordered a reduction in expenses, including layoffs of employees and strict cost-cutting measures. In addition, ECMN needed the proceeds of the IPO to coverexpenses of more than $4.3 million already incurred in connection with the IPO.

38. The ECMN registration statement became effective on June 15, 2000, at which time 1,260,000 shares of ECMN common stock were offered to the public at $13 per share. After expenses, ECMN netted approximately $12,060,000. All IPO purchases were recorded with a trade date of June 15, 2000, a process date of June 15, 2000, and a settlement date of June 20, 2000 -- which ultimately was the first day of public trading. Concurrently with the offering, CMAN and CMGT merged into separate wholly-owned subsidiaries of ECMN.

39. The warning signs of an unsuccessful IPO proved accurate. ECMN opened on June 20, 2000, at approximately $8 per share, and closed at $7.375, down 43 percent from the $13 offering price. Two days later, ECMN closed at $8 per share, but began to fall and never reached that level again. Today ECMN is trading at $.08 per share.

Chapman's Scheme to Support the ECMN IPO

40. Defendants Chapman, Bravo, Baldwin and Brown abused their positions with the various Chapman companies by engaging in a series of fraudulent transactions intended to rescue ECMN from the disastrous offering. These included improper and backdated sales to the DEM-MET Trust, CCM's advisory client; unauthorized sales to TCC brokerage customers; manipulation of the market for ECMN stock for months following the IPO; and false and misleading reports filed with the Commission.

The DEM-MET Trust Transactions

41. Chapman, as the controlling shareholder of ECMN, also controlled its subsidiaries, CCM (the investment adviser) and TCC (the broker-dealer that acted as lead underwriter). Chapman used that control to have CCM improperly place 395,000 shares, almost one-third of the IPO, with CCM's advisory client, the Trust, through TCC. Of these shares, 175,000 were sold a week after ECMN begantrading, and were illegally backdated by Chapman and Bravo to the initial trading date. The Trust's investors lost millions when ECMN's share price collapsed.

42. Defendant CCM was the investment adviser for the Trust, and as its President and Chief Investment Officer, Chapman made all decisions with respect to the hiring and firing of sub-advisers for the Trust as well as the allocation of monies to the sub-advisers. In addition, Chapman dealt directly with the Trust's three investors.

43. The sub-advisers made investment decisions for their respective portions of the Trust, based upon an approved list of eligible securities provided by CCM. A sub-adviser who wished to purchase a security not found on the approved list was required to seek prior authorization from CCM, which reviewed and approved all trades. According to the Trust Agreement, as well as the sub-advisory agreements between CCM and the sub-advisers, CCM had ultimate authority to make buy and sell decisions on behalf of the Trust.

44. Chapman had solicited Trust sub-advisers and CCM clients to buy shares in the ECMN IPO. Ultimately, five sub-advisers purchased shares of the IPO through TCC. Three of these sub-advisers purchased shares for their own separate client accounts. However, two sub-advisers, one of which was Albriond, Alan Bond's investment adviser, purchased shares of the ECMN IPO for placement in their managed portions of the Trust.

45. Chapman had a longstanding relationship with Bond, Albriond's owner and president. They met at least every other month, and spoke by telephone frequently. Chapman first retained Albriond as a sub-adviser to the Trust, and allocated funds for Bond to manage, in 1997. From that time forward, Chapman continuously gave Bond more funds to manage.

46. In February 1998, Albriond had purchased 70,000 shares of the CMAN IPO at Chapman's insistence. After Bond was indicted in December 1999, Chapman refused to terminate Albriond as a sub-adviser, even though many other clients had fired him. As a result, Bond felt obligated to Chapman.

47. At Chapman's urging, Albriond initially purchased 200,000 shares and the other sub-adviser 20,000 shares of ECMN at $13 per share on behalf of their respective portions of the Trust. Both amounts were reflected on the indications of interest, and both trades reflected a trade and processing date of June 15, 2000, the date used for the ECMN IPO, and a settlement date of June 20, 2000. Bravo signed the order tickets for these trades.

48. The Trust Agreement required CCM to provide written disclosure and obtain consent from the client prior to having TCC act as a principal in a transaction. In addition, the investment advisory agreement between CCM and the sub-advisers specifically prohibited sub-advisers from purchasing for the Trust shares of a company in which an insider owned more than 50 percent.

49. Chapman never obtained the required consents for the sale of ECMN shares to the Trust through the sub-advisers. Chapman never obtained prior consent from the Trust (or its investors) to purchase ECMN stock, and failed to notify them before the purchase. In fact, notwithstanding the requirements of the Trust Agreement and the obvious conflicts of interest, Chapman personally authorized the placement of ECMN shares in the Trust. In addition, although clearly not true, and in complete disregard for CCM's duties as an investment adviser, Chapman informed representatives of the sub-advisers that no conflicts of interest existed in allocating the ECMN shares to the Trust, and in purchasing the shares through TCC, the broker-dealer he controlled.

50. Moreover, on June 26, 2000, almost a full week after ECMN began trading, when ECMN was then trading at $7, Chapman and Bravo fraudulently caused Albriond to buy another 175,000 shares, again at the $13 IPO price, and backdated the sales to the initial trading date — resulting in an instant loss of over $1 million dollars to the Trust and its investors. These remaining 175,000 ECMN shares placed into the Albriond managed portion of the Trust reflected backdated trades for shares that Chapman had been unsuccessful in unloading elsewhere. Of this amount, 130,000 were shares that Chapman had tried to force on a TCC customer. When the customer refused to pay for them, Chapman was desperate to find another account into which to place the shares so that TCC would not have to pay for them. On June 26, 2000, Bravo instructed an ECMN employee to cancel the customer's purchase, and Chapman ordered Bravo to have the 130,000 shares transferred to Albriond's account.

51. The other 45,000 shares were TCC proprietary syndicate shares that had not been sold by the IPO closing date.

52. Had Chapman and Bravo not fraudulently backdated the sale date of the 175,000 shares, TCC would have been responsible for paying $2,275,000, and the IPO would have been endangered.

53. As part of this fraudulent transaction, Chapman and Bravo backdated these trades to make it appear as though they had taken place "as of" June 20, 2000, when the price of ECMN was $13 per share, when in fact they had not. An "as of" transaction is a trade that is booked after the original trade date. It may be legitimate or, as in this case, may indicate a fraudulent practice.

54. Although the three investors of the Trust received monthly statements as well as quarterly reports detailing the Trust's holdings, they apparently were not aware that the Trust held ECMN stock. At a meeting in approximately August 2001 — more than one year after shares of the ECMN IPO were placed into the Trust, Chapman told representatives of Maryland Pension that theAlbriond portion of the Trust held ECMN stock.

55. As CCM's secretary and assistant treasurer, and Chapman's most senior officer, Bravo not only knew that shares of ECMN were being purchased for the Trust, but also substantially assisted CCM in making these purchases through his role at TCC. In addition, as TCC's head of equity trading, Bravo authorized Albriond's initial purchase of 200,000 shares of the ECMN IPO, and oversaw the backdating of the 175,000 share purchase.

56. In return for his acceptance of the backdated shares, Chapman rewarded Bond with additional funds to manage. As of March 31, 2000, Albriond's managed portion of the Trust was valued at almost $45 million. In July 2000, Chapman gave Albriond an additional $10 million to manage for the Trust, worth an additional $45,000 per year in fees. Albriond received these monies despite the fact that the Trust assets that it managed had declined by 12.7 percent during the second quarter of 2000.

57. In addition, Chapman gave Albriond $1.5 million of the ECMN IPO proceeds to invest separately. These funds were transferred to Albriond on June 27, 2000, one day after the backdated trade. Over the next eight months, Bond effected 88 transactions and lost almost $900,000 of this amount. In March 2001, Chapman asked that the remaining funds, which then totaled $636,000, be returned.

58. By permitting the purchases of the ECMN shares in the Trust, CCM, Chapman and Bravo harmed CCM's client, the Trust, and the Trust's investors. The Trust's total losses from purchases and sales of ECMN stock as of February 5, 2002, the date the Trust was liquidated, was more than $4.3 million.

Unauthorized Trading at TCC

59. In addition to the transactions at CCM, defendant Daniel Baldwin, Jr., TCC's Senior Vice President, Institutional Equity Sales, executed a series of unauthorized ECMN IPO trades in his customer accounts.

60. The customers on whom Baldwin preyed included the elderly, or individuals who had specifically requested low-risk investments. Many knew nothing about investing or the stock market and relied on Baldwin to make their investment decisions.

61. Baldwin has been a registered representative with TCC since 1987, joining the company shortly after it was started, and was extremely loyal to Chapman, reporting directly to Chapman rather than to his titular supervisor, Bravo. Prior to the ECMN IPO, Baldwin handled $18,162,402 in 760 customer accounts, the largest number of any broker at TCC.

62. Baldwin placed shares of the ECMN IPO in more customer accounts than any other broker at TCC. A total of 223 of Baldwin's customers, comprising 238 accounts, purchased 308,000 shares in the offering.

63. However, at least 28 customers, holding 37 accounts, did not authorize the purchase of ECMN IPO shares. They neither requested the purchases nor did Baldwin solicit them. Instead, Baldwin orchestrated these ECMN IPO purchases, totaling 17,525 shares, either by selling the customers' other holdings without authorization or fraudulently making margin loans to their accounts and using the loans to purchase ECMN shares.

64. Since the Exchange Act prohibits the purchase of shares of an IPO on margin, Baldwin pledged other stocks in customers' portfolios for the loans that he then used to purchase ECMN stock inthe customers' accounts, all without their knowledge or consent.

65. When customers called to complain about or question the unauthorized purchases, Baldwin made misrepresentations about, among other things, the value of the investment in an effort to persuade them to ratify the unauthorized transaction.

66. Bravo knew or was reckless in not knowing about Baldwin's unauthorized trading. Bravo ran the trading desk and supervised TCC's operations. Because of Baldwin's long tenure and experience as a broker at TCC, Bravo supervised him less than other brokers. Further, Bravo was familiar with Baldwin's customers, was his direct supervisor, and signed all of the order tickets for the ECMN IPO.

Chapman and Bravo Use IPO Proceeds to Manipulate the Post-IPO Market for ECMN Shares

67. As ECMN's majority shareholder, Chapman had a direct financial interest in maintaining the price of ECMN at artificially high levels. His personal fortune and professional reputation were at stake.

68. As described, on June 20, 2000, ECMN opened on the NASDAQ market at $8 per share, well below the offering price of $13, and the stock price never recovered.

69. In order to avert financial and professional disaster brought on by the collapse of the IPO, between June 21, 2000 and November 30, 2000, Chapman, with Bravo's assistance, knowingly caused TCC, under the guise of market making, to use proceeds of the ECMN IPO to bid for, and purchase, ECMN stock at artificially high prices in an effort to illegally stabilize the price of ECMN stock and prevent further declines, thereby conducting an illegal market manipulation.

70. To effect the manipulation scheme, Chapman and Bravo employed manipulative tactics, including restricting sales of ECMN into the open market by delaying and/or refusing to executecustomer sell orders; arbitrarily setting the price of ECMN through price leadership; dominating and controlling the market; reducing the floating supply by absorbing shares of ECMN into TCC's proprietary account; and making materially misleading statements in Commission filings during the manipulation period, June 21, 2000 through November 30, 2000. As a result, TCC, through Chapman and Bravo, employed manipulative and deceptive conduct that created a false impression of demand for ECMN stock.

Domination of the Market and Price Leadership

71. TCC, through Chapman and Bravo, dominated and controlled the market for ECMN during the manipulation period. Chapman and Bravo abused TCC's position as the dominant market maker by controlling the pricing of ECMN to such an extent as to preclude an independent, competitive market from arising.

72. Bravo controlled the trading room and made changes in TCC's position in ECMN's stock and the bid prices for the stock at Chapman's instruction. Bravo regularly informed Chapman as to TCC's firm account positions in ECMN, and consulted with him on significant changes in TCC's trading position and bids.

73. Having caused TCC to place 1,005,662 shares out of the 1,260,000 shares offered in the IPO (80 percent) with its own customers and clients, both at TCC and CCM, Chapman then engaged in conduct designed to purchase as much ECMN stock in the aftermarket as was necessary to illegally stabilize and prevent the further decline of ECMN's stock price.

74. As the principal market maker and largest purchaser of ECMN shares, TCC controlled the market and regularly paid the highest price. Between June 21, 2000 and November 30,2000, TCC shared the highest bid for ECMN 80 percent of the time and held the exclusive high bid 54 percent of the time. TCC accounted for 55 percent of the total trading volume in ECMN during this period. On 22 trading days, TCC represented 70 percent or more of the volume. The next closest market maker accounted for only 13 percent of the volume.

Chapman and Bravo Reduce the Floating Supply

75. Defendants Chapman and Bravo reduced the floating supply of ECMN stock by causing TCC to purchase as many shares as possible, depositing them into TCC's trading account, and refusing and/or delaying execution of customer sell orders.

76. Chapman and Bravo caused TCC to engage in aggressive bidding and purchasing of ECMN, but rarely caused TCC to sell ECMN into the open market. TCC did not act as a legitimate market maker in ECMN. Instead of buying and selling as appropriate to assure an orderly market for ECMN, TCC bought 94 percent of the time. Between June 21 and November 30, 2000, TCC purchased 1,236,105 shares from other broker-dealers, and despite its abundant inventory of ECMN, only sold 4,000 shares to other broker-dealers. Chapman minimized the downward pressure on the price of ECMN by keeping the buy-to-sell ratio at more than 300 to 1, and by absorbing the excess shares into TCC's inventory account. TCC's few sales were usually to TCC customers.

77. Chapman and Bravo dramatically reduced the floating supply of the stock with their one-sided market domination. By June 30, 2000, TCC had purchased 843,919 shares of ECMN into TCC's proprietary account. Combining these shares with the shares already held at TCC gave Chapman control over a total of 3,084,764 out of 5,192,566 shares, or 59 percent, of the floating supply.

78. Between June 21, 2000 and July 14, 2000, ECMN's bid quotations fluctuated somewhat between a low of $6.88 and a high of $7.38 per share. However, from July 18, 2000 to November 30,2000, TCC's bid stayed exactly the same: $6.88. In stark contrast, during the same time period, the NASDAQ Composite Index declined from 4064 to 2597, a drop of 36 percent. Despite the declining market, Chapman continued to increase TCC's control over the floating supply with additional purchases of more than 500,000 shares by November 30, 2000, mostly at a constant price of $6.88 per share. During this time period, Chapman caused the retirement of 1,879,677 ECMN shares because the massive inventory created a potential violation of TCC's net capital requirements. Even with this reduction of the float, TCC controlled 49 percent of ECMN's stock.

79. Reducing the floating supply of ECMN shares over the course of the manipulation period made it easier for Chapman and Bravo to abuse TCC's power as the dominant market maker and manipulate the price of ECMN. Chapman's removal of 1,398,543 shares of ECMN from the floating supply served no legitimate market making or investment purpose, but was part of his scheme to illegally stabilize the price of ECMN stock.

Chapman and Bravo Restrict Brokers from Selling ECMN

80. Chapman and Bravo's creation of the artificial appearance of demand for ECMN stock would have been futile had they not actively discouraged TCC brokers from selling ECMN stock back into the market. After trading began, Chapman and Bravo used their control of TCC to discourage and even prevent brokerage customers from selling their ECMN stock.

81. In meetings, Bravo urged brokers to encourage customers to hold ECMN stock in an effort to stabilize the price. Bravo required brokers to get his prior approval when a customer requested to sell ECMN stock, and always asked about the reason for the sale — something not done for transactions in other companies' shares. He used threats and other intimidation to keep brokers from selling customer ECMN stock. Bravo's conduct led brokers to persuade their customers not to sellECMN stock.

82. ECMN employees also were discouraged from selling their own ECMN stock. They were required to obtain approval from Bravo and, if the sale was large, from Chapman as well.

83. As part of the scheme to manipulate the price of ECMN stock, TCC, through Chapman and Bravo, sold ECMN stock to customers, without disclosing, among other things, the following material facts:

(a) that the prices at which TCC sold ECMN to the public were not reasonably related to the prevailing market price;

(b) that the prices at which TCC sold ECMN stock to the public were arbitrarily set and did not reflect the free forces of supply and demand; and

(c) that TCC dominated and controlled the market for ECMN stock.

84. In addition, Chapman and Bravo failed to disclose to TCC customers the true reasons for the fluctuations in ECMN's share price in order to influence customers to either purchase or refrain from selling their ECMN stock. Chapman and Bravo fraudulently induced customers to purchase ECMN stock in the secondary market without disclosing that the stable share price was due to TCC's manipulative activities.

85. Once Chapman and Bravo ceased their efforts to manipulate the price of ECMN, the price dropped dramatically. No longer able to support the price of the stock, Chapman began backing away from his bid of $6.88 on November 29, 2000. By the close of trading on December 1, 2000, ECMN's price had fallen to $3.91 a share — a 43 percent drop. The stock never closed as high as $3.91 again, trading consistently for less than $3 per share. ECMN is currently trading at $.08 per share.

86. The collapse of ECMN's stock price resulted in substantial losses to investors who purchased the stock at artificially high prices.

Misrepresentations and Omissions in the Use of Proceeds

87. In addition to the market manipulation described above, and in order to avoid additional selling pressure on ECMN stock, Chapman and defendant Brown caused ECMN to misrepresent the use of IPO proceeds in its filings with the Commission. The fact that offering proceeds had not been used as described was never clearly disclosed to the public in the Form 10-QSB quarterly reports for the second and third quarters of 2000, while Chapman was propping up the price of ECMN stock. Both Chapman and Brown, ECMN's CFO, prepared and signed the quarterly and annual reports.

88. In its prospectus ECMN represented that the proceeds of the IPO would be used to implement ECMN's business plan — development of an Internet-based investment business.

89. In ECMN's Form 10-QSB for the quarter ended June 30, 2000, filed on August 15, 2000, ECMN disclosed, among other things, that it had used $345,000 of the offering proceeds for working capital and general corporate purposes, and that the remaining offering proceeds had been "invested by eChapman.com pending final application of such proceeds to implement and brand the eChapman.com strategy."

90. Similarly, in its Form 10-QSB for the quarter ended September 30, 2000, filed on November 14, 2000, ECMN represented that approximately $816,000 of the offering proceeds had been invested in a money fund, and that approximately $1,370,000 of the offering proceeds had been spent in accordance with the purposes set forth in the offering documents. ECMN also stated that "the remaining offering proceeds had been invested by eChapman.com pending final application of such proceeds to implement and brand the eChapman.com strategy."

91. In fact, the offering proceeds were committed to the market manipulation. Chapman spent almost $10 million of the $12 million IPO proceeds to buy back ECMN shares in the secondary market. ECMN offering proceeds were deposited into a TCC account at TCC's clearing broker, and then used as collateral for the purchase of the stock. As a result, proceeds were not available to implement the goals set forth in ECMN's prospectus.

92. Within two weeks of the IPO, more than $7 million of the $12 million in proceeds had already been pledged as collateral for the purchase of ECMN stock. By the end of September, nearly $10 million had been pledged for that purpose. The reality was that, as a result of its repurchase of its own stock, ECMN could not implement the business strategy that formed the basis of the IPO. Both Chapman and Brown knew this but neither they, nor ECMN, disclosed the truth about the use of the IPO proceeds.

93. Finally, in its Form 10-KSB for the year 2000, filed in April 2001, ECMN included a schedule that set forth "a reasonable estimate of the application of offering proceeds," in which it estimated that approximately $6.1 million of offering proceeds had been used to retire ECMN stock. In fact, even this belated disclosure was false; in reality ECMN had spent almost $10 million of IPO proceeds in buying in and retiring stock.

94. Chapman and Brown, who signed the reports filed with the Commission, knew or were reckless in not knowing that ECMN was making such material misrepresentations and omissions regarding the use of proceeds. Both Chapman and Brown knew how the proceeds of the IPO were spent. Brown was also responsible for reconciling TCC's account at the clearing broker and providing figures to be used in the reports filed with the Commission. They are both responsible for the filings and their contents.

FIRST CLAIM
Violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder

95. Paragraphs 1 through 94 are realleged and incorporated herein by reference.

96. From November 1999 through at least November 2000, as a result of the conduct alleged herein, defendants Chapman, eChapman, Inc., The Chapman Company, Chapman Capital Management, Inc., Bravo, Baldwin and Brown, in connection with the offer, purchase or sale of securities, directly or indirectly, by the use of the means and instruments of transportation and communication in interstate commerce, or the means and instrumentalities of interstate commerce, or the mails, or the facilities of a national securities exchange: (a) employed devices, schemes and artifices to defraud; (b) obtained money or property by means of, and made, untrue statements of material fact, and 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 (c) engaged in acts, transactions, practices and courses of business which operated as a fraud or deceit upon offerees, purchasers and prospective purchasers of securities.

97. By reason of the foregoing, defendants Chapman, ECMN, TCC, CCM, Bravo, Baldwin and Brown violated Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, thereunder.

SECOND CLAIM
Violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20 thereunder

98. Paragraphs 1 through 97 are realleged and incorporated herein by reference.

99. During the period set forth above, ECMN filed with the Commission quarterly reports on Form 10-QSB, and an annual report on Form 10-KSB. As described in this Complaint, these reports were materially false and misleading and omitted to state material facts necessary to make the statements made, in the light of the circumstances under which they were made, not misleading.

100. By reason of the foregoing, defendant ECMN has violated and, unless enjoined, will continue to violate Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 13a-1, 13a-13 and 12b-20, 17 C.F.R. §§ 240.13a-1, 240.13a-13 and 240.12b-20, thereunder.

101. As a result of the conduct alleged herein, defendants Chapman and Brown each provided substantial assistance in connection with ECMN's violations of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 13a-1, 13a-13 and 12b-20, 17 C.F.R. §§ 240.13a-1, 240.13a-13 and 240.12b-20, thereunder.

102. By reason of the foregoing, defendants Chapman and Brown each aided and abetted ECMN's violations of Section 13(a) of the Exchange Act and Rules 13a-1, 13a-13 and 12b-20, thereunder.

THIRD CLAIM
Violations of Sections 206(1), 206(2) and 206(3) of the Advisers Act

103. Paragraphs 1 through 102 are realleged and incorporated herein by reference.

104. During the period set forth above, defendant CCM made use of the means and instrumentalities of interstate commerce and of the mails while acting as an investment adviser.

105. As a result of the conduct alleged herein, defendant CCM, directly and indirectly, by use of the mails and the means and instrumentalities of interstate commerce: (a) employed devices, schemes and artifices to defraud investment advisory clients and prospective clients; (b) engaged in transactions, practices and courses of business which operated as a fraud and deceit upon such clientsand prospective clients; and (c) acted as a principal for its own account and knowingly purchased and sold securities for a client without disclosing to the client in writing before the completion of the transaction the capacity in which it was acting, and obtaining the client's consent to the transaction.

106. By reason of the foregoing, defendant CCM violated Sections 206(1), 206(2) and 206(3) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 80b-6(2) and 80b-6(3).

107. As a result of the conduct alleged herein, defendants Chapman and Bravo each provided substantial assistance to CCM in connection with CCM's violations of Sections 206(1), 206(2) and 206(3) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 80b-6(2) and 80b-6(3).

108. By reason of the foregoing, defendants Chapman and Bravo each aided and abetted CCM's violations of Sections 206(1), 206(2) and 206(3) of the Advisers Act.

WHEREFORE, the Commission respectfully requests that this Court:

I.

Issue an injunction permanently restraining and enjoining defendants Chapman, ECMN, TCC, CCM, Bravo, Brown and Baldwin from violating Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, thereunder.

II.

Issue an injunction permanently restraining and enjoining defendant ECMN from violating Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 13a-1, 13a-13 and 12b-20, 17 C.F.R. §§ 240.13a-1, 240.13a-13 and 240.12b-20, thereunder.

III.

Issue an injunction permanently restraining and enjoining defendants Chapman and

Brown from aiding and abetting violations of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a) and Rules 13a-1, 13a-13 and 12b-20, 17 C.F.R. §§ 240.13a-1, 240.13a-13 and 240.12b-20, thereunder.

IV.

Issue an injunction permanently restraining and enjoining defendant CCM from violating Sections 206(1), 206(2) and 206(3) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 80b-6(2) and 80b-6(3).

V.

Issue an injunction permanently restraining and enjoining defendants Chapman and Bravo from aiding and abetting violations of Sections 206(1), 206(2) and 206(3) of the Advisers Act, 15 U.S.C. §§ 80b-6(1), 80b-6(2) and 80b-6(3).

VI.

Order defendants ECMN, TCC, Chapman, Bravo and Baldwin to disgorge the ill-gotten gains, including, but not limited to, salaries, bonuses and commissions, that they derived from the activities set forth in this Complaint, together with prejudgment interest.

VII.

Order defendants Chapman, ECMN, TCC, CCM, Bravo, Brown and Baldwin to pay civil penalties, pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3), and Section 209(e) of the Advisers Act, 15 U.S.C. § 80b-9(e), as a result of the violations set forth herein.

VIII.

Issue an order pursuant to Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2), barring defendants Chapman, Bravo and Brown from serving as officers or directors of any issuer that has a class of securities registered with the Commission pursuant to Section 12 of the Exchange Act, 15 U.S.C. 78l, or that is required to file reports with the Commission pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. § 78o(d).

IX.

Order such other and further relief as this Court may deem just and appropriate.

Local Counsel:
Thomas M. DiBiagio
United States Attorney

By:_______/s/_________
Michael DiPietro
Assistant United States Attorney
Federal Bar No. 023885
6625 United States Courthouse
101 West Lombard Street
Baltimore, MD 21201-2692
(410) 209-4800

Dated: June 26, 2003

http://www.sec.gov/litigation/complaints/comp18203.htm