U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 18943 / October 26, 2004

SEC v. Arnold Geller, et al., Civil Action No. 1:04 CV 01858 (EGS) (D.D.C. October 26, 2004); SEC v. John Joslyn, et al., Civil Action No. 1:04 CV 01857(EGS) (D.D.C. October 26, 2004)

SEC FILES CIVIL INJUNCTIVE ACTION AGAINST CURRENT AND FORMER RMS TITANTIC, INC. OFFICERS AND CIVIL PENALTY ACTION AGAINST OTHER INDIVIDUALS IN CONNECTION WITH THEIR 1999 TAKEOVER OF THE COMPANY

The Securities and Exchange Commission ("Commission") today filed a settled civil injunctive action against Arnold Geller ("Geller"), current president and director of RMS Titanic, Inc. ("RMS"), and G. Michael Harris ("Harris"), a former officer and director of RMS. In a related proceeding, the Commission filed a settled civil penalty action against John Joslyn ("Joslyn"), Joseph Marsh ("Marsh"), P. David Lucas ("Lucas"), Steven Sybesma ("Sybesma") and Jon Thompson ("Thompson"), all of whom were shareholders of RMS. According to the Commission's Complaints, between May and November 1999, these seven defendants were members of a group of insurgent shareholders that, among other things, made materially false and misleading statements in Schedule 13D filings, failed to file and timely amend Schedule 13D filings and failed to comply with certain proxy rules under the Securities Exchange Act of 1934 ("Exchange Act") in an effort to acquire control of RMS and remove certain members of its then current management.

The Commission's Complaint for injunctive relief against Geller and Harris, and the Commission's Complaint for civil penalty against the other five individuals, allege that:

  • In 1999, the defendants formed a group to acquire control of RMS. Between May and November 1999, without required disclosure to the Commission and RMS shareholders, the group secured a majority of outstanding RMS common stock. Ultimately, on November 26, 1999, the group members filed a Schedule 13D ("November 1999 Schedule 13D"). That filing, in addition to being untimely, falsely and misleadingly stated that the obligation to file a Schedule 13D did not arise until November 16, 1999, and that the group had solicited 10 RMS shareholders, thereby obviating the need to file proxy materials. After filing the November 1999 Schedule 13D, the members of the group removed four RMS directors and two RMS officers, and installed Geller and Harris as officers;
     
  • As a result of the defendants' actions, RMS shareholders and investors could not assess the potential for changes in corporate control and adequately evaluate the company's worth. RMS shareholders and investors did not receive the facts necessary for informed investment decisions. Because these shareholders and investors did not learn of the defendants' plan to acquire control of the company until the defendants had acquired a majority position, they were powerless to prevent the change of control once they received the news; and
     
  • By making materially false and misleading statements in the November 1999 Schedule 13D, the defendants violated Section 13(d)(1) of the Exchange Act and Exchange Act Rules 12b-20 and 13d-1(a). In addition, the defendants violated Section 14(a) of the Exchange Act, and Exchange Act Rules 14a-3 through 14a-6, because the group solicited more than 10 shareholders and failed to file proxy materials with the Commission and provide such materials to solicited shareholders. All of the defendants also violated Section 13(d)(1) and Exchange Act Rules 12b-20 and 13d-1(a) by failing to timely file the November 1999 Schedule 13D. Furthermore, Geller, Harris and Joslyn violated Section 13(d)(2) of the Exchange Act, and Exchange Act Rule 13d-2(a), by failing to amend the Schedule 13D they filed in October 1998 to reflect material changes. Finally, Marsh and Thompson violated Section 13(d)(2) of the Exchange Act, and Exchange Act Rule 13d-2(a), by failing to amend the November 1999 Schedule 13D filing to reflect material changes, and Marsh committed the same violations with respect to a Schedule 13D he filed in October 1999.
     

Without admitting or denying the allegations in the Commission's Complaint, Geller and Harris have consented to the entry of final judgments enjoining them from violating Sections 13(d)(1), 13(d)(2) and 14(a) of the Exchange Act and Exchange Act Rules 12b-20, 13d-1(a), 13d-2(a) and 14a-3 through 14a-6. Geller also has consented to pay a civil penalty of $85,000. The final judgment as to Harris does not order him to pay a civil penalty based on his sworn representations and other documents and information submitted to the Commission concerning his financial condition. Each of the defendants named in the Commission's Complaint for civil penalty has consented, without admitting or denying the Commission's allegations, to the entry of final judgments ordering them to pay civil penalties in the following amounts: Joslyn, $75,000; Marsh, $75,000; Lucas, $30,000; Sybesma, $30,000; and Thompson, $15,000.

In addition, on October 26, 2004, the Commission instituted and simultaneously settled administrative and cease-and-desist proceedings against Joslyn, Marsh, Lucas, Sybesma, Thompson and one additional member of the group, Stanley Thomas, based on certain of their conduct in the removal action. (In the Matter of John Joslyn, et al., Administrative Proceeding File No. 3-11718 ("Order")). Without admitting or denying the findings in the Commission' Order, the respondents agreed to settle the charges against them by consenting to the Order which:

  • directs Joslyn, Marsh, Lucas, Sybesma, Thompson and Thomas to cease and desist from committing or causing any violations, and any future violations, of Sections 13(d)(1) and 14(a) of the Exchange Act and Exchange Act Rules 12b-20, 13d-1(a) and 14a-3 through 14a-6 and, additionally as to Joslyn, Marsh and Thompson, Section 13(d)(2) of the Exchange Act and Exchange Act Rule 13d-2(a);
     
  • directs Marsh, Lucas and Sybesma to pay disgorgement and prejudgment interest in the total amounts of $35,000, $20,000 and $20,000, respectively, because they were able to buy certain RMS shares more cheaply than they could have had the market been aware of their group and its activities; and
     
  • directs Thomas to pay a civil money penalty of $20,000 and suspends Thomas, who was a registered representative during the relevant time, from association with any broker or dealer for a period of nine months.
     

SEC Complaint in this matter (John Joslyn, Joseph Marsh, P. David Lucas, Steven Sybesma, Jon Thompson)

SEC Complaint in this matter (Arnold Geller, G. Michael Harris)