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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20260 / August 30, 2007

SEC v. FacePrint Global Solutions, Inc. and Pierre Cote, Case No. 1:07-cv-01251-OWW-NEW (E.D. Cal. filed August 30, 2007)

SEC Charges Anti-Terrorism Software Firm With Illegal Stock Scheme

San Francisco, Calif., Aug. 30, 2007 - The Securities and Exchange Commission today filed charges against a Fresno, Calif-based software company and its CEO for conducting an illicit stock-selling scheme that raised nearly $1.5 million. FacePrint Global Solutions, Inc., a start-up company attempting to develop facial recognition software for use in crime and terrorism prevention, and its CEO Pierre Cote, devised a scheme to finance the struggling company without conducting a properly-registered securities offering by selling millions of shares of stock to the public through nominee accounts Cote secretly controlled.

The Commission's complaint, filed in federal district court in Fresno, alleges that FacePrint was a start-up software company in late 2004 with little or no cash and minimal revenue derived solely from its sale of playing cards showing the faces of wanted criminals. The Commission further alleges that, in order to raise money while evading legal restrictions on FacePrint's ability to sell stock to the public, Cote arranged to surreptitiously sell shares through nominees. According to the Commission, FacePrint and Cote issued stock to a FacePrint employee and the 20-year-old niece of Cote's assistant. Cote, who the complaint alleges controlled these nominees' brokerage accounts, began selling the stock to the public, unloading over nine million shares by May 2006. Cote then funneled nearly $1.5 million from these illegal stock sales back to the company.

The Commission's complaint further alleges that Cote facilitated his illicit stock sales by timing them to coincide with company press releases and spam e-mail campaigns conducted by stock promoters hired by the company.

The Commission's complaint charges FacePrint and Cote with registration violations as well as violations of the rules governing the activities of those participating in a distribution of securities. The complaint further charges Cote with violations of the stock ownership reporting requirements. The Commission seeks permanent injunctions against future violations of the securities laws, disgorgement and interest, and civil penalties from both FacePrint and Cote, and further seeks an order barring Cote from participating in an offering of penny stock.

FacePrint is charged with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Rule 102 of Regulation M of the Securities Exchange Act of 1934. The Commission is seeking injunctive relief, disgorgement of ill gotten gains, and monetary penalties against FacePrint.

Cote is charged with violating Sections 5(a) and 5(c) of the Securities Act and Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1 and 16a-3 thereunder, and Rule 101 of Regulation M thereunder. The Commission is seeking injunctive relief, disgorgement of ill gotten gains, and monetary penalties against Cote, as well as an order prohibiting Cote from participating in an offering of penny stock.

SEC Complaint in this matter

 

http://www.sec.gov/litigation/litreleases/2007/lr20260.htm


Modified: 08/30/2007