Temporary Suspension of Trading in the Securities of Electronic Game Card, Inc.
The U.S. Securities and Exchange Commission announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act), of trading in the securities of Electronic Game Card, Inc. (EGMI), of Irvine, California, at 9:30 a.m. on Feb. 19, 2010, and terminating at 11:59 p.m. on March 4, 2010.
The Commission temporarily suspended trading in the securities of EGMI because of questions that have been raised about the accuracy of assertions by EGMI, and by others, in financial disclosures to investors concerning, among other things, the company's assets.
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 the company.
Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not he has complied with the rule, he should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, he should refrain from entering quotations relating to EGMI's securities until such time as he has familiarized himself with the rule and is certain that all of its provisions have been met. 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.
Any broker, dealer or other person who has any information which may relate to this matter should contact Bruce Karpati, Co-Chief - Asset Management Unit (212-336-0104); Gwen Licardo, branch chief (212-336-0126); or Steve Larson, staff attorney (212-336-0142) of the New York Regional Office of the Securities and Exchange Commission. (Rel. 34-61544)
Following is a schedule of Commission meetings, which will be conducted under provisions of the Government in the Sunshine Act. Meetings will be scheduled according to the requirements of agenda items under consideration.
Open meetings will be held in the Auditorium, Room L-002 at the Commission's headquarters building, 100 F Street, N.E., Washington, D.C. Visitors are welcome at all open meetings, insofar as space is available. Persons wishing to photograph or videotape Commission meetings must obtain permission in advance from the Secretary of the Commission. Persons wishing to tape record a Commission meeting should notify the Secretary's office 48 hours in advance of the meeting.
Any member of the public who requires auxiliary aids such as a sign language interpreter or material on tape to attend a public meeting should contact SECInterpreter@SEC.gov at least three business days in advance. For any other reasonable accommodation related disability contact DisabilityProgramOfficer or call 202-551-4158.
Open Meeting - Wednesday, February 24, 2010 - 10:00 a.m.
The subject matter of the Open Meeting will be:
Item 1: The Commission will consider whether to adopt amendments to Rules 201 and 200(g) of Regulation SHO relating to short sale restrictions.
Item 2: The Commission will consider whether to publish a statement regarding its continued support for a single-set of high-quality globally accepted accounting standards and its ongoing consideration of incorporating International Financial Reporting Standards into the financial reporting system for U.S. issuers.
Closed Meeting - Thursday, February 25, 2010 - 2:00 p.m.
The subject matter of the Closed Meeting scheduled for Thursday, February 25, will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; 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.
In the Matter of Macheezmo Mouse Restaurants, Inc.
An Administrative Law Judge issued an Order Making Findings and Revoking Registrations by Default as to each class of registered securities of six Respondents (Default Order) in Macheezmo Mouse Restaurants, Inc., Admin. Proc. 3-13759 (Feb. 18, 2010). The Default Order finds that Respondents failed to comply with Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 13a-1 and 13a-13 by failing to file required periodic reports for six years or more. Based on these findings, the Default Order revokes the registration of each class of registered securities of Macheezmo Mouse Restaurants, Inc., Mast/Keystone, Inc., Mego Financial Corp., Melloncamp, Inc., Metal Mines, Inc., and Metawave Communications Corp. pursuant to Section 12(j) of the Exchange Act. (Rel. 34-61538; File No. 3-13759)
Commission Dismisses Appeal filed by Edward J. Jakubik, Jr.
The Commission has dismissed the application for review of NASD (now FINRA) disciplinary action filed by Edward J. Jakubik, Jr., formerly a registered representative at a FINRA member firm. The NASD had barred Jakubik in a 2004 default decision. The Commission dismissed Jakubik's appeal because he had failed to exhaust his administrative remedies by not first appealing the NASD Hearing Officer's decision to the NASD's National Adjudicatory Council. The Commission also noted, as an additional supporting reason for its decision, that Jakubik's appeal to the Commission was untimely as it was filed nearly five years after NASD's decision became final. (Rel. 34-61541; File No. 3-13648)
In the Matter of Ariel Corp.
An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Ariel Corp., Administrative Proceeding No. 3-13767. The Order Instituting Proceedings alleged that Ariel Corp., Classica Group, Inc., Commodore Environmental Services, Inc., Dupont Direct Financial Holdings, Inc., Engage, Inc., New Paradigm Software Corp. (n/k/a Brunton Vineyards Holdings, Inc.), Polymer Research Corp. of America, and ShopNet.com, Inc., each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.
The Default Order finds the allegations to be true and revokes the registrations of each class of registered securities of Ariel Corp., Classica Group, Inc., Commodore Environmental Services, Inc., Dupont Direct Financial Holdings, Inc., Engage, Inc., New Paradigm Software Corp. (n/k/a Brunton Vineyards Holdings, Inc.), Polymer Research Corp. of America, and ShopNet.com, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-61548; File No. 3-13767)
SEC Charges Greenstone Holdings, Inc., the Company's Chief Executive Officer, Two Attorneys, and Four Stock Promoters with Pump and Dump
On Feb. 18, 2010, the Commission charged issuer Greenstone Holdings, Inc., the company's Chief Executive Officer, Hisao Sal Miwa, the company's outside counsel, John B. Frohling, attorney Thomas F. Pierson, and four stock promoters, Daniel D. Starczewski, Joe V. Overcash, Jr., Frank J. Morelli, III, and James S. Painter, III with engaging in an illegal, and in some cases fraudulent, scheme to sell hundreds of millions of Greenstone shares to the public. At the same time, Greenstone and Miwa fraudulently "pumped" the market for Greenstone stock by issuing a series of false and misleading press releases and hiring third-party stock promoters to circulate many of these statements on the internet and via email. On June 18, 2008, as part of its Anti-Spam Initiative, the SEC suspended trading in Greenstone's securities.
The SEC alleges that from approximately 2006, Defendants arranged for Greenstone to issue stock to certain entities that Pierson, Starczewski, Morelli, Overcash, and Painter controlled, for further sale to the general public, all through unregistered securities transactions. At various times over the next two years, Pierson, Starczewski, Morelli, Overcash, and Painter widely marketed and sold the Greenstone shares to the public, illegally using the sale proceeds to finance Greenstone's business activities and directly for Defendants' own personal benefit. At the same time, defendants Greenstone, Miwa, Frohling, Pierson, Starczewski, and Overcash engaged in a fraudulent scheme to cover up these illegal stock sales, including providing Greenstone's stock transfer agent with false and misleading legal opinions and preparing back-dated and otherwise false promissory notes.
In addition, according to the SEC's complaint, Greenstone and Miwa intentionally prepared and disseminated to the public a long series of materially false and misleading press releases announcing fictitious Greenstone business transactions and otherwise creating the false appearance of a thriving company. Acting with Miwa's knowledge and consent, Starczewski, Overcash, and Painter also hired a multitude of stock promoters to tout Greenstone (and its stock price) through widely-distributed internet campaigns. Often these materials repeated the false and misleading claims set out in the company's press releases, while failing to disclose that Greenstone had paid for the campaigns with its illegal stock issuances.
The SEC further alleges that Defendants sold the illegally issued Greenstone shares to the public, reaping proceeds in excess of $1.3 million between September 2006 and June 2008. Moreover, a portion of these sales were directed back to Greenstone.
The complaint also names as relief defendants thirteen companies controlled by the defendants and through which the defendants directed their illegal public sales of Greenstone's stock.
The SEC's complaint alleges that all defendants violated Sections 5 of the Securities Act of 1933 (Securities Act) and that Greenstone, Miwa, Starczewski, Overcash, Pierson, and Frohling violated Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The SEC's complaint also charges, alternatively, that Miwa, Starczewski, Overcash, Pierson, and Frohling aided and abetted Greenstone's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC seeks injunctive relief and financial penalties from the defendants, disgorgement from Greenstone, Pierson, Starczewski, Morelli, Overcash, and Painter, penny stock bars for Miwa, Starczewski, Overcash, Pierson, Frohling, Painter, and Morelli, and an officer-and-director bar against Miwa. [SEC v. Greenstone Holdings, Inc., et al., Civ. No. 10-CV-1302 (S.D.N.Y.)] (LR-21416)
SEC Files Settled Charges Against Purported International Humanitarian Organization and its CEO for Offering Billions in Fraudulent Bonds
The Securities and Exchange Commission today filed fraud charges against a purported international humanitarian organization and its president and chief executive officer for fraudulently offering billions in worthless bonds to several U.S broker-dealers.
The SEC's complaint, filed in the United States District Court for the Central District of California, charges Samuel M. Natt, 54, of Palos Verdes Estates, Calif., and his Palos Verdes Estates, California-based company, Pacific Asian Atlantic Foundation (PAAF), for offering billions in fraudulent PAAF bonds from late 2006 through 2009. The complaint alleges that the defendants created the false impression that the bonds were genuine debt securities by drafting and disseminating fraudulent offering memoranda that misrepresented, among other things, PAAF's assets and financial condition, its ability and intent to pay the principal and interest on the bonds, the riskiness of the offering, and PAAF's intended use of the bond proceeds. The complaint further alleges that Natt and PAAF attempted to legitimize the bonds by obtaining corporate bond identification numbers from the CUSIP Service Bureau based upon PAAF's misleading offering memoranda. According to the complaint, the defendants took these actions to ensure that registered broker-dealers and other financial institutions would accept the worthless bonds and deposit them into accounts held by PAAF.
The complaint further alleges that Natt made four separate attempts to deposit the bonds at various registered broker-dealers. Once deposited into a PAAF brokerage account, Natt intended that the bonds either be used as collateral for loans or sold into the market. To induce these broker-dealers to accept the bonds for deposit into PAAF's account, the complaint alleges that Natt falsely claimed that the bonds were valid debt securities issued by PAAF in a private placement offering. The complaint alleges that Natt sent several of the broker-dealers PAAF's misleading bond offering memoranda, which included PAAF's false financial statements claiming assets of $5.3 billion, and the CUSIP Service Bureau information. When Natt's efforts at the broker-dealers failed, Natt caused PAAF to issue bonds with a total purported face value of $97 billion to various third parties. The complaint alleges that Natt instructed those parties, who acted as middle-men on behalf of PAAF, to offer the bonds to financial institutions to obtain lines of credit or sell the bonds into the market. Natt promised to split any returns obtained from the bonds up to 50% between the third parties and PAAF. According to the complaint, no known broker-dealer or financial institution has accepted the PAAF bonds for deposit.
Natt and PAAF have agreed to settle this case without admitting or denying the allegations in the complaint. Natt and PAAF consented to a permanent injunction from further violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933. In addition to the permanent injunction, Natt consented to pay a $50,000 civil penalty. [SEC v. Pacific Asian Atlantic Foundation and Samuel M. Natt, Civil Action No. CV 10-1214 GHK (RCx) (C.D. Cal.)] (LR-21417)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by NASDAQ OMX BX to modify fees for members using the NASDAQ OMX BX Equities System (SR-BX-2010-013) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61514)
A proposed rule change (SR-Phlx-2010-17), filed by NASDAQ OMX PHLX relating to the Options Regulatory Fee has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61529)
A proposed rule change (SR-CBOE-2010-014) filed by the Chicago Board Options Exchange relating to a Settlement Payment Obligation has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61530)
Proposed Rule Change
The Commission issued notice of a proposed rule change submitted by NASDAQ OMX BX (SR-BX-2010-009) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 relating to the directed order process on the Boston Options Exchange Facility. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61531)
JOINT INDUSTRY PLAN RELEASES
Immediate Effectiveness of Amendment to the Plan for the Purpose of Developing and Implementing Procedures to Facilitate the Listing and Trading of Standardized Options
A proposed amendment to the Plan for the Purpose of Developing and Implementing Procedures to Facilitate the Listing and Trading of Standardized Options (4-443) filed by BATS Exchange pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 to add BATS Exchange, Inc. as a Sponsor has become effective. Publication is expected in the Federal Register during the week of February 22. (Rel. 34-61528)
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