Litigation Release No. 17539 / May 30, 2002

Securities and Exchange Commission v. Hollywood Trenz, Inc., Edward R. Showalter, Civil Action No. 98-1106 (RMU) (D.D.C. May 4, 1998).

SEC Files Contempt Action Against Defendant Edward R. Showalter for Failure to Pay SEC Judgment of Over $750,000; SEC Also Obtained Asset Freeze, Travel Restriction, and Passport Surrender Order Against Showalter

The Securities and Exchange Commission today announced that on May 22, 2002 the Honorable Ricardo M. Urbina, United States District Judge for the District of Columbia, entered an order to show cause (i) why defendant Showalter should not be held in contempt of court for not paying an outstanding judgment of over $750,000, entered against Showalter on May 15, 2001, and (ii) why Showalter should not provide a sworn accounting of his finances. A hearing on these issues is scheduled for June 3rd. The Court also ordered a freeze of up to $750,000 of Showalter's assets including assets of a company under his control, International Financial Group dba IFG Goldstar Cement Company. In addition, the Court restricted Showalter's travel outside the U.S., and ordered him to surrender his passport to the Court immediately.

Previously, in entering a default judgment, the Court ordered Showalter to pay $900,000 (including a $150,000 penalty) after the Court found that Showalter had orchestrated two fraudulent schemes to raise capital illegally. In the first scheme, Showalter's company materially overstated the value of the primary asset of a wholly-owned subsidiary, a portfolio of defaulted bank loans, in reports filed with the Commission and disseminated to the public. In the second scheme, Showalter's company fraudulently raised millions of dollars by issuing stock to nominee consultants pursuant to Form S-8 registration statements. Consequently, the Court's judgment also permanently enjoined Showalter from violating, among other things, the antifraud, registration, reporting, and internal control provisions of the federal securities laws, and barred him from serving as an officer or director of a public company. The Court also found that Showalter had "engaged in a pattern of repeated, willful violations of the court's orders," including failure "to appear for court-scheduled depositions and hearings," violations of the Court's order to provide discovery, and failure to pay court-ordered expenses to the SEC. See Lit. Rel. No. 17204.

The SEC based its contempt action on new information showing that Showalter was now living and operating in California, and trying to raise money purportedly for a cement import business, IFG Goldstar Cement Company. The SEC's contempt action alleges that Showalter claimed to have invested about $1.7 million of his own money in the business, and that Showalter was paying himself a salary of $30,000 per month while he was trying to start-up this new business.