UNITED STATES OF AMERICA
In the Matter of
Mark E. Gould and
ORDER INSTITUTING PUBLIC
The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") be, and they hereby are, instituted against Mark E. Gould ("Gould") and Jackson L. Morris ("Morris"). Accordingly, IT IS HEREBY ORDERED that said proceedings be, and hereby are, instituted.
In anticipation of the institution of these administrative proceedings, respondents Gould and Morris have submitted Offers of Settlement ("Offers"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings herein, except that they admit the jurisdiction of the Commission over them and over the subject matter of these proceedings, Morris and Gould consent to the issuance by the Commission of this Order Instituting Public Administrative Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings and Issuing a Cease-and-Desist Order (the "Order").
On the basis of this Order, and of the Offers of Settlement of Gould and Morris, the Commission makes the following findings:1
A. Nature of Proceeding
This matter involves Morris and Gould's participation in an unregistered distribution of the common stock of PSA, Inc. during 1998. Morris and Gould received their shares from a group of stock promoters who were completing a reverse merger for the Original PSA, a privately held company, and who were engaged in a "pump and dump" securities fraud scheme.2
Mark E. Gould, 51, works as a financial consultant and resides in Clearwater, Florida.
Jackson L. Morris, 55, is a securities attorney practicing in Tampa, Florida
C. Other Relevant Persons and Entities
American Telecommunications Standards International, Inc. ("ATSI" or the "shell company"), was a Nevada corporation whose public stock traded on the NASDAQ Bulletin Board.
Thomas K. Williams ("Williams"), was the Chief Executive Officer of ATSI.
PSA, Inc. is the combined entity formed by the reverse merger between shell company ATSI and Original PSA, the privately held company, in March 1998.
First New Haven Corporation was the entity through which the stock promoters carried out parts of the fraud scheme.
D. Gould's and Morris' Participation in the Unregistered Distribution of PSA, Inc. Stock
1. In February 1998, a group of stock promoters working under the name "First New Haven Corporation" (hereinafter "the First New Haven Group" or "the promoters") were working to put together a so-called "reverse merger" between ATSI, a publicly traded shell corporation based in Colorado, and Original PSA, a private company based in Los Angeles.3 For their efforts, the promoters planned to acquire, at little or no cost, a large block of shares of the merged company, pump up the price of the shares, and then dump the shares into the inflated market. This activity is commonly known as a "pump and dump" securities fraud scheme.
2. Gould and Morris worked as consultants for the First New Haven Group. Gould assisted the promoters in structuring the reverse merger and Morris drafted documents for the reverse merger. In return for their consulting services, the First New Haven Group agreed to provide Gould and Morris with a block of stock in PSA, Inc.
3. In late February 1998, before the merger occurred, the First New Haven Group met with Thomas K. Williams ("Williams"), the Chief Executive Officer of ATSI, the shell corporation. Williams was an affiliate and control person of ATSI, and thus was prohibited from distributing any shares of ATSI to the public during the time that he remained in control of ATSI, unless a registration statement was filed with the Commission or he complied with the strict requirements of Rule 144 (promulgated under the Securities Act). Williams owned approximately 2.1 million shares of ATSI stock. As part of the reverse merger agreement, the First New Haven Group offered to take the approximately 2.1 million shares of stock held by Williams and distribute them into the market following the reverse merger between ATSI and Original PSA. The promoters also offered to remit part of the proceeds from the sale of these shares back to Williams. Williams agreed to the arrangement. By agreement, the actual transfer of shares from Williams to the First New Haven Group was to take place after the effective date of the merger. At the time, Gould and Morris did not know about this agreement.
4. The reverse merger between ATSI and Original PSA occurred in March 1998. As a result of the merger, shares in ATSI were converted to shares of the newly merged entity, whose name was changed to PSA, Inc. As previously arranged, Williams transferred approximately 2.1 million shares of PSA, Inc. stock to the First New Haven Group. These promoters then transferred 100,000 shares of PSA, Inc. stock to Gould and 50,000 PSA, Inc. shares to Morris, as payment for Morris and Gould's consulting services. Morris and Gould knew that the promoters held a large block of PSA, Inc. shares that the promoters planned to distribute into the marketplace.
5. Gould and Morris sold their PSA, Inc. shares into the marketplace between approximately April and September 1998.
6. Section 5(a) prohibits the sale of securities unless a registration statement is in effect, and Section 5(c) prohibits the offer for sale of securities unless a registration statement has been filed, through the mail or in interstate commerce. 7. No registration statement was filed with the Commission and in effect for any part of the distribution of the 2.1 million PSA, Inc. shares obtained from the ATSI control person, including the offer or sale of the approximately 2.1 million PSA, Inc. shares to the First New Haven Group, the subsequent transfer to Morris and Gould, and Morris and Gould's sale of their 150,000 shares into the market. Moreover, no exemption from the provisions of Sections 5(a) and 5(c) of the Securities Act was available.
8. Morris and Gould received and sold their shares as part of the overall unregistered distribution of PSA, Inc. stock.
Based on the foregoing, the Commission finds that Gould and Morris committed violations of Sections 5(a) and 5(c) of the Securities Act, and further deems it appropriate to accept the Offers of Settlement of Gould and Morris.
As set forth in the Offers, both Gould and Morris undertake to cooperate with the Commission staff in preparing for and presenting any civil litigation or administrative proceedings concerning any transaction that is the subject of this Order. The Commission has considered the undertakings of Gould and Morris in determining the appropriate Order. If Gould or Morris fails to comply with these undertakings, the Commission reserves the right to reopen this proceeding and reconsider the appropriateness of the Order imposed.
Accordingly, IT IS ORDERED THAT Gould cease and desist from committing any violation and any future violation of Sections 5(a) and 5(c) of the Securities Act.
IT IS FURTHER ORDERED THAT Morris cease and desist from committing any violation and any future violation of Sections 5(a) and 5(c) of the Securities Act.
By the Commission.
Jonathan G. Katz
|1||The findings herein are made pursuant to Respondents' Offers of Settlement and are not binding on any other person or entity in this or any other proceeding.|
|2||In conjunction with the issuance of this Order, the Commission has moved to dismiss Gould and Morris from a related action pending in the United States District Court for the Northern District of California, which is based on the conduct discussed in this Order. See SEC v. Durante, et al., C 99-3690 SBA (N.D. Cal.). See also SEC Litigation Release Nos. 16237 and 16673.|
|3||In a reverse merger, typically a publicly-traded shell company (i.e., a company with few or no operations but whose stock is publicly-traded) merges with a private company, the private company's management, and the surviving corporation bears the same name as the former private company.|
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