U.S. SECURITIES AND EXCHANGE COMMISSION
Litigaton Release No. 18535 / January 9, 2004
Securities and Exchange Commission v. Ira J. Gaines, et al. Civil Action No. 02-CV-1685 PHX (PGR), United States District Court for the District of Arizona.
On January 6, 2004, the Honorable Paul G. Rosenblatt, U.S. District Judge, District of Arizona, entered an Agreed Final Judgment against Ira J. Gaines, which permanently enjoins Gaines from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-thereunder. Further, under the terms of the order to which Gaines consented, he is prohibited from directly or indirectly, offering, making or engaging in mini-tender offers in the future. In addition, Gaines must also pay $72,413 in disgorgement, including prejudgment interest, and a $50,000 civil penalty.
The Commission's Complaint charged that Gaines, individually and d/b/a Wrigley Drive Partners and Morten Avenue Partners, from September 1999 through March 2001, made fraudulent "mini-tender offers" to shareholders to purchase up to 1% of the outstanding stock of 287 public companies. "Mini-tender offer" is a securities industry term for a tender offer resulting in ownership by the offeror of not more than 5% of a public company's securities. Gaines deceived the shareholders by failing to disclose in his offers the following material facts: (1) Gaines' offer price was below the prevailing market price; (2) Gaines reserved sole discretion to modify his offers, including such terms as the offer price and the offer period; and (3) Gaines reserved the right to terminate his offers without notice, regardless of how many shareholders had tendered shares. According to the Commission, Gaines knew, or was reckless in not knowing, that the shareholders were not receiving this material information, and supported this allegation by pointing out that in 1999, for virtually identical conduct, Gaines agreed to a Commission order against his previous company, IG Holdings. In the Matter of IG Holdings, Inc., Exchange Act Release No. 41759 (August 19, 1999).