UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 50314 / September 3, 2004
Admin. Proc. File No. 3-11630
IN THE MATTER OF MICHAEL SYDNEY NEWMAN
The Commission has instituted administrative proceedings against Michael S. Newman (Newman) pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act).
The Division of Enforcement (Division) alleges that on Februay 3, 2004, Newman was enjoined by Judge Dale A. Kimball of the U.S. District Court, District of Utah, from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. The Commission filed its complaint against Newman and others on October 16, 2003.
The Complaint in the underlying injunctive action alleged that from in or about October 2002, until the filing of the Complaint, Newman and Sukumo conducted an unlawful scheme to mislead and defraud more than one thousand overseas investors, located primarily in the United Kingdom, through sales of stock in Stem Genetics, F10, Diversified, Valesc, and NCIH. It is further alleged that Newman directed the activities of Sukumo raising more than $16.3 million from January 1, 2003 through September 30, 2003.
The Complaint also alleged that, in connection with the sale of the various securities, Newman and others made numerous material misrepresentations to investors, including: the sales commission Sukumo received was only 2%, rather than the 70% commission Sukumo actually received; the shares investors purchased were free-trading shares rather than the restricted shares they actually received; and misrepresentations about the operations and prospects of the companies whose shares were being sold by Sukumo and Newman. Finally, Complaint alleged that neither Newman nor Sukumo was registered with the Commission as a broker or dealer at the time they were selling the stock of Stem Genetics, F10, Diversified, Valesc, and NCIH.
In the instant proceeding, a hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Newman an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate with respect to Newman's association with any broker or dealer. The Commission directed that an administrative law judge shall issue an initial decision in this matter within 210 days from the date of service of the Order Instituting Proceedings.
See also the Order in this matter