U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19342 / August 22, 2005
Securities and Exchange Commission v. Steven E. Muth and Door Chair, Ltd., Civil Action No. 03 CV 2178 WQH (JFS)(S.D.Cal.)
FINAL JUDGMENT ENTERED AGAINST REGISTERED REPRESENTATIVE STEVEN E. MUTH IN MARKET MANIPULATION CASE INVOLVING THE SECURITIES OF CREATIVE HOST SERVICES, INC.
The Securities and Exchange Commission announced today that on August 18, 2005, the United States District Court for the Southern District of California entered a final judgment against former registered representative Steven E. Muth, ordering him to pay a total of $2,042,557 in disgorgement, interest and penalties. Previously Muth, pursuant to his consent, was enjoined from violating the antifraud provisions of the federal securities laws.
The Commission's action, filed in November 2003, alleged that during the period November 1999 to June 2000, Muth manipulated the market of the securities of Creative Host Services, Inc. stock from $0.78 to $29.00, an increase of 3,618%. Creative Host is a San Diego-based airport concessionaire. Muth caused Creative Host's stock price to rise by restricting supply and artificially creating demand for the stock through a variety of techniques and devices. These included: 1) causing Kirkpatrick's clients to buy and control 90% of Creative Host's shares; 2) engaging in high-pressure sales tactics; 3) using his employer's affiliation with Mutual of Omaha Insurance Company to gain client trust; 4) refusing to execute clients' orders to sell Creative Host shares; 5) encouraging customers to obtain credit on their Creative Host shares in order to release funds with which to buy additional shares without explaining the risks of that credit; 6) hiring promoters to tout the shares on the Internet; 7) delaying submission of client orders toward the end of the trading day to increase demand at the end of the day; 8) helping his employer lead the bid prices placed for Creative Host shares, and 9) orchestrating prearranged trades. As a result of these actions, Muth received $950,562 in ill-gotten commissions and $546,781 in ill-gotten trading profits, $463,030 of which was received through co-defendant Door Chair, Ltd., an entity Muth controls. The complaint charged Muth with violations of the antifraud provisions, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Previously, the Court entered a default judgment against Door Chair.
For further information, please see Litigation Release LR 18447 (November 6, 2003).