Securities Act of 1933
Release No. 8100 / May 15, 2002

Securities Exchange Act of 1934
Release No. 45939 / May 15, 2002

Administrative Proceeding
File No. 3-10782



In the Matter of
 
BRUCE E. STRAUGHN
 
Respondent.
 
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ORDER INSTITUTING PUBLIC
ADMINISTRATIVE PROCEEDINGS
PURSUANT TO SECTION 8A OF
THE SECURITIES ACT OF 1933 AND
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934,
MAKING FINDINGS
AND ISSUING A CEASE-AND-DESIST
ORDER

I

The Securities and Exchange Commission ("Commission") deems it appropriate to institute public administrative proceedings pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Bruce E. Straughn ("Respondent" or "Straughn").

II

In anticipation of the institution of this administrative proceeding Straughn has submitted an Offer of Settlement ("Offer") that the Commission has determined to accept. Solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except that Straughn admits the jurisdiction of the Commission over him and over the subject matter of this proceeding and the findings contained in Section III under the heading "Respondent," Straughn by his Offer consents to the entry of this Order and the findings and the cease-and-desist order set forth below.
Accordingly, IT IS ORDERED that proceedings pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act be, and they hereby are, instituted.

III

On the basis of this Order and Straughn's Offer, the Commission finds that:

Respondent

Bruce E. Straughn, 46, was at all relevant times a registered representative associated with a registered broker-dealer, La Jolla Capital Corporation ("La Jolla"). He managed La Jolla's Chicago office during the relevant period.

Related Entity

Interactive MultiMedia Publishers, Inc. ("IMP") was incorporated in Delaware on March 28, 1994 under the name Fujacorp Industries, Inc. ("New Fujacorp"). In connection with a reverse merger on April 6, 1995 with Jo-To Interactive, Inc. ("Jo-To"), a closely held Ohio corporation, New Fujacorp's corporate name was changed to Interactive MultiMedia Publishers, Inc. New Fujacorp was not a Commission registrant, but it had the same corporate name as a different Delaware corporation ("Old Fujacorp") that was a Commission registrant. IMP purported to be the successor to Old Fujacorp in public statements and in filings with the Commission. These public statements and filings about the identity and corporate history of IMP were false. No class of New Fujacorp's or IMP's securities was ever registered under the Exchange Act, nor was there ever an effective registration of any offering of the securities of New Fujacorp or IMP under the Securities Act.

Facts

Summary

In April 1995, Respondent Bruce E. Straughn acquired IMP stock from the issuer as advance consideration for his services in promoting the stock and supporting its price. In early 1996, after he had acquired additional IMP stock from affiliates of IMP, Straughn fraudulently manipulated the stock price by arranging for secretly paid stock touters to publish recommendations to buy IMP's stock on the internet and elsewhere. He distributed to these stock touters materially false and misleading information, in Commission filings and other documents, about the value of IMP's copyright assets, contracts and business prospects knowing that the information he distributed to the stock touters was materially false and misleading, or he distributed it with such complete disregard for the accuracy of the information that he was reckless in not knowing it was materially false or misleading. Straughn also knew, or was reckless in not knowing, that the touters, in connection with their published touts, would and did use the false and misleading material information concerning the value of IMP's copyright assets, contracts and business prospects that he had distributed to them.

After publication of some of the stock touts Straughn had arranged, the stock price rose dramatically. Straughn, through brokerage accounts nominally controlled by his wife, then sold his IMP stock at the inflated prices in sales transactions that were not registered with the Commission. Straughn's proceeds from these sales, which violated the antifraud and registration provisions of the securities laws, amounted to approximately $1.2 million.

The Issuance of Restricted IMP Stock to Straughn's Nominees

On or about April 26, 1995, in transactions not involving any public offering, IMP issued 450,000 new shares of stock to Straughn as compensation, in advance, for his services in promoting a market for IMP stock and supporting its price. Straughn directed that the stock be issued to his nominees, including 225,000 shares to his wife under a business name she sometimes used, Forget-Me-Notes. The remaining 225,000 shares were issued at Straughn's direction to his brokerage client, a lawyer, purportedly to satisfy a debt for legal services owed by Straughn's wife. The securities were deposited in two La Jolla accounts in the nominees' names for which Straughn was the account representative.

On or about January 24, 1996, Straughn acquired from IMP, directly or indirectly, 347,500 additional IMP shares for no consideration. These shares, originally issued in 1995 to affiliates of IMP, were deposited into a brokerage account nominally maintained by Straughn's wife under the name Forget-Me-Notes.

The Fraudulent Manipulation of IMP's Stock Price and Straughn's Sales of IMP Stock

During 1995 and 1996, Straughn familiarized himself with IMP's business activities, plans and Commission filings. He visited IMP's offices and was in frequent contact with IMP's president and chief executive officer.

In early 1996, Straughn arranged, directly or indirectly, for a professional stock promoter and three other stock touters to publish recommendations to buy IMP's stock on the internet and elsewhere. Straughn distributed to these stock touters, directly or indirectly, materials that contained fraudulent IMP press releases and other materially false and misleading information concerning the value of IMP's copyright assets, its contracts and its business prospects. Straughn knew that the information he distributed to the stock touters was materially false and misleading, or he distributed it with such complete disregard for the accuracy of the information that he was reckless in not knowing it was materially false or misleading. Straughn also knew, or was reckless in not knowing, that the touters, in connection with their published touts, would and did use the false and misleading material information concerning the value of IMP's copyright assets, contracts and business prospects that he had distributed to them.

The stock price rose dramatically in response to manipulative efforts by Straughn and others. On February 9, 1996 IMP's stock price opened at $ 9/16 and closed at $ 11/16. On February 27, 1996, after publication of some of the stock touts Straughn had arranged, the price reached its 1996 high of $8.00. Thereafter Straughn, directly or indirectly, sold the IMP stock nominally owned by Forget-Me-Notes, realizing total sales proceeds of approximately $1.2 million.

Violations

The Antifraud Provisions

Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder

Section 17(a) of the Securities Act prohibits the employment of fraudulent and manipulative devices in the offer or sale of securities. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit the same conduct if committed in connection with the purchase or sale of securities. Congress drafted Section 10(b) "as a catchall clause to prevent fraudulent practices." Chiarella v. United States, 445 U.S. 222, 226 (1980). False and misleading statements violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act if they are material (i.e., a reasonable investor would consider the statements important), Basic, Inc. v. Levinson, 485 U.S. 224 (1988), and are made with "scienter" (i.e., a mental state embracing intent to deceive, manipulate, or defraud). Ernst & Ernst v. Hochfelder, 425 U.S. l85, l94 n.l2 (l976). Reckless conduct, defined as "an extreme departure from the standards of ordinary care," can satisfy the scienter requirement. SEC v. Steadman, 967 F.2d 636, 641-42 (D.C. Cir. 1992).

Straughn violated the antifraud provisions when he, making use of means or instrumentalities of transportation or communication in interstate commerce or of the mails, in connection with a fraudulent scheme to manipulate the price of IMP's stock,

  • distributed to four stock touters, directly or indirectly, information contained in Commission filings and other documents concerning the value of IMP's copyright assets, contracts and business prospects that Straughn knew, or was reckless in not knowing, was materially false or misleading;
     
  • arranged, directly or indirectly, for the four stock touters to publish recommendations to buy IMP stock, on the internet and elsewhere, when he knew, or was reckless in not knowing, that the touters, in connection with their published touts, would use the false and misleading material information concerning the value of IMP's copyright assets, contracts and business prospects that he had distributed to them;
     
  • facilitated, directly or indirectly, transfers of IMP stock from affiliates of IMP to the touters, as compensation for their publishing recommendations to buy the stock when he knew, or was reckless in not knowing, that the touters' publications did not disclose the compensation or its amount;
     
  • caused the sale of IMP stock from some of the touters' brokerage accounts for which he was account representative while he knew, or was reckless in not knowing, that the touters did not disclose publicly that they were selling IMP stock contemporaneously with their published recommendations to buy; and
     
  • sold, directly or indirectly, IMP stock during the period when the stock price was artificially elevated as a result of the stock touts he had arranged.

On the basis of the foregoing, Straughn violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

The Registration Provisions

Sections 5(a) and 5(c) of the Securities Act

Sections 5(a) and 5(c) of the Securities Act prohibit the offer or sale, directly or indirectly, of securities in interstate commerce unless a registration statement is in effect or has been filed as to such securities.

No registration statement had been filed or was in effect as to the IMP securities that Straughn, directly or indirectly, acquired from IMP in 1995 and 1996 and that he sold, directly or indirectly, during 1996, and no exemption from registration is applicable.

On the basis of the foregoing, Straughn violated Sections 5(a) and 5(c) of the Securities Act when he sold securities of IMP in unregistered transactions during 1996.

Statements of Financial Condition

Straughn and his wife have submitted sworn Statements of Financial Condition dated December 29, 2001 and other evidence and Straughn has asserted his inability to pay disgorgement and prejudgment interest.

IV

Accordingly, the Commission deems it appropriate to require Straughn to cease and desist from committing or causing violations and any future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, as specified by Straughn in his Offer.

Therefore, IT IS ORDERED, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that Straughn is required to cease and desist from committing or causing violations or future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and

IT IS FURTHER ORDERED that Straughn shall pay disgorgement of $1.2 million plus prejudgment interest thereon, but that payment of such amount is waived, based upon the sworn representations of Straughn and his wife in their Statements of Financial Condition dated December 29, 2001 and other documents submitted to the Commission; and

IT IS FURTHER ORDERED that the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Straughn and his wife provided accurate and complete financial information at the time such representations were made; and (2) seek an order directing payment of disgorgement and prejudgment interest. No other issue shall be considered in connection with this petition other than whether the financial information provided by Straughn and his wife was fraudulent, misleading, inaccurate, or incomplete in any material respect. Straughn may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of disgorgement and interest should not be ordered; (3) contest the amount of disgorgement and interest to be ordered; or (4) assert any defense to liability or remedy, including, but not limited to, any statute of limitations defense.

By the Commission.

Jonathan G. Katz
Secretary