UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 19476 / November 29, 2005
SECURITIES AND EXCHANGE COMMISSION v. INTEGRATED SERVICES GROUP INC., JAMES L. ROWTON and DAVID M. LOEV, Defendants, Case No. 4:05-cv-04071 (U.S.D.C/S.D. Tex, Houston Division)
SEC CHARGES HOUSTON COMPANY AND ITS CHIEF EXECUTIVE IN "PUMP AND DUMP" SCHEME. COMPANY'S OUTSIDE SECURITIES ATTORNEY SETTLES CHARGES.
On November 29, 2005, the Securities and Exchange Commission filed a civil lawsuit in the Houston federal court against Integrated Services Group, Inc. ("ISVG"), its de facto chief executive, James L. Rowton, and the company's outside securities counsel, David M. Loev. Houston-based ISVG is a non-reporting public company whose common stock trades on the Pink Sheets and is purportedly in the business of providing global positioning system and navigational technologies for commercial transportation application. The SEC sued ISVG and Rowton for violating the antifraud and securities registration provisions of federal securities laws, and Loev for violating the securities registration provisions.
Loev has agreed to settle the SEC's suit by consenting to the entry of an order permanently enjoining him from violating the securities registration provisions, ordering him to disgorge $25,785.50, plus interest, and imposing a $25,000 civil penalty. The order also prohibits Loev from, a) issuing any legal opinions that the securities of any issuer are exempt from the securities registration provisions of the federal securities laws pursuant to Rule 504 of Regulation D, and 2) accepting securities of any issuer whose securities are quoted on the Pink Sheets in consideration for legal or consulting services rendered.
The SEC's complaint alleges that during 2003, ISVG and Rowton engaged in a "pump and dump" scheme in which millions of unregistered ISVG shares were sold into an inflated market created by a series of false and misleading press releases, promotional "fax blasts" and spam email. According to the complaint, these promotional materials contained unfounded revenue projections and materially false and misleading information regarding purported acquisitions of, and agreements with, third parties, and the company's status as a reporting company with the Commission. It is alleged that ISVG and Rowton realized over $70,000 in unjust profits from the scheme.
According to the complaint, Loev, a Houston securities attorney, issued several letters to ISVG's transfer agent opining that ISVG's securities offering was exempt from registration under SEC Rule 504 and certain Texas rules and that over 25 million ISVG shares, representing virtually the entire public float, could be issued without a restrictive legend. Loev also received approximately 5 million shares in the unregistered ISVG offering in payment of attorney and consulting fees, and sold certain of these shares in the open market for approximately $25,000 in net proceeds.
The SEC's complaint alleges that ISVG and Rowton violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Loev is charged with violating Sections 5(a) and 5(c) of the Securities Act. In addition to the settled order against Loev, the SEC is seeking a permanent injunction against ISVG and Rowton, and disgorgement, prejudgment interest, a civil money penalty and a penny stock bar against Rowton.
