Michael Carnicle

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT of 1934
Release No. 50842 / December 13, 2004

ADMINISTRATIVE PROCEEDING
File No. 3-11682

The Securities and Exchange Commission ("Commission") instituted this proceeding on September 24, 2004, pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"). On October 20, 2004, Michael Carnicle ("Carnicle") acknowledged receiving by facsimile a copy of the Order Instituting Proceedings ("OIP"), from my office. On November 9, 2004, a U.S. probation officer personally served Carnicle with the OIP.

On December 7, 2004, the Division of Enforcement ("Division") filed a Motion for Default pursuant to Rules 155(a) and 220(f) of the Commission's Rules of Practice and a Memorandum in Support of Motion ("Memorandum"), with Exhibit A attached. Pursuant to Rules 155(a) and 220(f), Carnicle is in default because he did not file an Answer within twenty days of receipt of the OIP. See 17 C.F.R. §§ 201.155(a), .220(f); OIP at 3. Pursuant to Rule 155(a), I find the following allegations in the OIP to be true.

In 1993 and 1994, Carnicle was in his early thirties and a resident of Salt Lake City, Utah. In this time period, AutoCorp Equities, Inc. ("AutoCorp"), a Nevada corporation headquartered in Frisco, Texas, whose common stock was registered with the Commission pursuant to Section 12(g) of the Exchange Act, had a business that involved attempts to produce live stage performances of the American Gladiators television show in Las Vegas, Nevada. AutoCorp's common stock was quoted on the NASDAQ Small-Cap Market until it was delisted in June 1994 because it did not meet the market's minimum bid requirements. After the delisting, AutoCorp's common stock was quoted in the National Quotation Bureau Pink Sheets. During this time period, the price of AutoCorp's common stock was less than five dollars a share. At no relevant time did AutoCorp have net tangible assets in excess of two million dollars or average revenue of six million dollars for a three-year period.

On August 10, 1998, the Commission filed a complaint in SEC v. Autocorp Equities, Inc., Docket No. 2:98 CV 0562 (D. Utah) against Carnicle which alleged, among other things, that Carnicle violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder, and that he aided and abetted AutoCorp's violations of Section 13(b)(2)(A) of the Exchange Act. The complaint alleged that:

In or about December 1993, Carnicle arranged for AutoCorp to enter into a financing agreement to provide funding for AutoCorp to promote a live stage production of the American Gladiators television show in Las Vegas, Nevada. The financing transaction involved AutoCorp's acquisition of five million dollars in certificates of deposit ("CDs"), ostensibly issued by Commercial Bank Sinektica, a Russian bank. While the CDs had a face value of five million dollars, Carnicle knew the CDs were worthless. The Russian CDs were not, in fact, issued by the Russian bank, but were instead printed at a Kinko copy center in Florida by Hillel Sher, a co-defendant in SEC v. Autocorp Equities, Inc., Docket No. 2:98 CV 0562.

Carnicle arranged for AutoCorp to pay for the Russian CDs by issuing Regulation S stock, structuring the transaction to create the appearance that the sale met the requirements of Regulation S under the Securities Act. See Rule 901, Regulation S, Rules Governing Offers and Sales Made Outside the United States Without Registration Under the Securities Act of 1933. However, the issuance of stock did not comply with Regulation S because the stock was sold to a United States resident.

Once AutoCorp obtained the Russian CDs, it included them as assets on its financial statements, which were included in a Form 10-Q filed with the Commission.

The Commission filed a motion for summary judgment against Carnicle on April 16, 2003. United States District Court Judge Paul G. Cassell granted the Commission's motion on December 8, 2003. On September 7, 2004, the court entered an order enjoining Carnicle from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5 and 13b2-1, and from aiding and abetting future violations of Section 13(b)(2)(A) of the Exchange Act. The court's order required Carnicle to pay disgorgement of $183,186, prejudgment interest of $203,008.94, and a civil penalty of $50,000.

Public Interest

The Division argues that a severe sanction is required because Carnicle is a recidivist. (Memorandum at 5.) Carnicle served a three-year sentence in federal prison for a 1987 conviction of counterfeiting. (Id.) On September 20, 1999, Carnicle was permanently enjoined from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 7(f) of the Exchange Act and Rule 10b-5, and Sections 17(a)(1), 17(e)(1), 34(b), and 37 of the Investment Company Act of 1940. The court ordered Carnicle to pay disgorgement of $444,323, plus prejudgment interest, and to pay a third-tier penalty of $444,323. SEC v. Michael Carnicle, 1:95 CV 110C (D. Utah 1999). (Exchange Act Rel. No. 16293 (Sept. 27, 1999).) Carnicle was also a defendant in three criminal cases that originated in the District of Nevada, the Western District of Michigan, and the District of Utah. The three cases were consolidated in the District of Nevada, and Carnicle pled guilty. He served a prison term and was released on or about March 12, 2003. (Memorandum at 5.)

ORDER

The record makes clear that it is in the public interest that Carnicle be prevented from participating in the securities industry to the maximum extent allowed. I therefore GRANT the Motion for Default and the relief requested.

I ORDER that Michael Carnicle is barred from participating in an offering of penny stock pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934.