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U.S. Securities and Exchange Commission

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16918 / February 28, 2001

SECURITIES AND EXCHANGE COMMISSION V. CHIDWHITE ENTERPRISES, INC. AND JERRY L. CHIDESTER Civil Action NoA01-CV-131 (W.D. Texas, Austin Division)

On February 28, 2001, the Securities and Exchange Commission ("SEC") filed civil fraud charges in federal district court in Austin, Texas, against Chidwhite Enterprises and Jerry L. Chidester (collectively, the "Defendants") in connection with an unregistered Internet offering of so-called "free" stock credits. The complaint alleges that the Defendants used spam e-mail and a web page to defraud over 6,000 investors throughout the United States and the world, raising nearly $96,000 in the fraudulent offering.

  • Chidwhite Enterprises, Inc., a Delaware corporation headquartered in Austin, Texas, was formed in March 2000 purportedly to develop and operate Chidwhite.com, an Internet website devoted to selling consumer optical goods.

  • Jerry L. Chidester, 26, of Austin, Texas, is the founder, sole shareholder, and chief executive officer of Chidwhite Enterprises.

The SEC's complaint charges the Defendants with securities fraud in connection with a promotion for Chidwhite Enterprises in which the Defendants offered 100 stock credits "free" to each applicant on an internet website who paid an "administrative fee" of $10. The Defendants claimed that investors could redeem their stock credits for common stock when Chidwhite Enterprises completed a purportedly impending initial public offering ("IPO") of its securities.

The SEC's complaint alleges that the Defendants made numerous misrepresentations and omissions of material facts in connection with the offering including, among other things, that the SEC had approved the offering, that Chidwhite Enterprises would conduct an IPO upon completion of the offering, and that Chidwhite Enterprises stock would be valued at $20 to $50 per share at the time of its IPO. However, the SEC never approved the offering and Chidwhite Enterprises never undertook any meaningful steps to conduct an IPO. Moreover, Chidwhite Enterprises never established offices, never acquired any inventory, and never offered any products or services, via Chidwhite.com or otherwise. The SEC claims that Chidester misappropriated all of the administrative fees generated in the promotional offering and converted the fees to his own use.

The SEC is seeking permanent injunctions against future violations of the registration and antifraud provisions of the federal securities laws, specifically Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is further seeking disgorgement of ill-gotten gains and prejudgment interest against Chidester and Chidwhite Enterprises.

This action is brought as part of the SEC's Fifth Internet Fraud Sweep. For tips on how to avoid Internet investment schemes, visit http://www.sec.gov/investor/pubs/cyberfraud.htm. For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml. For a description of other SEC enforcement actions involved in this Internet Fraud Sweep, visit http://www.sec.gov/news/press.shtml.

http://www.sec.gov/litigation/litreleases/lr16918.htm

Modified:03/01/2001