The Securities and Exchange Commission ("Commission") announced today that on August 25, 2004, the Honorable James Robertson, United States District Court Judge for the District of Columbia, entered an Order of Final Judgment against U.S. Technologies, Inc. ("UST"). UST consented to entry of the Final Judgment, without admitting or denying the allegations in the Commission's complaint, to settle the civil action against UST filed on December 19, 2002. The Final Judgment enjoins UST from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder.
In a related proceeding instituted on August 26, 2004, the Commission issued an Order Instituting Proceedings pursuant to Section 12(j) of the Exchange Act against UST. As part of its settlement with the Commission, UST consented to entry of the Commission's Order, which deregisters the company's common stock pursuant to Section 12(j) of the Exchange Act. [See SEC Administrative Proceedings Release No. 34-50273, August 26, 2004].
The Commission's complaint in the case alleged that from June 1998 through August 2002, UST's Chief Executive Officer, C. Gregory Earls, misappropriated approximately $13.8 million from investors who believed they were giving Earls money to purchase preferred stock and warrants from UST. According to the complaint, Earls carried out this scam through a limited liability company he created called USV Partners LLC. The complaint charged that Earls falsely told investors in USV Partners that the entity was created solely to purchase and hold UST stock and warrants, and that he would not take any management fees. According to the complaint, Earls lured more than one hundred investors into giving him more than $20 million to purchase UST stock and warrants through USV Partners. Although UST badly needed the capital infusion, according to the complaint, Earls bought only a small portion of the stock he promised investors. He then allegedly misappropriated $13.8 million of their money by paying himself $4.7 million in management fees and $9.1 million that he falsely classified as "Legal and Accounting" expenses. As alleged in the complaint, neither UST nor Earls has ever publicly disclosed Earls' diversion of these investor funds.
On April 23, 2004, in a related criminal proceeding, a jury convicted Earls of 22 counts of securities fraud, mail fraud and wire fraud arising out of the same events and activities alleged in the Commission's complaint. United States v. C. Gregory Earls, No. 02-MAG-531 (S.D.N.Y.).
For further information regarding this case, see Litigation Release No. 17904 (December 19, 2002) and Litigation Release No. 18031 (March 12, 2003).