U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19784 / August 1, 2006
SEC v. Richard P. Smyth, Arnold E. Johns, Jr., Michael J. Becker and Alan T. Davis, Civil Action No. 1:01-CV-1344 (N.D. Ga.)
Atlanta Man Ordered to Pay $771,787 for Illegal Insider Trading
The Securities and Exchange Commission ("Commission") announced today that on July 28, 2006, the Honorable Clarence Cooper, United States District Judge for the Northern District of Georgia, issued an order requiring Arnold E. Johns, Jr. of Atlanta, Georgia, to pay $372,578 of disgorgement, plus prejudgment interest of $399,209, for his 1996 illegal insider trading. The ruling came after an evidentiary hearing held July 17, 2006, and follows a remand from the Eleventh Circuit which directed that the district court conduct the evidentiary hearing.
Johns was president and a director of Vista 2000, Inc., a now defunct consumer products company formerly headquartered in Roswell, Georgia. Vista's common stock previously traded on the NASDAQ SmallCap Market until it became listed on the NASDAQ National Market on February 13, 1996. Subsequently, on May 31, 1996, Vista's stock was delisted.
Judge Cooper found that Johns unlawfully sold 47,500 shares of Vista 2000, Inc. stock over an 11-day period in February 1996 while he was in possession of material, nonpublic information regarding Vista 2000, Inc. The information Johns possessed was not publicly disclosed until April 15, 1996, after the close of the market. As a result, Johns has now been ordered to pay a total of $771,787.
Previously, on October 30, 2002, Judge Cooper issued an Order of Permanent Injunction prohibiting Johns from violating the antifraud provisions, books and records provisions, internal accounting control provisions and reporting provisions of the Securities Act of 1933 (Section 17(a)) and the Securities Exchange Act of 1934 (Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and Rules 10b-5, 12b-20, 13-11, 13a-13 and 13b2-1 thereunder). Johns agreed to settle the charges without admitting or denying the allegations in the amended complaint.
The Commission's amended complaint alleged a wide-range of securities law violations committed by Johns during 1995 and 1996. The allegations included Johns': (1) failure to conform with generally accepted accounting principles ("GAAP") resulting in the overstatement in various filings made with the Commission of Vista's revenues, income, earnings per share, and assets during 1995 and 1996 (the misstated amounts ranged up to 83,592% and in most periods, resulted in Vista reporting income when it was, in fact, experiencing losses), (2) failure to disclose the misappropriation of $481,000 in 1996 by Vista's chairman of the board, and (3) engaging in illegal insider selling of Vista common stock during 1996.
The Commission alleged that the misstatements contained in Vista's financial statements during Johns' tenure were material and caused numerous reports on Forms 10-QSB and 8-K to be false and misleading.
See also: L.R. 17044 / June 21, 2001; L.R. 17175 / October 5, 2001; L.R. 17211 / October 30, 2001; L.R. 17824 / November 1, 2002; L.R. 17566 / June 17, 2002; L.R. 18612 / March 8, 2004; L.R. 18607 / March 3, 2004.