UNITED STATES OF AMERICA
|In the Matter of
|ORDER MAKING FINDINGS AND
IMPOSING PENNY STOCK BAR
PURSUANT TO SECTION 15(b) OF THE
SECURITIES EXCHANGE ACT OF 1934
In these public administrative proceedings instituted on March 22, 1999, by the Securities and Exchange Commission ("Commission") pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"), Respondent Gerard Burns ("Burns") has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over him and over the subject matter of this proceeding and as to the findings contained in Section II, paragraph C, below, which are admitted, Burns, by his Offer, consents to the entry of findings and remedial sanctions set forth below.
On the basis of this Order, the Order Instituting Public Proceedings and the Offer, the Commission finds that:
A. In June 1994, prior to VDS becoming a reporting company, All American Environmental Funding Corporation ("All American"), a privately held corporation, engaged in a reverse merger with VDS. Before the reverse merger, VDS was a shell corporation that conducted no business and that had assets under $1,000.
B. Gerard Burns ( "Respondent" or "Burns") was, at all relevant times, the chief executive officer and president of VDS. During the relevant time period, Burns controlled, directed, and possessed the power to direct, control or cause the direction or control of VDS' management and policies.
C. On October 21, 1998, the United States District Court for the Southern District of Florida entered a final judgment of permanent injunction and other relief, by default, enjoining Burns from further violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder and from further violations, as a control person, of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder.
D. Previously, on September 29, 1997, the Commission filed a complaint in the United States District Court for the Southern District of Florida, SEC v. Gerard Burns, et al., Civil Action No. 97-3111-CIV-MOORE (S.D. Fla. 1997), against Burns, among others (the "Complaint"). The Complaint charged Burns with violations of certain provisions of the antifraud and corporate reporting provisions of the federal securities laws.
E. The Commission's Complaint alleged, among other things, as follows: 1. Between July and November 1994, Burns, with the active participation of others, solicited investments in VDS from citizens of Spain. During that period, Burns fraudulently offered and sold approximately $2.7 million worth of VDS stock to Spanish citizens.
2. The centerpiece of the sales effort was a Business Profile provided to most investors which was the sole source of information about VDS and which contained material misrepresentations and omissions of material fact, including the following: (a) representing that VDS owned Cotechnica, Inc. ("Cotechnica"), a solid waste collection and disposal business in Venezuela, when, in fact, Cotechnica was never acquired by VDS;
(b) representing that VDS' environmental clean-up business, combined with Cotechnica's solid waste collection and disposal business, had "anticipated" annual combined revenues of $45 - $50 million, when, in fact, such "anticipated revenues" were baseless;
(c) misrepresenting that as of August 30, 1994, VDS had assets of $16,343,371, thereby overstating VDS' assets by at least 300%;
(d) misrepresenting that as of August 30, 1994, VDS had shareholder equity of $14,751,412, thereby overstating VDS' shareholder equity by at least 150%;
(e) misrepresenting that VDS had service contracts for $100 million worth of environmental clean-up work, thereby overstating the total amount of such contracts by at least 800%;
(f) misrepresenting that VDS became a publicly traded company in June 1994 when, in fact, VDS had never been approved for trading on the bulletin board, pink sheets, or any other comparable trading medium;
(g) failing to disclose that in 1987, Burns was criminally convicted for fraud in connection with the sale of unregistered securities (State of Arizona vs. Leonard Martin Thouburon a/k/a Gerard Michael Burns (DR87-07088MSCO, 87-30415 DPS); and
(h) failing to disclose that approximately $635,000 from the proceeds of the sale of VDS stock would be used for Burns' personal expenses. 3. Burns, acting as an officer and/or director of VDS, knowingly, willfully and/or recklessly prepared, caused and/or allowed to be filed with the Commission on behalf of VDS a materially false and misleading Form 8-K for the period ending June 30, 1994, which misrepresented, among other things, that VDS owned property valued at $6,000,000, when, in fact, VDS never owned any such property. F. At all times Respondent was selling it, VDS' common stock was a penny stock as defined by the Exchange Act and Rules promulgated thereunder.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offer by Respondent Burns.
ACCORDINGLY, IT IS ORDERED that Respondent Burns be, and hereby is, barred from participation in any offering of a penny stock.
For the Commission, by its Secretary, pursuant to delegated authority.
Jonathan G. Katz
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