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U.S. Securities and Exchange Commission

Litigation Release No. 18828 / August 11, 2004

Securities and Exchange Commission v. Peter F. Paul, Stephen M. Gordon, and Jeffrey L. Pittsburg, Case No. CV 04-6613 SVW (SSx) (C.D. Cal.)

SECURITIES AND EXCHANGE COMMISSION CHARGES THREE INDIVIDUALS WITH MANIPULATING THE MARKET FOR THE SECURITIES OF STAN LEE MEDIA, INC.

The Securities and Exchange Commission announced today that it filed a complaint in federal district court in Los Angeles against three defendants for manipulating the stock of Stan Lee Media, Inc. The defendants are Peter F. Paul, the co-founder of Stan Lee Media; Stephen M. Gordon, its former executive vice president of operations; and Jeffrey L. Pittsburg, formerly an officer and part-owner of Pittsburg Institutional, Inc., a Commission-registered broker-dealer. The Commission alleges that, between October 2, 2000 and November 24, 2000, Paul, Gordon, and Pittsburg manipulated the market for Stan Lee Media stock. Stan Lee Media, located in Encino, California, was founded by comic book icon Stan Lee and Paul. Stan Lee is not named as a defendant in this action.

The complaint alleges that, during the relevant period, Paul, Gordon, and Pittsburg engaged in a scheme to maintain and control the price of Stan Lee Media's stock at artificially inflated levels by, among other things, concealing their trading in Stan Lee Media stock to create a false and misleading appearance of active trading. The defendants engaged in the following conduct:

  • Paul and Gordon, who already controlled a large number of Stan Lee Media shares, used nominee accounts at Pittsburg Institutional to buy 1.6 million Stan Lee Media shares valued at $14 million in nominee accounts at Pittsburg Institutional and attempted to pay for the stock with checks that bounced.

  • While aggressively purchasing Stan Lee Media shares, Paul and Gordon sold Stan Lee Media stock at below market prices. Pittsburg executed and reported all of these sales transactions after the close of trading, thus avoiding public reporting of the lower sales prices.

  • Paul failed to make required filings with the Commission regarding his beneficial ownership of, and changes to his ownership of, Stan Lee Media shares.

  • Pittsburg maintained the high bid for Stan Lee Media stock through the use of RediBook ECN, an electronic communications network, thereby disguising the fact that virtually all of the demand for Stan Lee Media stock was coming from Pittsburg Institutional. When Pittsburg stopped bidding for the stock, the price of the stock collapsed in two days by 72%.

  • Pittsburg engaged in "marking-the-close." Through this practice, he attempted to influence the closing price of the stock by placing purchase orders at or near the close of market.

The complaint charges that Paul, Gordon, and Pitsburg violated the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges Paul and Gordon with violating the credit provisions of Section 7(f) of the Exchange Act and Regulation X thereunder, and the securities reporting requirements of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder. Additionally, the complaint charges Paul with violations of the stock ownership reporting requirements of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder.

The complaint seeks an order enjoining Paul, Gordon, and Pittsburg from future violations of the securities laws, prohibiting Paul and Gordon from serving as an officer and director of a public company, directing Pittsburg to disgorge all amounts he received as a result of his violations plus prejudgment interest, and ordering each defendant to pay a civil penalty.

Gordon, without admitting or denying the Commission's allegations, consented to the entry of a judgment permanently enjoining him from future violations of the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, the credit provisions of Section 7(f) of the Exchange Act and Regulation X thereunder, and the securities reporting requirements of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder, prohibiting him from serving as an officer or director of any reporting company, and not ordering civil penalties based on his sworn representations in his statement of financial condition.

The United States Attorney's Office for the Eastern District of New York has previously charged Paul, Gordon, and Pittsburg with conspiracy to commit securities fraud and securities fraud, related to their manipulative conduct involving Stan Lee Media stock.

 

http://www.sec.gov/litigation/litreleases/lr18828.htm


Modified: 08/12/2004