Securities and Exchange Commission
Litigation Release No. 17826 / November 4, 2002
Securities and Exchange Commission v. Jawsh Corporation; Civil Action No. 4:02:CV1640DDN (E.D. Mo.) (Noce, J.)
The Securities and Exchange Commission (Commission) today announced that it had filed a civil action in the United States District Court for the Eastern District of Missouri against Jawsh Corporation (Jawsh) for offering unregistered securities and acting as an unregistered investment company.
The Commission's Complaint alleges that in about 1984 Jawsh was formed as a Missouri corporation by William L. Bates (Bates) of St. Louis, Missouri, who was, at all times, the Company's sole shareholder, officer and director. The Complaint also alleges that, from about 1987 through about September 2000, Jawsh, through Bates, publicly offered and sold $16 million in unregistered securities to 250 investors in at least 11 states through the means and instruments of interstate commerce and the mails. The Commission's Complaint also alleges that Jawsh pooled money obtained from investors and invested it, reinvested it and traded in securities without a registration statement being in effect with the Commission as to Jawsh. The Commission's Complaint also alleges that Jawsh thereby violated Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act) and Section 7(a) of the Investment Company Act of 1940 (Investment Company Act). Simultaneously with the filing of the civil action, Jawsh consented to an order, without admitting or denying the Commission's allegations, except as to jurisdiction, which is admitted: (1) enjoining Jawsh from further violations of the registration provisions of the Securities Act of 1933 and the Investment Company Act; (2) for the Court to immediately take exclusive jurisdiction and possession of Jawsh and its books, records and assets, and to appoint a trustee, pursuant to Section 42(d) of the Investment Company Act, to operate Jawsh and dispose of any or all of Jawsh's assets in the best interests of investors, in compliance with the federal securities laws and subject to such terms and conditions as the Court may prescribe; and (3) freezing the Company's assets and preserving its books and records, until the trustee has been appointed.
The Commission also instituted public administrative and cease-and-desist proceedings against Bates based on findings that: from about 1987 through about September 2000, Bates publicly offered and sold $16 million in unregistered securities to 250 investors in at least 11 states to invest and trade in securities, solely at Bates' discretion, and caused and willfully aided and abetted Jawsh to act as an unregistered investment company in violation of the registration provisions of the federal securities laws. Simultaneously with the institution of administrative and cease-and-desist proceedings, Bates consented, without admitting or denying the Commission's findings, except as to jurisdiction, which is admitted, to issuance of a Commission order (Order) ordering Bates to: (1) cease and desist from committing or causing any violation, and any future violation, of Sections 5(a) and 5(c) of the Securities Act and Section 7(a) of the Investment Company Act; and (2) comply with his undertakings to: (a) pay the costs of the trustee appointed in the civil action up to $20,000; and (b) cooperate fully, truthfully and without compensation, with the Commission and the trustee, by: transferring Jawsh's assets, producing any documents in his possession, custody or control, providing truthful testimony in any depositions and hearings in which his testimony may be relevant, and providing whatever other assistance is requested of him.