U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20525 / April 10, 2008
SEC v. Compass Capital Group, Inc., Mark A. Lefkowitz, Alvin L. Dahl, John R. Dumble, John C. Hopf, Kevin D. Romney, and Shane H. Traveller, Case No. 2:08-CV-00457 (D. Nev.) filed April 10, 2008
SEC Charges Compass Capital Group, Inc., its Principal, Mark Lefkowitz, and Former Officers and Directors of 21st Century Technologies, Inc. in Unlawful Public Offering and With Securities Fraud
The Securities and Exchange Commission today charged Compass Capital Group, Inc., Mark A. Lefkowitz, Alvin L. Dahl, John R. Dumble, John C. Hopf, Kevin D. Romney, and Shane H. Traveller with engaging in an unlawful public offering of the securities of 21st Century Technologies, Inc., a former Business Development Company; making materially false and misleading statements in the offer and sale of 21st Century's securities; and aiding and abetting reporting, record-keeping, and internal controls violations by 21st Century.
The Commission's complaint alleges that, in 2003, defendants Romney, Hopf, Lefkowitz, and Compass Capital employed a scheme to evade the registration requirements of the federal securities laws for a public offering of 21st Century securities. Purporting to act pursuant to a registration exemption under Regulation E of the Securities Act of 1933, these defendants structured a public offering in a manner that generated excess and unlawful proceeds and as a result, the offering failed to qualify for the Regulation E exemption. Further, these defendants fraudulently deprived the public of material information about Compass Capital's and others' roles as underwriters for the offering and how the underwriters were compensated for distributing 21st Century's securities.
In particular, the Commission alleges Compass Capital and its affiliates, including Lefkowitz and Hopf, bought shares at an undisclosed discount from 21st Century, with a view to distributing them in a public offering, thereby acting as undisclosed underwriters for 21st Century's public offering. As a result, the offering raised more than $5 million in a twelve-month period, the maximum amount permitted under Regulation E. The unregistered sales of 21st Century's shares therefore violated the Securities Act's registration requirements.
The complaint further alleges that Romney, Dumble, and Traveller violated the antifraud provisions of the federal securities laws by publishing materially false and misleading statements by 21st Century and that Dahl, Dumble, and Traveller aided and abetted 21st Century's reporting, record-keeping, and internal controls violations. 21st Century reported false and materially misleading valuations and descriptions of several of its portfolio investments and failed to devise and maintain a system of internal accounting controls sufficient to assure that only authorized transactions were executed and that transactions were recorded accurately.
The Commission's complaint also alleges that Lefkowitz and Compass Capital each acted as a broker and dealer in connection with 21st Century's public offering, although neither Lefkowitz nor Compass Capital was registered with the Commission as a broker-dealer
The Commission seeks a final judgment permanently enjoining defendants Lefkowitz, Dumble, Romney, and Traveller from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule l0b-5 thereunder; permanently enjoining defendants Romney and Traveller from violating Section 17(a) of the Securities Act; permanently enjoining defendants Compass Capital, Lefkowitz, Romney, and Hopf from violating Section 5(a) and 5(c) of the Securities Act; permanently enjoining defendants Compass Capital and Lefkowitz from violating Section 15(a) of the Exchange Act; permanently enjoining defendants Dumble, Traveller, and Dahl from violating Section 13(a) of the Exchange Act and Rules 12b-20 (Dumble, Traveller, and Dahl), 13a-1 (Traveller and Dahl), 13a-11 (Dumble), and 13a-13 (Dumble, Traveller, and Dahl); permanently enjoining defendant Traveller from violating Section 13(b)(5) of the Exchange Act and Rule 13b2-1; permanently enjoining defendants Dumble, Romney, and Dahl from violating Rule 13a-14 of the Exchange Act, enacted as part of the Sarbanes-Oxley Act of 2002; permanently enjoining defendants Compass Capital and Lefkowitz, from violating Section 13(d) of the Exchange Act and Rule 13d-1; and ordering all of the defendants to pay civil penalties and disgorgement of any ill-gotten gains.
The Commission also seeks entry of an order barring Dumble, Romney, and Traveller from serving as officers or directors of any public company, and barring all defendants from participating in any future offerings of penny stock.