SECURITIES ACT OF 1933
RELEASE NO. 7748 / September 30, 1999
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 41950 / September 30, 1999
ADMINISTRATIVE PROCEEDING FILE NO. 3-10055
The Commission has instituted a public administrative and cease-and-desist proceeding, pursuant to pursuant to Section 8A of the Securities Act of 1933 (Securities Act) and Sections 15(b) and 21C of the Securities Exchange Act of 1934 (Exchange Act) against Madlyn L. Ferro (Ferro) and Dwight H. Stephens (Stephens). The proceeding is based upon allegations that Ferro, who was associated with Rich Management Corp. (Rich Management), an unregistered broker-dealer, and Stephens, who was associated with Cyber-Tech Marketing & Consulting Group, Inc. (Cyber-Tech), another unregistered broker-dealer, each engaged in the unlawful sale of unregistered securities of Friendly Power Company (Friendly Power). The unregistered securities took the form of partnership units in various franchises in Friendly Power.
The administrative and cease-and-desist proceeding against Ferro is based upon allegations that Ferro offered and sold the Friendly Power partnership units on behalf of Rich Management through unsolicited telephone solicitations to investors located nationwide, that Rich Management raised more than $5 million of the total amount raised in the Friendly Power offering, and that Rich Management received over $2 million in commission payments. The proceedings are also based on allegations that Ferro was one of Rich Management's unregistered representatives, had worked with the principals of Friendly Power and Rich Management for several years, previously sold partnership units in at least one other venture started by the principals of Friendly Power and Rich Management, and that between November 1997 and July 1998, Ferro sold approximately 20 of the Friendly Power partnership units in return for commissions from Rich Management of $52,252.70.
The administrative proceeding against Stephens is based upon allegations that Stephens was associated as an officer and director of Cyber-Tech, and that between November 1997 and July 1998, Cyber-Tech offered and sold the Friendly Power securities to the general public. The proceedings are also based on allegations that on June 28, 1999, in the case of SEC v. Friendly Power Company, LLC, et al., 98-2902-CIV-KING (S.D. Fla.), the United States District Court for the Southern District of Florida entered a final judgment of permanent injunction and other relief, by default, enjoining Stephens from violating the antifraud and securities and broker-dealer registration provisions of the federal securities laws. The Court found that Stephens had failed to appear, answer or otherwise plead to the Complaint filed by the Commission against him. The Commission's Complaint alleged, among other things, that between November 1997 and July 1998, Respondent made, or directed his employees to make, material misrepresentations and omissions in connection with the offer and sale of unregistered securities in Friendly Power Company concerning: the potential profitability of an investment in a Friendly Power partnership unit; the availability of the securities (in a manner designed to create a false sense of urgency in the investor); Friendly Power's unilateral right to revoke a franchise's right of exclusivity to the franchise area; and the risk of an investment in a Friendly Power partnership unit.
A hearing will be held before an administrative law judge to determine whether the staff's allegations are true, and if so, what sanctions, if any, are appropriate against Ferro and Stephens.