U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18024 / March 10, 2003
COURT ORDERS ARIZONA TRUST AND TRUSTEE TO SHOW WHY THEY SHOULD NOT BE HELD IN CONTEMPT FOR FAILURE TO DISGORGE ILLEGAL PROFITS FROM ROLE IN INTERNET PUMP AND DUMP SCHEME
SEC v. Hitsgalore.com, Inc., Stephen J. Bradford, Life Foundation Trust and Jeanette B. Wilcher, Civil Action No. SACV 01-1133 GLT (ANx) (C.D. Cal.).
On February 19, 2003, a federal judge in Santa Ana, California, ordered Life Foundation Trust and its trustee Jeannette Wilcher to show cause why they should not be held in civil contempt for their failure to pay over $1 million required by a July 29, 2002 judgment against them. The judgment required payment of $1,191,423 in combined disgorgement of illegal profits and prejudgment interest for defendants' role in a "pump and dump" scheme involving the stock of Hitsgalore.com, Inc. The February 19 Order requires Wilcher and Life Foundation to appear in Court on March 24, 2003, and demonstrate why Wilcher should not be incarcerated and forced to surrender her passport for her failure to disgorge the illegal profits, and requires Life Foundation to demonstrate why it should not be subject to an escalating daily fine for its failure to disgorge.
Hitsgalore was a publicly traded Internet company located in Rancho Cucamonga, California, that maintained a website providing an Internet search engine and leasing advertising space to consumers. On November 28, 2001, the Commission filed an action against Wilcher and Life Foundation Trust along with Hitsgalore and its former president, Stephen J. Bradford. The complaint charged Hitsgalore and Bradford with fraud in connection with several press releases issued by the company between April 16 and May 10, 1999 that contained false and misleading statements about a purported investment in Hitsgalore by Life Foundation Trust. The fraudulent press releases caused a dramatic rise in the price of Hitsgalore's stock, quoted on the OTCBB, from $6.3125 to a high of $20.125. The complaint also charged Life Foundation Trust, a Scottsdale, Arizona, for-profit trust, and Wilcher, a resident of Scottsdale, Arizona, with aiding and abetting Hitsgalore's fraud and illegally selling Hitsgalore stock. The Commission previously settled its claims against Bradford and Hitsgalore.
On July 29, 2002, the Honorable Gary L. Taylor, United States District Judge for the Central District of California, granted summary judgment in favor of the Commission against Life Foundation Trust and Wilcher without the need for trial. Among other relief, the Court held Life Foundation Trust and Wilcher jointly liable for disgorgement of the $1,024,418.50 that Life Foundation Trust made in profits on the illegal sale of Hitsgalore stock; (3) ordered Life Foundation Trust to pay a civil penalty of $1,024,418.50; and (4) ordered Wilcher to pay a civil penalty of $110,000.