U.S. Securities and Exchange Commission
Litigation Release No. 18305 / August 22, 2003
SEC v. Rocky Mountain Energy Corporation, Inc., John N. Ehrman, W. Roderick Johnson, Sr., and John W. Ehrman, Jr. (Defendant Solely for Purposes of Equitable Relief), Case No. H-03-CV-1133 (U.S.D.C., S.D. Tex.)
Permanent Injunction Entered Against Securities Recidivist And Convicted Felon John N. Ehrman, In Unregistered Offering And Fraudulent Manipulation Scheme
On August 18, 2003, the U.S. District Court for the Southern District of Texas entered a permanent injunction by consent against John N. Ehrman, former CEO of Rocky Mountain Energy Corporation. The Securities and Exchange Commission had filed a civil action against Rocky Mountain, Ehrman, and Rocky Mountain's General Counsel, W. Roderick Johnson, on April 3, 2003, in connection with an illegal unregistered offering of Rocky Mountain securities and a fraudulent manipulation of the company's stock. The lawsuit was filed to halt an alleged fraudulent "pump-and-dump" scheme involving the securities of Rocky Mountain, a Houston-based oil-and-gas company whose stock is quoted on the OTC Bulletin Board.
The SEC complaint alleges that, from July 2002 to the present, Ehrman used four bogus share-exchange transactions to secretly obtain control of approximately 50% of Rocky Mountain's issued and outstanding stock. Additionally, it is alleged that Rocky Mountain and Ehrman issued a stream of glowing but false and misleading press releases to artificially inflate the price and trading volume of the company's stock. The press releases and other promotional statements, touted numerous "acquisitions" of valuable oil-and-gas properties, or agreements to acquire such properties, along with expected revenues and other benefits from the acquisitions. The complaint alleges that Rocky Mountain had neither the assets nor the financing to complete these acquisitions. Concurrent with the misleading public announcements, it is alleged that Ehrman and Johnson dumped more than $800,000 of Rocky Mountain stock into the unsuspecting marketplace.
In carrying out the fraudulent scheme, Ehrman allegedly caused Rocky Mountain to file false and misleading reports and registration statements with the SEC. Among other things, these filings failed to disclose that Ehrman caused Rocky Mountain to issue approximately 47 million shares of stock in four sham share-exchange transactions. The filings also misrepresented Ehrman's ownership, transfer, and sale of approximately 31 million of these shares.
Ehrman was previously enjoined by the Commission in another fraudulent oil and gas scheme in 1990 (SEC v. Transwestern Oil & Gas, et. al., CA H-90-1875 S.D. Tex) and barred from association with any broker, dealer, investment company, investment adviser or municipal securities dealer (In the Matter of Ehrman Investment Group, Inc., and John N. Ehrman, Administrative Proceeding File No. 3-7529). In a related criminal action, he also pleaded guilty to federal mail fraud charges and received a three year probated sentence (U.S. v. John N. Erhman, CR H-94-23 S.D. Tex).
The permanent injunction enjoins him from future violations of the antifraud and registration provisions of 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, and the beneficial-ownership and principal-shareholder reporting provisions of Section 13(d) and 16 (a) of the Exchange Act and Rules 13d-1 and 16a-3 thereunder. The permanent injunction also enjoins Ehrman from aiding and abetting any violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13.
For additional information, see Litigation Release No. 18069 (April 3, 2003).