UNITED STATES DISTRICT COURT
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
Plaintiff, Securities and Exchange Commission ("SEC" or "Commission") alleges that:
1. The Commission brings this action to enjoin Defendant Camilo Pereira a/k/a Camilo Agasim-Pereira from continuing to violate the federal securities laws. From July 1998 through April 1999 ("the relevant time period"), Defendant reaped illegal profits totaling over $2 million by issuing false and misleading press releases about Quest Net Corp. ("Quest Net"), a company he controlled and whose stock was quoted on the National Association of Dealers Over-the-Counter Bulletin Board ("OTCBB"), and then dumping his own shares through nominee accounts while Quest Net's stock price was artificially inflated. In addition to a permanent injunction against Defendant, the SEC also seeks disgorgement of Defendant's ill-gotten gains, plus pre-judgment interest thereon, and the imposition of a civil money penalty pursuant to Section 21(d) of the Securities Exchange Act of 1934 ("Exchange Act").
2. Camilo Pereira is 42 years old and is last known to reside in Port Elizabeth, South Africa. During the relevant time period, Defendant resided in North Miami Beach, Florida. Defendant was the chief executive officer, chairman of the board of directors of Quest Net and was the person responsible for Quest Net's day-to-day operations.
JURISDICTION AND VENUE
3. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78u(d), 78u(e) and 78aa].
4. Certain of the acts and transactions constituting violations of the Exchange Act have occurred within the Southern District of Florida. Defendant resided in the Southern District of Florida. The principal offices of Quest Net were located within the Southern District of Florida. Defendant engaged in many of the acts and practices complained of herein within the Southern District of Florida.
5. Defendant, directly and indirectly, has made use of the means and instrumentalities of interstate commerce and the mails, in connection with the acts, practices, and courses of business complained of herein.
DEFENDANT'S FRAUDULENT "PUMP AND DUMP" SCHEME
A. Defendant's Material Misrepresentations and
6. In July 1998, Defendant formed Quest Net, a Florida corporation, following a reverse merger between his privately held corporation and a publicly traded shell corporation. Quest Net was purportedly was in the telecommunications and Internet business, and its stock was publicly quoted on the OTCBB.
7. In an effort to artificially inflate Quest Net's stock price, between July 1998 and April 1999, Defendant caused Quest Net to issue a series of press releases that contained materially false and misleading statements and omissions of material facts concerning, among other things, major client and asset acquisitions and company revenues. Defendant was the person responsible for approving and disseminating the false press releases to the public. Defendant also made false and misleading statements during an online interview with a financial website company.
(1) Acquisition of Quest Net's First Wireless Client
8. On July 31, 1998, Quest Net issued a press release announcing that Quest Net had signed its first contract for wireless broadband service with a privately held Florida corporation named WebCafe Corporation ("WebCafe"). The press release boasted that the contract with WebCafe "marks the start of Quest Net's first penetration in the wireless broadband distribution." The press release identified the president of WebCafe as "Patricia Martins."
9. This press release was materially misleading because it failed to disclose that WebCafe was a company formed, owned and operated by Defendant. Indeed, Defendant incorporated WebCafe a mere seven weeks prior to the date of the press release. WebCafe's president, Patricia Martins, is in reality Defendant's sister who had granted Defendant a general power of attorney over all of her business dealings, including, of course, WebCafe. None of these material facts were disclosed by Defendant.
(2) Quest Net's Major Asset Purchase From Grupo
10. On December 29, 1998, Quest Net issued a press release announcing that it had purchased certain assets totaling $2 million from Grupo Internet Latinoamericano S.A. ("Grupo"), a privately held British Virgin Islands company. Quest Net claimed that it purchased these assets, which purportedly consisted of computer hardware and software, from Grupo in exchange for common and preferred stock in Quest Net valued at $2 million. This press release quoted Defendant Pereira as saying that "[w]e are on course to expand Quest into a full service Internet solutions company, not just an Internet provider," and that "[t]his acquisition is another step in that direction."
11. In a second press release issued after the market closed on December 30, 1998, Quest Net again mentioned the Grupo transaction and boasted that the acquisition had "fueled the second straight day of positive active trading" of the company's stock.
12. These press releases were blatantly false and misleading because the Quest Net/Grupo transaction was a complete sham. Grupo was in fact nothing more than a shell company that Defendant formed and controlled as part of a fraudulent scheme to manipulate Quest Net's stock price. Defendant formed Grupo with Quest Net funds and, in order to conceal his control of Grupo, Defendant appointed his father-in-law, David Plant, as the sole director of Grupo. As with the WebCafe transaction, Defendant obtained a general power of attorney over all of Plant's business dealings, including, Grupo. None of these facts were disclosed by Defendant.
13. Moreover, Grupo in fact never owned much of the telecommunications equipment that Quest Net claimed to have purchased from Grupo. Some of the equipment that Defendant claimed to have acquired from Grupo belonged to third parties and had already been in Quest Net's possession before the sham "purchase" from Grupo.
14. The fraudulent press releases Quest Net disseminated on December 29th and December 30th concerning this sham transaction caused Quest Net's stock price to soar from a price of $2.53 per share with 26,200 shares traded on December 28th to a high of $30 per share with 441,600 shares traded on January 5th.
(3) Quest Net's Purchase of Ecreditcard.com
15. On April 1, 1999, Quest Net issued a press release announcing that Quest Net had purchased an e-commerce website named "Ecreditcard.com" for an undisclosed amount of cash and stock. According to the press release, Ecreditcard.com specialized "in providing secure [c]redit [c]ard [sic] for clients worldwide" and had been "in operation for over two years with great results."
16. This press release was misleading and failed to disclose that Defendant owned Ecreditcard.com and was running the website. Defendant had purchased and registered the "Ecreditcard.com" domain name in July 1997.
(4) Quest Net's Inflated Revenue Announcements
17. On March 29, 1999, Quest Net issued a press release that provided an address for an Internet website which had hosted an online interview with Defendant. During this interview, Defendant falsely stated that in: "[t]he last two quarters, in terms of revenues that have been collected, [Quest Net] had about $900,000 of revenue per quarter."
18. On April 13, 1999, Quest Net issued a press release reporting that Quest Net had generated $1,526,053 in gross revenues and $423,181 in pretax profits for the six months ended December 31, 1998. The next day, the company issued another press release that also touted its gross revenues and profit figures for the same period.
19. Defendant's online interview and the two April 1999 press releases failed to disclose that over 30% of the approximately $1.5 million in reported revenues was made up of a potentially uncollectible receivable from a Quest Net customer who was involved in ongoing litigation with Quest Net over the receivable. The dispute involved Quest Net's sale of software to the customer and whether Quest Net had delivered a fully functional version of the software.
20. After the issuance of these two false press releases, the company's stock price dramatically rose from $4.56 per share on April 12th to $13.50 per share on April 15th. During these three days of trading, the trading volume increased from 42,100 shares traded on April 12th to 290,000 shares traded on April 15th.
B. Defendant "Dumps" His Quest Net Stock
21. Defendant's campaign of disseminating false information was part of an unlawful scheme to manipulate the price of Quest Net's stock. During the relevant time period, Defendant controlled the majority of Quest Net's outstanding common stock, which included shares that he acquired as part of the fraudulent Grupo transaction.
22. In an effort to conceal both his control of Quest Net and illegal trading, Defendant opened nominee accounts in the names of Grupo and David Plant (his father-in-law). After Quest Net issued the false press release concerning Grupo, which caused the price of Quest Net to rise, Defendant began selling shares of Quest Net stock through these nominee accounts at artificially inflated prices. Defendant repeated his clandestine sales of Quest Net stock after its price spiked as a result of subsequent false and misleading announcements of material information.
23. In total, from December 1998 through April 16, 1999, Defendant sold approximately 215,000 shares of Quest Net stock resulting in proceeds of more than $2.0 million. The majority of this money was eventually wired from Defendant Pereira's nominee accounts and sent to various foreign bank accounts and offshore trusts that are controlled by Defendant.
FRAUD IN VIOLATION OF SECTION 10(b) OF THE
The Commission repeats and realleges its allegations set forth in paragraphs 1 through 23 of this Complaint as if fully stated herein.
24. Since a date unknown but since at least July 1998 through April 1999, Defendant, directly or indirectly, by use of the means and instrumentalities of interstate commerce or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of securities, as described herein, has knowingly, willfully or recklessly: (i) employed devices, schemes or artifices to defraud; (ii) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (iii) engaged in acts, practices and courses of business which have operated, are now operating and will continue to operate as a fraud upon the purchasers of such securities.
25. By reason of the foregoing, Defendant, directly or indirectly, violated and, unless enjoined, will continue to violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 [17 C.F.R. § 240. 10b-5], thereunder.
WHEREFORE, the Commission respectfully requests that the Court:
Declare, determine and find that Defendant has committed the violations of the federal securities laws alleged herein.
Permanent Injunctive Relief
Issue a Permanent Injunction, enjoining Defendant, his agents, servants, employees, attorneys, and all persons in active concert or participation with him, and each of them, from violating Section 10(b) of the Exchange Act and Rule 10b-5, thereunder.
Officer and Director Bar
Pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)], grant an Order permanently barring Defendant from acting as an officer or director of any issuer that has a class of securities registered with the Commission pursuant to Section 12 of the Exchange Act [15 U.S.C. § 781], or that is required to file reports under Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)].
Issue an Order directing Defendant to disgorge all profits or proceeds that he has received as a result of the acts and/or courses of conduct complained of herein, with prejudgment interest thereon.
Issue an Order directing Defendant Pereira to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78(d)(3).
Retention of Jurisdiction
Further, the Commission respectfully requests that the Court retain jurisdiction over this action in order to implement and carry out the terms of all orders and decrees
that may hereby be entered, or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.
Chedly C. Dumornay
Jeffrey L. Cox
Attorneys for Plaintiff