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U.S. Securities and Exchange Commission

SEC News Digest

Issue 2008-178
September 12, 2008

COMMISSION ANNOUNCEMENTS

Securities and Exchange Commission Suspends Trading in Eight Issuers for Failure to Make Required Periodic Filings

The Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on Sept. 12, 2008, and terminating at 11:59 p.m. EDT on Sept. 25, 2008.

  • American Environmental Corp. (n/k/a TrackBets International, Inc.) (TRKB)
  • BAM! Entertainment, Inc. (BFUN)
  • Entertainment Technologies & Programs, Inc. (ETPI)
  • Inter Con PC, Inc. (ICPC)
  • Rudy Nutrition (RUNU)
  • Trans Global Services, Inc. (TGSI)
  • XCL Ltd. (XCLT)
  • ZymeTx, Inc. (ZMTX)

The Commission temporarily suspended trading in the securities of these eight issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).

The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.

Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject companies unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of these companies that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.

If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-58526)


SEC Chairman Cox Praises House Passage of Bill to Further Bolster SEC's Gold Standard Law Enforcement

On September 11, the Securities and Exchange Commission Chairman Christopher Cox today applauded the U.S. House of Representatives for passing legislation that would provide new investor protection measures and further bolster the SEC's enforcement program that already is recognized as the world's most effective and successful in policing the markets and protecting investors.

The Securities Act of 2008, sponsored by Rep. Paul Kanjorski (D-PA) with bipartisan support including House Financial Services Committee Chairman Barney Frank and Ranking Member Spencer Bachus, incorporates recommendations made by the SEC to Congress to enhance the securities laws and give the SEC's Enforcement Division increased flexibility and resources to pursue securities fraudsters and other wrongdoers in the markets.

"The House of Representatives today passed measures that the SEC requested to improve the securities laws and provide additional tools for the SEC's enforcement program that already is seen as the gold standard around the world. Policing the markets and keeping investors' money safe has never been more important, and so this legislation comes at a critical time," said Chairman Cox. "I would like to personally commend and thank Congressman Kanjorski, Chairman Frank, and Ranking Member Bachus for their outstanding leadership in shepherding this important legislation through Congress on behalf of America's investors."

The new tools that the legislation provides will be a boon to the SEC enforcement staff, which under Chairman Cox has increased to 34 percent of the SEC workforce from 32 percent in 2005 and 29 percent in the 1990s. This investment in investor protection already is paying significant dividends. In the past three years, the SEC has achieved the greatest number of corporate penalties in any year in SEC history, the second highest-ever number of enforcement actions brought in a single year, and the second highest-ever single-year total for penalties and disgorgements. The Securities Act of 2008 would help further strengthen this record of accomplishment through the elimination of unnecessary duplication and extraneous responsibilities for SEC enforcement staff in their pursuit of wrongdoers, by giving the SEC authority to obtain financial penalties from wrongdoers in administrative proceedings without needing to file a separate civil action in federal court.

Supporting the SEC's enforcement efforts, as this legislation does, directly benefits injured investors. During the past month alone, the SEC's Division of Enforcement has announced several landmark preliminary settlements that would represent the largest settlements and returns of customer money in SEC history. These resolutions of SEC enforcement investigations into auction-rate securities abuses will enable individual investors to receive more than $28.4 billion of their money back, even as the SEC investigations into individual wrongdoing continue.

Among other recent SEC enforcement successes covering a wide range of issues of critical importance to investors:

  • The SEC acted quickly to bring one of biggest insider trader cases since the days of Ivan Boesky.
  • The SEC won the second highest corporate penalty of all-time, behind only Worldcom.
  • The SEC set the record for the highest financial sanction against an individual in an enforcement action.
  • The SEC last month charged two Wall Street brokers in a $1 billion subprime-related ARS fraud.
  • The SEC earlier this year obtained an emergency asset freeze and charged a Rome, Italy insider trader within days of the illegal trades from outside the U.S.
  • The SEC earlier this year charged a Wall Street short seller with spreading false rumors.
  • The SEC has filed more than 30 Foreign Corrupt Practices Act (FCPA) enforcement actions since January 2006 - more than the SEC filed in the prior 28 years combined.
  • Each year, hundreds of thousands of ordinary investors are targeted by unscrupulous manipulators who prey upon the over-the-counter (OTC) markets in what is known as microcap fraud. The SEC has responded with a new enforcement group that is cracking down on shell company manipulators, pump-and-dump artists, and Internet spam fraudsters.
  • The SEC's anti-spam initiative has been credited with a 30-percent reduction in the volume of stock market spam emails in an independent industry review.
  • The SEC has continued to aggressively combat scams targeting the retirement savings of America's senior citizens, bringing more than 50 enforcement actions in the past two years against wrongdoers targeting older investors. The SEC will host its third annual Seniors Summit in Washington D.C. on September 22 to help older investors learn new ways to protect themselves from scam artists and securities swindlers.

Building on these enforcement milestones will require that the SEC's staff have the tools they need to apprehend fraudsters and protect investors. The legislation passed by the House today would do that in a number of ways, including for the first time making nationwide service of subpoenas available in civil actions filed in federal court. It would enable the SEC to bar a wrongdoer who committed a securities law violation in one part of the securities industry from entering other segments of the industry. The bill also makes explicit the SEC's authority to impose sanctions and other remedies on individuals who violated the securities laws while associated with a registered entity, even when they are no longer associated with that entity.

Congress has similarly provided the SEC with increased authority in past years in order to strengthen the agency's enforcement role as the investors' advocate. The Sarbanes-Oxley Act of 2002 provided the SEC with authority to return financial penalties through so-called "Fair Fund" distributions. Since then, SEC enforcement actions returned more than $4 billion to harmed investors. Another $1 billion in SEC Fair Fund distributions is expected in the next six months. (Press Rel. 2008-195)


Commission Meetings

Closed Meeting - Thursday, September 18, 2008 - 1:00 p.m.

The subject matter of the closed meeting scheduled for Thursday, September 18, will be: formal orders of investigation; institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; an adjudicatory matter; and other matters relating to enforcement proceedings.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.


ENFORCEMENT PROCEEDINGS

Securities and Exchange Commission Orders Hearing on Registration Revocation Against Five Public Companies for Failure to Make Required Periodic Filings

On September 11, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of five companies for failure to make required periodic filings with the Commission:

  • Bay Area Holdings, Inc.
  • BCC Acquisition Corp.
  • Be, Inc.
  • Bear Aerospace, Inc.
  • Bermuda Acquisitions, Inc.

In this Order, the Division of Enforcement (Division) alleges that the five issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58523; File No. 3-13182


Securities and Exchange Commission Orders Hearing on Registration Revocation Against Six Public Companies For Failure to Make Required Periodic Filings

September 11, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of six companies for failure to make required periodic filings with the Commission:

  • Omni Nutraceuticals, Inc.
  • Omnipower, Inc.
  • Ontro, Inc.
  • Onvantage, Inc.
  • Opal Technologies, Inc.
  • Optical Specialties, Inc.

In this Order, the Division of Enforcement (Division) alleges that the six issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58524; File No. 3-13183)


Securities and Exchange Commission Orders Hearing on Registration Revocation Against Five Public Companies For Failure to Make Required Periodic Filings

On September 11, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of five companies for failure to make required periodic filings with the Commission:

  • California Service Stations, Inc.
  • Cozumel Corp.
  • Jenson International, Inc.
  • Meditecnic, Inc.
  • Space Launches Financing, Inc.

In this Order, the Division of Enforcement (Division) alleges that the five issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58525; File No. 3-13184)


Commission Orders Hearings on Registration Suspension or Revocation Against Eight Companies for Failure to Make Required Periodic Filings

In conjunction with today's trading suspension, the Commission today also instituted two separate public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of eight companies for failure to make required periodic filings with the Commission:

  • American Environmental Corp. (n/k/a TrackBets International, Inc.) (TRKB)
  • BAM! Entertainment, Inc. (BFUN)
  • Rudy Nutrition (RUNU)
  • Entertainment Technologies & Programs, Inc. (ETPI)
  • Inter Con PC, Inc. (ICPC)
  • Trans Global Services, Inc. (TGSI)
  • XCL Ltd. (XCLT)
  • ZymeTx, Inc. (ZMTX)

In each Order, the Division of Enforcement (Division) alleges that the respective respondents are delinquent in their required periodic filings with the Commission.

In each of these proceedings, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in each proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58527; In the Matter of American Environmental Corp. (n/k/a TrackBets International, Inc.), et al., Administrative Proceeding File No. 3-13185; In the Matter of Entertainment Technologies & Programs, Inc., et al., Administrative Proceeding File No. 3-13186)


Revocation of Registration of Securities of HomeBanc Corp.

The Commission announced the revocation of the registration of the securities of HomeBanc Corp. (HomeBanc), of Atlanta, Georgia, registered with the Commission pursuant to Section 12 of the Exchange Act, on September 12, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (the Exchange Act).

In its Order revoking the registration of securities of HomeBanc registered with the Commission pursuant to Section 12 of the Exchange Act, the Commission found the following:

HomeBanc has failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, 17 C.F.R. 270.13a-1 and -13, while its common and preferred stock were registered with the Commission in that it has not filed an annual report on Form 10-K since its 2006 Form 10-K or quarterly reports on Form 10-Q for any period subsequent to its quarter ending March 31, 2007.

The Commission cautions broker dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

Further, brokers and dealers should be alert to the fact that, Section 12(j) provides, in pertinent part, as follows:

No member of a national securities exchange, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security the registration of which has been and is suspended or revoked pursuant to the preceding sentence.

Without admitting or denying the findings in the Order Instituting Proceedings, Making Findings, and Revoking Registration of the Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934, HomeBanc consented the entry of an order finding that it had failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder and revoking the registration of each class of HomeBanc's securities registered with the Commission pursuant to Section 12 of the Exchange Act. (Rel. 34-58528; File No. 3-13187)


Delinquent Filers' Stock Registrations Revoked

The registrations of the stock of Respondents Walking Stick Oil & Gas Corp. and Wineshares International, Inc., have been revoked. Each had repeatedly failed to file required annual and quarterly reports with the Securities and Exchange Commission. Thus, each violated a crucial provision of the federal securities laws that requires public corporations to publicly disclose current, accurate financial information so that investors may make informed decisions. The revocations were ordered in an administrative proceeding before an administrative law judge. (Rel. 34-58529; File No. 13133)


Securities and Exchange Commission Orders Hearing on Registration Revocation Against Four Public Companies For Failure to Make Required Periodic Filings

On September 12, the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of four companies for failure to make required periodic filings with the Commission:

  • AD Art Electronic Sign Corp.
  • Homenet Corp.
  • Little River Ventures, Inc.
  • Webquest International, Inc.

In this Order, the Division of Enforcement (Division) alleges that the four issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-58530; File No. 3-13188)


In the Matter of Donald H. Allen

The Commission announced today that it has issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against Donald H. Allen (Allen), of Colorado Springs, Colorado.

The Order finds that on September 2, 2008, a final judgment was entered by consent against Allen permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. American Energy Resources Corp., H&M Petroleum Corp., and Donald H. Allen, Civil Action No. 08-cv-01847-REB-BNB, in the U.S. District Court for the District of Colorado. The judgment requires Allen, AER, and H&M to jointly and severally pay $510,000 of disgorgement to the registry of the court and distribute the funds to investors.

The Order further finds that the Commission's complaint alleged that, between March 2002 and December 2006, Allen, and his two wholly-owned companies, H&M and AER, raised approximately $9.9 million from at least 355 investors nationwide through a series of unregistered offerings of fractional interests in oil and gas projects. The complaint alleged that Allen, AER, and H&M, made material misrepresentations or omissions to investors regarding the use of investor funds, the companies' records of successful oil and gas projects, the companies' investments of their own capital in the projects, and the projected returns of the investments. The complaint also alleged that Allen engaged in unregistered sales of securities and acted as an unregistered broker-dealer in connection with those sales.

The Order, which is based on the entry of the permanent injunction against Allen, bars Allen from association with any broker or dealer, with the right to reapply for association after five years. Allen consented to the issuance of the Order without admitting or denying the findings of the Order, except as to the jurisdiction of the Commission and the entry of the injunction against him, which he admitted. (Rel. 34-58531; File No. 3-13189)


SEC v. Bruce Grossman, et al.

The Commission announced today that it filed a civil injunctive action against Bruce Grossman and Jonathan Curshen, two stock promoters, alleging that they engaged in a fraudulent broker bribery scheme designed to manipulate the market for the common stock of Industrial Biotechnology, Corp. (IBOT)

The complaint alleges that Bruce Grossman and Jonathan Curshen engaged in an undisclosed kickback arrangement with an individual who claimed to represent a group of registered representatives with trading discretion over the accounts of wealthy customers. Unbeknownst to Grossman and Curshen, the individual actually was an undercover FBI agent. Grossman and Curshen promised to pay a 25% kickback to the agent and the registered representatives he purported to represent in exchange for the purchase of up to $3 million of IBOT stock through the customers' accounts.

The complaint further alleges that from June 27 to July 2, 2008, Grossman and Curshen instructed the agent to purchase approximately 85,000 shares of IBOT stock for a total of approximately $76,000 through matched trades using detailed instructions concerning the size, price and timing of the purchase orders. Thereafter, Grossman and Curshen paid bribes of almost $19,000 to the agent.

The complaint charges Grossman and Curshen with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains, if any, plus pre-judgment interest, civil penalties, and an order prohibiting Defendants from participating in any offering of penny stock. [SEC v. Bruce Grossman and Jonathan Curshen, Civil Action No. 08 Civ. 7893 (PGG) (S.D.N.Y.)] (LR-20712)


SEC Charges Mark D. Lay and MDL Capital Management, Inc. With Defrauding Ohio Bureau of Workers' Compensation

The Commission announced that, on September 11, it filed securities fraud charges in the United States District Court for the Western District of Pennsylvania against Mark D. Lay of Aliquippa, Pennsylvania, and MDL Capital Management, Inc. (MDL Capital), an investment adviser registered with the Commission and located in Pittsburgh, Pennsylvania. Lay was the Chairman, CEO and Chief Investment Strategist of MDL Capital and part-owner of MDL Capital. Without admitting or denying the allegations of the complaint, Lay and MDL Capital have consented to the entry of a final judgment permanently enjoining them from engaging in the violations set forth below, and ordering other relief.

The Commission's complaint alleges that, between February 2004 and November 2004, Lay and MDL Capital defrauded their advisory client, the Ohio Bureau of Workers' Compensation, in connection with the Bureau's investment of public money in the MDL Active Duration Fund, Ltd., a hedge fund affiliated with and managed by Lay and MDL Capital. The Bureau transferred approximately $200 million from its advisory account managed by MDL Capital and Lay to the hedge fund pursuant to an agreement that those assets would be conservatively leveraged.

The complaint further alleges that MDL Capital and Lay exposed Bureau funds to unauthorized and undisclosed risk by substantially exceeding a 150% leverage guideline, at one point using leverage of over 21,000% in the hedge fund. As a result, the Bureau incurred losses of approximately $160 million. During the course of the fraud, Lay repeatedly lied to and misled the Bureau as to the reasons for and amount of the losses as well as the excessive leverage Lay was using.

In October 2007, based on these same facts, Lay was convicted in the Northern District of Ohio of criminal mail fraud, wire fraud and investment adviser fraud. Lay is currently serving a 12 year prison sentence.

The complaint alleges that Lay and MDL Capital violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Subject to the Court's approval, the final judgment imposes permanent injunctions against MDL Capital and Lay and orders them to pay $1,544,195 in disgorgement and prejudgment interest, but waives payment of these amounts, and does not impose civil penalties, based on the defendants' sworn statements of financial condition [SEC v. Mark D. Lay and MDL Capital Management, Inc., Civil Action No. 08-CV-1269 (DSC) (W.D. Pa.)] (LR-20713)


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http://www.sec.gov/news/digest/2008/dig091208.htm


Modified: 09/12/2008