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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 44388 / June 4, 2001

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1402 / June 4, 2001

ADMINISTRATIVE PROCEEDING
File No. 3-10502


In the Matter of

JAMES M. CASSIDY and
TPG CAPITAL CORPORATION,

Respondents.


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ORDER INSTITUTING PROCEEDINGS
PURSUANT TO SECTION 21C
OF THE SECURITIES EXCHANGE
ACT OF 1934, MAKING FINDINGS
AND IMPOSING A CEASE-AND-
DESIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") to determine whether James M. Cassidy ("Cassidy") and TPG Capital Corporation ("TPG Capital") (together, Cassidy and TPG Capital are hereinafter referred to as the "Respondents") violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and caused violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.

II.

In anticipation of the institution of these administrative proceedings, Cassidy and TPG Capital have submitted Offers of Settlement 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 to which the Commission is a party, and without admitting or denying the findings contained herein, except that Respondents admit the jurisdiction of the Commission over them and over the subject matter of this proceeding, Cassidy and TPG Capital consent to the entry of this Order Instituting Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order ("Order"). The Commission has determined that it is appropriate to accept the Offer and accordingly is issuing this Order.

III.

Based on the foregoing, the Commission finds that:

A. Respondents

James M. Cassidy, age 65, is the sole officer and controlling shareholder of TPG Capital Corporation. He is a resident of Washington, DC.

TPG Capital Corporation is a private company headquartered in Washington, D.C. Cassidy is TPG Capital's sole officer and its controlling shareholder. From 1999 through 2000, TPG Capital assisted companies to become reporting companies by arranging for the companies to acquire public blank check corporations that TPG Capital controlled.

B. Background

In January 1999, the National Association of Securities Dealers ("NASD") issued an "eligibility rule" requiring all companies that displayed their stock quotations on the NASD's over the counter bulletin board ("bulletin board") to file periodic reports, including financial statements, with the Commission by June 2000.1 The rule provided that companies that did not meet the deadline would be removed from the bulletin board. One means for bulletin board companies to meet the requirements before the deadline was by acquiring registered "blank check"2 companies and inheriting their status as reporting companies. These newly formed companies were not required to file financial statements until 75 days after they consummated mergers. However, if an acquisition had occurred or was probable when the blank check company filed its registration statement, then the blank check company was required to file the target company's financial statements at the time of registration.

From around August 1999 until at least February 2000, the Respondents arranged reverse mergers between reporting companies that they controlled and issuers that might not otherwise satisfy the eligibility rule. The Respondents then arranged reverse mergers with issuers that faced possible delisting. The target companies paid TPG Capital a substantial fee for each transaction, and in some cases provided the Respondents with warrants to purchase shares of their stock. In the course of providing these services, the Respondents repeatedly made false or misleading disclosures in documents filed with the Commission. Between May 26, 1999 and November 18, 1999, the Respondents filed amended registration statements for five blank check companies ("the blank check companies") that falsely stated that the companies had not engaged in negotiations with specific entities regarding a possible business combination. Three of these companies also filed periodic reports falsely stating that they had not engaged in merger negotiations. The Respondents thereby violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and caused the blank check companies to violate Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.

C. Respondents Made False and Misleading Statements in Registration Statements

1. Aterian Corporation

On June 17, 1999, Aterian Corporation ("Aterian") filed a registration statement on Form 10-SB with the Commission. Cassidy drafted the Form 10-SB and signed it as Aterian's President and Director. Aterian's Form 10-SB registration was effective on August 16, 1999. On October 25, 1999, the Respondents provided Gourmet's Choice Coffee Company, Inc. ("Gourmet's Choice"), a company whose securities were listed on the bulletin board, with a document entitled "Agreement to Provide a Reporting Company" and a draft of a plan of merger between Aterian and Gourmet's Choice. On November 2, 1999, the Respondents sent Gourmet's Choice a draft of a stock-for-stock exchange agreement. On November 3, 1999, Gourmet's Choice paid a substantial fee to TPG Capital. On November 4, 1999, Aterian filed an Amended Form 10-SB. Cassidy drafted the Amended Form 10-SB and signed it as Aterian's President and Director. In the Amended Form 10-SB, Aterian falsely stated that Aterian "has not engaged in any negotiations with any specific entity regarding the possibility of a business combination," and that Aterian "has no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity." On November 22, 1999, Aterian and Gourmet's Choice executed a reorganization agreement. On November 29, 1999, Aterian and Gourmet's Choice closed the reverse merger.

2. Forestay Corporation

On June 17, 1999, Forestay Corporation (" Forestay") filed a registration statement on Form 10-SB with the Commission. Cassidy drafted the Form 10-SB and signed it as Forestay's President and Director. Forestay's Form 10-SB registration was effective on August 16, 1999. On November 5, 1999, the Respondents provided Milinx Business Group, Inc., ("Milinx") with a sample agreement that identified Forestay as the blank check company that would merge with Milinx. At that time, Milinx had no securities listed on the bulletin board or elsewhere. On November 15, 1999, the Respondents sent Milinx amendments to a Certificate of Merger, which again identified Forestay as the blank check company that would merge with Milinx. On November 17, 1999, the Respondents sent the finalized merger documents to Milinx for execution. On November 18, 1999, Forestay filed an Amended Form 10-SB. The Amended Form 10-SB falsely stated that the Forestay "has not engaged in any negotiations with any specific entity regarding the possibility of a business combination," and that Forestay "has no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity." Cassidy drafted the Amended Form 10-SB and signed it as Forestay's President and Director. On December 7, 1999, Forestay and Milinx executed a reorganization agreement. On December 10, 1999, Forestay and Milinx closed the reverse merger transaction.

3. Epilogue Corporation

On June 17, 1999, Epilogue Corporation ("Epilogue") filed a registration statement on Form 10-SB with the Commission. Cassidy drafted the Form 10-SB and signed it as Epilogue's President and Director. Epilogue's Form 10-SB registration was effective on August 16, 1999. On October 26, 1999, the Respondents communicated with Nextpath Technologies, Inc. ("Nextpath"), a company whose securities traded on the bulletin board, regarding a reverse merger with a blank check company. On October 28, 1999, the Respondents and Nextpath agreed upon the Respondents' compensation. At approximately 10:00 a.m. on November 3, 1999, Nextpath wired a substantial cash payment into an escrow account for TPG Capital. Later that day, Epilogue filed an Amended Form 10-SB that falsely stated that Epilogue "has not engaged in any negotiations with any specific entity regarding the possibility of a business combination," and that Epilogue "has no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity." Cassidy drafted the Amended Form 10-SB and signed it as Epilogue's President and Director. On November 11, 1999, Epilogue and Nextpath executed a reorganization agreement and closed the reverse merger transaction.

4. Abbacy Corporation

On June 17, 1999, Abbacy Corporation ("Abbacy") filed a registration statement on Form 10-SB with the Commission. Cassidy drafted the Form 10-SB and signed it as Abbacy's President and Director. Abbacy's Form 10-SB registration was effective on August 16, 1999. On September 24, 1999, Abbacy and CBCOM executed a reorganization agreement. On October 18, 1999, Abbacy consummated a reverse merger with CBCOM, Inc. ("CBCOM"), a company whose securities were not listed on the bulletin board or elsewhere. On October 15, 1999, Abbacy filed an Amended Form 10-SB that failed to disclose the transaction with CBCOM, and falsely stated that Abbacy "has not engaged in any negotiations with any specific entity regarding the possibility of a business combination," and that Abbacy "has no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity." Cassidy drafted the Amended Form 10-SB and signed it as Abbacy's President and Director.

5. Torbay Acquisition Corporation

On February 19, 1999, Torbay Acquisition Corporation ("Torbay Acquisition") filed a registration statement on Form 10-SB with the Commission. Cassidy drafted the Form 10-SB and signed it as Torbay Acquisition's President and Director. Torbay Acquisition' Form 10-SB registration was effective on April 18, 1999. On March 24, 1999, Cassidy formed Acropolis Acquisition Corporation, and later changed the name of Acropolis Acquisition Corporation to Torbay Holdings, Inc. ("Torbay Holdings"). Cassidy owned and controlled Torbay Holdings. Torbay Holdings' securities were not listed on the bulletin board or elsewhere. On May 28, 1999, Cassidy drafted an Amended Form 10-SB for Torbay Acquisition and signed it as Torbay Acquisition's President and Director. Torbay Acquisition and Torbay Holdings executed a reorganization agreement on July 19, 1999. On October 26, 1999, Cassidy merged Torbay Holdings with Torbay Acquisition. In the May 28, 1999 Amended Form 10-SB, Torbay Acquisition falsely stated that it "has not engaged in any negotiations with any specific entity regarding the possibility of a business combination," and that it "has no current arrangement, agreement or understanding with respect to engaging in a business combination with a specific entity."

D. Respondents Made Materially False and Misleading Statements in Periodic Reports

1. Aterian Corporation

On November 15, 1999, Aterian filed a quarterly report with the Commission on Form 10Q-SB for the fiscal period ended September 30, 1999. Cassidy drafted the Form 10Q-SB and signed it as Aterian's President and Director. As discussed above, on October 25, 1999, the Respondents provided Gourmet's Choice with documents concerning a proposed merger between Aterian and Gourmet's Choice. On November 2, 1999, the Respondents sent additional merger documentation to Gourmet's Choice and, the following day, paid a substantial sum to TPG Capital's escrow agent. In the Form 10Q-SB, Aterian falsely stated that it "has not made any final decision concerning or entered into any agreements for a business combination."

2. Forestay Corporation

On November 15, 1999, Forestay filed a quarterly report with the Commission on Form 10Q-SB for the fiscal period ended September 30, 1999. Cassidy drafted the Form 10Q-SB and signed it as Forestay's President and Director. As discussed above, on November 5, 1999, the Respondents provided Milinx with a sample agreement that identified Forestay as the blank check company that would merge with Milinx. On November 15, 1999, the Respondents sent Milinx additional documentation that identified Forestay as the blank check company that would merge with Milinx. In the Form 10Q-SB, Forestay falsely stated that it "has not made any final decision concerning or entered into any agreements for a business combination."

3. Torbay Acquisition Corporation

On July 13, 1999, Torbay Acquisition filed a quarterly report with the Commission on Form 10Q-SB for the fiscal period ended June 30, 1999. As discussed above, Cassidy created Torbay Acquisition to merge it with Torbay Holdings, Inc., which was another entity that he owned. Cassidy drafted the Form 10Q-SB and signed it as Torbay Acquisition's President and Director. In the Form 10Q-SB, Torbay Acquisition falsely stated that it "has not made any final decision concerning or entered into any agreements for a business combination."

IV.

LEGAL DISCUSSION

A. Violations of Section 10(b) and Rule 10b-5

Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit, among other things, (i) false and misleading statements of material facts and (ii) omissions to state material facts necessary to make the statements that were made, in light of the circumstances under which they were made, not misleading, in connection with the purchase or sale of a security. Information is material if there is "a substantial likelihood that a reasonable investor would consider it important" in making investment decisions or a reasonable investor would view the information as having significantly altered the total mix of information available. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976); Basic, Inc. v. Levinson, 485 U.S. 224, 232 (1988).

By making the materially false and misleading statements discussed above with respect to Aterian and Epilogue, the Respondents violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Cassidy was the sole officer and director of the blank check companies, and TPG Capital was the controlling shareholder. Cassidy drafted the registration statements and periodic reports for the blank check companies, and signed them as the sole officer and director of the companies. In addition, Cassidy drafted the merger agreements and negotiated the transactions. The Respondents knew, or were reckless in not knowing, that the statements in the registration statements and periodic reports were materially false or misleading.

B. Violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 Thereunder

Section 13(a) of the Exchange Act and Rule 13a-13 require issuers of securities registered pursuant to Section 12 of the Exchange Act to file periodic reports with the Commission. Implicit in these filing requirements is that such filings be accurate. SEC v. Kalvex, 425 F. Supp. 310, 316 (S.D.N.Y. 1975). In addition to the information expressly required, Exchange Act Rule 12b-20 requires a registrant to include additional material information that is necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

As discussed above, the Respondents made materially false or misleading statements in registration statements and periodic reports filed with the Commission for the blank check companies, thereby causing the blank check companies they controlled to violate Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.

IV.

FINDINGS

Based on the above, the Commission finds that Cassidy and TPG Capital violated Sections 10(b) of the Exchange Act and Rule 10b-5 thereunder and caused violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.

V.

Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that Cassidy and TPG Capital cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and from causing any violation and any future violation of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes

1 Order Granting Approval of Proposed Rule Change, Exchange Act Rel. No. 4087

2 As defined by the Securities Act of 1933, the term "blank check" company means any development stage company that is issuing a penny stock and that 1) has no specific plan of purpose; or 2) has indicated that its business plan is to merge with an unidentified company or companies. 15 U.S.C. § 77g(b)(3).

http://www.sec.gov/litigation/admin/34-44388.htm


Modified: 06/05/2001