On August 27, 2004, the Honorable Garrett E. Brown, Jr. of the U.S. District Court for the District of New Jersey entered a final judgment of permanent injunction ("Final Judgment") against Ed Johnson, the former Chief Executive Officer, Chairman of the Board, and President of MERL Holdings Inc.com ("MERL"), in an accounting fraud, insider trading and false filing case. The Final Judgment permanently enjoins Johnson from violating the anti-fraud provisions of the federal securities laws, permanently bars Johnson from acting as an officer or director of any public company, permanently bars Johnson from participating in any offering of penny stock, orders Johnson to pay disgorgement in the amount of $42,262, plus prejudgment and postjudgment interest to be determined, orders Johnson to pay a civil insider trading penalty of $42,262, plus postjudgment interest to be determined, and orders Johnson to pay a civil monetary penalty in the amount of $120,000, plus postjudgment interest to be determined.
On March 8, 2004, following a two-week trial, a federal jury in Trenton, New Jersey found for the Commission on all counts of its complaint against Johnson. In its complaint, the Commission alleged that Johnson inflated the assets and financial results of MERL in two registration statements filed by the company with the Commission and disseminated to the public. The jury found that Johnson violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, in connection with a multi-faceted fraud designed to raise $25 million in the public securities markets.
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