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U.S. Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 17305 / JANUARY 14, 2002

SECURITIES EXCHANGE COMMISSION V. MAX C. TANNER, ET AL., 02 CV 0306 (S.D.N.Y.) (WHP) (January 14, 2002)

SEC SUES NINE INDIVIDUALS, INCLUDING LAS VEGAS LAWYER AND TRADER AT UTAH MARKET-MAKING FIRM, IN $3.7 MILLION PUMP-AND-DUMP SCHEME

The Securities and Exchange Commission announced today that it filed a complaint in the federal District Court for the Southern District of New York against: Max C. Tanner, a Las Vegas attorney; Kevin Kirkpatrick, a trader at Olsen Payne & Co., a Utah-based market-making firm; Kevin J. Ruggiero and Michael Boston, both of whom were brokers associated with Baxter, Banks, & Smith ("BBS"), a now defunct broker-dealer; Alex Sheyfer and Alexander Zalmenenko, both of whom were unlicensed brokers also associated with BBS; and several stock promoters, including Dennis Evans, a resident of Las Vegas, Nevada, Mark A. Taylor, Sr., a resident of Tampa, Florida, and Kenneth Kurtz, a resident of Salt Lake City, Utah.

The Commission's Complaint alleges that from March 1998 through June 1999, the Defendants engaged in a pump and dump scheme involving the stock of Maid Aide, Inc. ("MDAN"), a shell company trading on the Over-the-Counter Bulletin Board ("OTC-BB"). The complaint alleges that as a result of this scheme, MDAN traded at artificially inflated prices ranging between $5.00 and $9.35 per share, allowing the Defendants to dump more than 475,000 MDAN shares into the market for proceeds of over $3.7 million. In addition, the complaint alleges the following:

  • Although MDAN purported to be a commercial and residential cleaning services company, it was actually nothing more than a publicly trading shell corporation controlled by Tanner and Evans. Tanner and Evans controlled at least 90% of MDAN's public float. In early 1998, Tanner entered into an agreement with Taylor, Kurtz, and Ruggiero that entitled Taylor, Kurtz, and Ruggiero to 125,000 MDAN shares each. Tanner, Taylor, Kurtz, and Ruggiero agreed to set up boiler rooms that would sell these shares to the public in exchange for undisclosed kickbacks paid from the sale proceeds.

  • On February 27, 1998, Tanner, Taylor, Kurtz, and Ruggiero issued a press release announcing that MDAN intended to merge with CFE Trucking Inc., a private company that was in the business of hauling gravel for use in building and road construction. Shortly after the press release was issued, two boiler rooms operating as BBS branch offices began cold calling investors to tout MDAN. Boston supervised one of the BBS boiler rooms, and Sheyfer and Zalmenenko supervised the other.

  • The cold callers working in the boiler rooms made numerous material misrepresentations to investors, including baseless predictions that MDAN's stock price would double in six months. The cold callers also routinely posed as Boston and Ruggiero in order to hide their identities and the fact that they were not licensed brokers. The cold callers failed to inform investors that they were being paid up to 70% of the proceeds from each MDAN stock sale that they solicited. Boston, Ruggiero, Sheyfer, and Zalmenenko were paid a portion of these kickbacks in exchange for supervising the boiler rooms.

  • To further the scheme, Kurtz and Ruggiero recruited Kirkpatrick, a trader at Olsen Payne & Co. Kurtz and Ruggiero guaranteed that Kirkpatrick would be allowed to profit on all of his MDAN trades if his firm made a market in MDAN's securities. Kirkpatrick agreed, and Olsen Payne & Co. acted as market maker for MDAN from March 1998 through June 1999. During this period, Kirkpatrick posted artificial price quotations concerning MDAN's stock on the OTC-BB and executed matched orders with other participants in the scheme in order to create artificial rises in MDAN's stock price and trading volume.

The Commission's complaint charges all of the defendants with violations of the antifraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. In addition, the complaint charges Tanner, Evans, Taylor, Ruggiero, and Boston with violations of Sections 5(a) and 5(c) of the Securities Act and Sheyfer and Zalmenenko with violations of Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. The Commission seeks injunctions prohibiting future violations of the securities laws, disgorgement, and civil penalties. The Commission is also seeking an order barring Tanner and Evans from serving as an officer or director of any public company.

In addition to the Commission's civil action against Tanner, Evans, Ruggiero, Taylor, and Kurtz, these individuals were indicted on September 19, 2000 for their role in the MDAN scheme by the Department of Justice, Tax Division ("DOJ"). Tanner and Evans were found guilty in the criminal action on November 19, 2001. Ruggiero, Taylor, and Kurtz had previously entered guilty pleas in connection with the criminal action. The Commission acknowledges the assistance of the DOJ, the U.S. Attorney's Office for the Southern District of New York, the FBI, NASD Regulation, Inc., and the British Columbia Securities Commission in connection with this matter.


*  SEC Complaint in this matter.


http://www.sec.gov/litigation/litreleases/lr17305.htm

Modified: 01/15/2002