U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19555 / February 6, 2006
Securities and Exchange Commission v. John R. Shrewder, The Franklin Group, Inc., Ashley Miron Leshem, and Ananda Capital Partners, Inc., Civil Action No. 06-80126 (S.D. Fla. February 6, 2006)
SEC Names Tulsa Man in Fax Blasting Securities Fraud Case
SEC Charges that Boca Raton Consultant Violated his SEC Penny Stock Bar
The Commission filed an action today in United States District Court against John R. "Jay" Shrewder, 46, and The Franklin Group, Inc., a company that Shrewder founded, alleging securities fraud and illegal touting, and also against Ashley Miron Leshem, 39, of Boca Raton, Florida, alleging violations of an SEC penny stock bar. The complaint alleges that Shrewder and The Franklin Group improperly manipulated the market for at least two securities and inundated the public with millions of faxes that contained materially false information. The two securities are ArTec, Inc. and Sequoia Interest Corporation (whose securities trade on the over-the-counter market under the symbols ATKJ and SQNC). According to the complaint, these activities resulted in several hundred thousand dollars in unlawful profits by Shrewder.
The Commission's complaint alleges that after defendant Leshem hired them on behalf of ArTec in the fall of 2004, defendants Shrewder and The Franklin Group sent out "fax blasts" that contained false and misleading statements regarding: the volume of ArTec's public float; the amount and type of Shrewder's compensation; the origin of the information and analysis in the faxes; the amount of research Shrewder did about the company; and the claim that Shrewder's analysis of the stock was independent. The SEC also alleges that Shrewder claimed in the faxes that a "third party" had retained him when, in fact, Leshem (an ArTec consultant) informed him that ArTec's management was setting his compensation. According to the complaint, Shrewder illegally profited by selling or "scalping" ArTec stock, which he had received as compensation for his promotional activities, into the rising market generated in whole or in part by his own faxes. Finally, the SEC alleges that by acting as a consultant to ArTec and by, among other things, hiring Shrewder on behalf of ArTec, Leshem violated a 1999 SEC penny stock bar.
The Commission charges that Shrewder and The Franklin Group violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Sections 17(a) and 17(b) of the Securities Act of 1933 and seeks a permanent injunction, disgorgement, prejudgment interest and civil penalties against Shrewder and TFG, as well as a penny stock bar against Shrewder.
The Commission charges that Leshem violated Section 15(b)(6)(B)(i) of the Exchange Act by violating a 1999 SEC penny stock bar and seeks a judicially imposed penny stock bar, a permanent injunction, disgorgement, prejudgment interest and civil penalties. A company affiliated with Leshem, Ananda Capital Partners, Inc. is named as a relief defendant.
On April 8, 2005, the Commission filed a subpoena enforcement proceeding against Shrewder. See Litigation Release No. 19180 (April 12, 2005). On December 23, 2004, the Commission suspended trading in ArTec, Inc. securities. See Exchange Act Release No. 34-50923 (December 23, 2004).
The Commission has issued an Investor Alert concerning investment related faxes. This alert is available on the Commission's website at the following location: http://www.sec.gov/investor/pubs/junkfax.htm.
The Commission's investigation concerning ArTec, Inc. and other entities organized by a shell-creation group is continuing. The staff wishes to thank the NASD for its assistance in this investigation.