SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16708 / September 18, 2000
ACCOUNTING AND AUDITING ENFORCEMENT 1302 / September 18, 2000
SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS, CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS, CV 99-1361 BR (D. Ore. September 27, 1999)
SEC SETTLES FRAUD CASE AGAINST TERRY L. NEAL
The Securities and Exchange Commission today announced that on September 13, 2000, the United States District Court for the District of Oregon permanently enjoined Terry L. Neal from committing securities fraud and violating certain other provisions of the federal securities laws, barred him from serving as an officer or director of a public company, and ordered him to disgorge $2,300,000 in ill-gotten gains, including prejudgment interest, and a $200,000 civil penalty.
The Complaint alleged that, among other things, Neal devised a comprehensive scheme to materially overstate Itex's financial condition and results of operations. Neal caused Itex to enter into sham barter transactions, which inflated assets, revenues and earnings during fiscal 1994, 1995 and 1996. Neal caused press releases to be issued touting Itex's extraordinary gains in financial condition and results of operation, causing the price of the stock to rise from $1.25 per share to $12.50 per share in eighteen months. The fraudulent scheme included the issuance of unregistered Itex stock to Neal-related entities and family members at substantial discounts or in exchange for grossly overvalued assets, after which the stock was then resold in the U.S. public market for an estimated $1.6 million in profits.
Neal consented to the entry of the judgment without admitting or denying the allegations against him. In addition to the disgorgement and civil penalty, the judgment permanently enjoined Neal from violating Sections 5 and 17(a) of the Securities Act, Sections 10(b), 13(d) and 16(a) of the Exchange Act and Rules 10b-5, 13b2-1, 13d-1, 13d-3, 16a-2 and 16a-3 thereunder Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1 and 13b2-2 thereunder.
With the entry of this judgment, five of the six defendants in this proceeding have settled with the Commission. At the time of this release, Michael T. Baer is the only defendant who has not yet settled with the Commission.
For further information, see LR-16305 (announcing complaint), LR-16430 (settlement with Morris), LR-16437 (settlement with Itex), and LR-16536 (settlements with Norris and Pfaltzgraff). All of these releases are available at the Commission's website at http://www.sec.gov/enforce/litig.htm