SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16223 / July 28, 1999
SEC v. ALLIANCE INDUSTRIES, PETER H. NORMAN, AND DONALD A. BAILLARGEON, U.S. District Court for the Eastern District of California, No. CIV-F-99-6073(RECDLB)(July 27, 1999)
SEC SUES TWO OFFICERS OF ALLIANCE INDUSTRIES
Norman and Baillargeon Touted Alliance On the Internet,
The Securities and Exchange Commission announced that it filed a civil injunctive action in the United States District Court for the Eastern District of California alleging that two top officers of Alliance Industries, Peter H. Norman and Donald A. Baillargeon, carried out a wide-ranging manipulation of Alliance's stock from January to November 1996, causing investors to lose millions of dollars. Norman is the chairman and CEO of Alliance, a small holding company based in Bakersfield, California. Baillargeon served as Alliance's vice president for marketing and public relations.
The Commission's complaint alleges that Norman and Baillargeon used Alliance's internet web site to make materially false representations about businesses in which various Alliance subsidiaries were supposedly engaged, including the cultivation and sale of fast-growing "paulownia" hardwood trees, the breeding and selling of live goats and goat carcasses, and the development of a nationwide chain of chiropractic clinics. The complaint alleges that, contrary to the representations, Alliance owned no paulownia tree technology or plantations, did not own or operate a goat business, and was not developing a chain of chiropractic clinics. Nonetheless, according to the complaint, Norman and Baillargeon projected that Alliance's various businesses would generate $4.8 billion over a projected ten-year period, and that the paulownia tree business alone would bring Alliance more than $l billion in annual revenue by 2006. The complaint alleges that those and other projections had no reasonable basis and were materially false and misleading.
According to the complaint, Norman controlled about 80% of the 24 million shares of Alliance common stock outstanding. The complaint states that the stock, which was listed for trading on the OTC Bulletin Board, rose from $1.00 per share in January 1996 to a split-adjusted high of $46 on November 21, 1996, when the Commission issued a ten-day trading suspension.
The complaint also alleges that Norman engaged in a series of manipulative securities transactions, including "wash trading," designed to make it appear that there was an active market for Alliance stock. According to the complaint, Norman's own purchases and sales accounted for 100% of the trading in Alliance on numerous trading days. The complaint further alleges that Norman sold more than 2.2 million shares of Alliance common stock to the public between May 1996 and March 1997, making millions of dollars in illegal profits.
The Commission seeks an order enjoining Norman, Baillargeon, and Alliance from further violations of Section Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5, and enjoining Norman and Alliance from further violations of Section 5 of the Securities Act. The complaint also seeks an order directing Norman to pay disgorgement, imposing civil monetary penalties upon Norman and Baillargeon, barring Norman from serving as an officer or director of any public company, and other unspecified relief.
This enforcement action is part of the Commission's four-pronged approach to attacking microcap fraud: enforcement, inspections, investor education and regulation. For more information about the SEC's response to microcap fraud and the litigation releases for these cases, visit the SEC's Microcap Fraud Information Center at http:// www.sec.gov/news/extra/microcap.htm.
Investors are advised to read the SEC's "Cyberspace" Alert before purchasing any investment promoted on the internet. The free publication, which alerts investors to the telltale signs of online investment fraud, is available on the Investor Assistance and Complaints link of the SEC's home page on the World Wide Web