U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20017 / February 26, 2007
SEC v. Crestview Capital Partners, LLC and Stewart R. Flink, Civil Action No. 07C-1090 (N.D. Ill.)
SEC Files Settled Securities Fraud Charges Against Hedge Fund Adviser and One of Its Managing Members
The Securities and Exchange Commission (Commission) today filed a settled civil injunctive action against a Northbrook, Illinois hedge fund adviser, Crestview Capital Partners, LLC (Crestview), and one of its managing members, Stewart R. Flink, charging them with making fraudulent representations in connection with investments by Crestview-managed funds (Crestview funds) in two registered direct offerings. Registered direct offerings generally are characterized as privately negotiated sales of securities by public companies pursuant to an effective shelf registration statement. Crestview and Flink made false representations in the offering documentation for the two registered direct offerings that Crestview funds had not shorted the respective issuer's stock in the ten trading days preceding the signing of the documentation. Without admitting or denying the Commission's allegations, Crestview and Flink have agreed to a civil injunction for violations of the federal securities laws. In addition, Crestview agreed to pay $394,640 in disgorgement and civil penalties and to retain an independent consultant to monitor Crestview's compliance procedures. Also, Flink agreed to pay $120,000 in civil penalties. After filing, the Court entered final judgments against Crestview and Flink today.
The Commission's complaint, filed in the United States District Court for the Northern District of Illinois, alleges that Crestview funds agreed to invest $1.4 million in a registered direct offering by Introgen Therapeutics, Inc. (Introgen) that was publicly announced on November 26, 2003 and agreed to invest $1.25 million in a registered direct offering by Targeted Genetics Corporation (Targeted Genetics) that was publicly announced on February 2, 2004. The complaint further alleges that as a condition to participating in the offerings, Introgen and Targeted Genetics required the Crestview funds to represent in the subscription agreements for the offerings that Crestview funds had not shorted Introgen and Targeted Genetics stock respectively in the ten days preceding the execution of the agreements. The complaint alleges that Flink, who is 50 years old and resides in Deerfield, Illinois, acting with full authority for Crestview, knowingly or recklessly signed the Introgen and Targeted Genetics subscription agreements on behalf of Crestview funds even though Crestview funds had short sold 108,218 and 255,000 shares respectively of Introgen and Targeted Genetics stock in the ten days preceding the execution of the subscription agreements for each of the companies. Flink's shorting of Introgen and Targeted Genetics stock yielded Crestview funds $197,320 in illegal profits.
The complaint alleges that Crestview and Flink violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Without admitting or denying the Commission's allegations, Crestview and Flink have agreed to the entry of final judgments permanently enjoining them from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Crestview also has agreed to disgorge $197,320 in unlawful profits, plus 37,879 in prejudgment interest and to pay a civil penalty of $197,320. Crestview further agreed to retain an independent consultant to monitor Crestview's compliance procedures for 18 months and to report to the Commission staff every 6 months during the 18 month period. Flink also agreed to pay a $120,000 civil penalty.