U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20433 / January 18, 2008
SEC v. Gerald H. Levine and Marie A. Levine, Civil Action No. 99 CIV 02568 (D.D.C.)
Court Enters Temporary Restraining Order and Grants Other Emergency Relief Against Recidivists Gerald and Marie Levine to Halt Ongoing Securities Fraud, Also Schedules Contempt Hearing
Today, the U.S. Securities and Exchange Commission ("Commission") announced that on January 17, 2008, the Honorable Henry H. Kennedy, Jr., U.S. District Judge for the District of Columbia, entered a temporary restraining order and granted other emergency relief against recidivists Gerald H. and Marie A. Levine ("the Levines"), and ordered them to appear on February 20, 2008 to determine whether the court should enter a preliminary injunction against them for engaging in ongoing securities fraud. The Court also ordered the Levines to show cause why they should not be held in civil contempt of court for violating the terms of a prior securities fraud judgment against them. The Court decreed that, should the Levines fail to comply with the order or fail to appear at the February 20 hearing, they could be subject to a warrant for their arrest.
The Court issued its order in response to the Commission's motion contending that the Levines are in contempt for failing to pay more than $445,000 in disgorgement and prejudgment interest as required by the final judgment of securities fraud entered against them on June 6, 2007 ("June 6th judgment"), and for committing new acts of securities fraud in violation of that judgment's antifraud injunction. As part of its order, the Court also froze the Levines' assets, ordered them to account for and repatriate investor funds, and appointed a temporary receiver for various companies controlled by the Levines, among other things.
The Court found that the Commission had made a prima facie case of securities law violations by the Levines. In its motion, the Commission contends that the Levines are involved in the ongoing fraudulent sale of the shares of several thinly-capitalized issuers traded in the grey market. Shares traded in the grey market have no active market makers. These issuers are Avitech LifeSciences, Inc., Biomaxx Systems, Inc., Evolution Global Capital Partners, Inc., Green Machine Development Corp., and Xiiva Holdings, Inc. The Commission has previously suspended trading in each of these stocks in separate administrative actions. (Links to the suspension orders are listed below.) The Commission alleges that the Levines have misappropriated over $1.4 million of investor funds, using four alter-ego companies to perpetrate the securities fraud. Those alter-ego companies are Wire to Wire, Inc., The Delaware Escrow Company, Euro Escrow, and Public Highway, Inc. ("the alter-ego companies"). The Commission also contends that innocent investors are being told materially false and misleading statements about these issuers. For example, the Commission alleges that investors have been told that Avitech would soon be offering a cure for HIV/AIDS, that Evolution is developing properties with several prominent building companies, and that Green Machine owns mining concessions in Africa that are about to be purchased by a prominent mining company. The Commission contends that all of these statements are false. The Commission also contends that, in connection with these ongoing fraudulent sales, the Levines have failed to disclose several materially misleading facts to investors, including the Levines' involvement in the sale of these securities, that a judgment of securities fraud has already been entered against them, and that they are defendants in yet another civil enforcement action accusing them of securities fraud. Specifically, as to this last point, on April 17, 2007, the Commission sued the Levines for securities fraud in the action entitled SEC v. Gerald Harold Levine, et al., 2:07-CV-00506 LDG/RJJ (the "Nu Star" case), currently pending in U.S. District Court for the District of Nevada.
In his order, Judge Kennedy did the following, among other things: temporarily restrained the Levines from further acts in violation of the antifraud injunction contained in the June 6th judgment, as well as from any activities in any way related to the purchase or sale of any penny stock, any stock traded in the grey market, or any stock quoted on the Pink Sheets, LLC, without prior leave of the Court; froze the Levines' assets, whether in their own names or in the names of the alter-ego companies; ordered the Levines to account for their assets and stock transactions, whether in their own names or in the names of the alter-ego companies; ordered the repatriation of all funds moved offshore by the Levines or their alter-ego companies; ordered expedited discovery and the preservation of evidence; and appointed a temporary receiver for the alter-ego companies. The Court ordered the receiver to: take immediate possession of all assets held by the alter-ego companies; take immediate possession of, and change the locks on, all offices used by the alter-ego companies; enter the home of the Levines to remove all assets of, and computers used by, the alter-ego companies; receive all mail of the alter-ego companies; investigate the manner in which the alter-ego companies conducted business; and institute legal proceedings on behalf of the investors of Avitech, Biomaxx, Evolution, Green Machine and Xiiva who sent funds to the alter-ego companies. Judge Kennedy's order also set the date for a hearing on the preliminary injunction and finding of contempt sought by the Commission, for February 20, 2008.
For further information concerning this action and its underlying action against the Levines, please see the following:
Litigation Release No. 20124 (May 22, 2007), http://www.sec.gov/litigation/litreleases/2007/lr20124.htm;
For further information concerning the ongoing Nu Star case against the Levines, please see the following:
Litigation Release No. 20077 (April 18, 2007), http://www.sec.gov/litigation/litreleases/2007/lr20077.htm.
For further information concerning the trading suspensions, please see the following:
Release No. 34-56965 (Xiiva Holdings, Inc., December 14, 2007), http://www.sec.gov/litigation/suspensions/2007/34-56965.pdf;