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U.S. Securities and Exchange Commission

HELANE L. MORRISON (#127752)
ROBERT L. MITCHELL (#161354)
MARC J. FAGEL (#154425)
ANDREW B. HOLMES (#185401)

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
44 Montgomery Street, Suite 1100
San Francisco, California 94104
Telephone: (415) 705-2500
Facsimile: (415) 705-2501

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA


SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

vs.

GARY STEPHEN JOINER, GRANT W. PECK, DEAN FREDRICK SESSIONS, and MARK ALLEN DISALVO,

Defendants.


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Case No.

COMPLAINT

SEC'S APP FOR TRO

Plaintiff Securities and Exchange Commission (the "Commission") alleges:

SUMMARY OF THE ACTION

1. This case involves a scheme to evade the registration requirements of the federal securities laws. The scheme allowed corporate insiders to sell millions of dollars of stock to investors without disclosing the sales to the investing public.

2. Defendants Gary Stephen Joiner ("Joiner"), Grant W. Peck ("Peck"), Dean Fredrick Sessions ("Sessions"), and Mark Allen DiSalvo ("DiSalvo") were in the business of creating "shell companies" - companies with no operations and no existence aside from publicly-traded stock that the defendants controlled. The defendants created the shell companies for the purpose of merging them with privately-held companies in a process known as a "reverse merger." Through the reverse mergers, the privately-held companies became publicly-traded without registering with the Commission.

3. By structuring these reverse mergers to circumvent the federal registration provisions, defendants avoided disclosing to investors the control over the outstanding stock held by corporate insiders and affiliates.

4. Following each reverse merger, the defendants personally sold hundreds of thousands of shares of stock to the public. They also sold several million shares to persons affiliated with the private companies, who resold the stock to the public. Investors bought stock in the newly-merged companies, unaware that essentially every share of stock purchased on the open market had been surreptitiously dumped by the defendants or the corporate insiders to whom the defendants had transferred their stock. Defendants' failure to comply with the registration provisions denied investors information that could have influenced their decision to invest in these companies.

5. As a result of the conduct alleged, the Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties against all defendants.

AUTHORITY TO BRING THIS ACTION

6. Plaintiff Commission brings this action pursuant to Sections 20(b) and 20(d) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. §§ 77t(b) and 77t(d)].

JURISDICTION AND VENUE

7. This Court has jurisdiction over this action pursuant to Sections 20(d)(1) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(d)(1) and 77v(a)]. Defendants, directly or indirectly, have made use of the means and instrumentalities of interstate commerce or of the mails in connection with the acts, practices and courses of business alleged in this Complaint.

8. Venue in this District is proper pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)]. Certain of the transactions, acts, practices, and courses of business alleged herein occurred within this District.

9. Assignment to the San Francisco Division is appropriate pursuant to Civil Local Rule 3-2(d) because a substantial part of the alleged misconduct occurred in San Mateo County, California.

THE DEFENDANTS

10. Gary Stephen Joiner, 51, of Boulder, Colorado, is a licensed attorney in the state of Colorado.

11. Grant W. Peck, 47, is a resident of Boulder, Colorado.

12. Dean Fredrick Sessions, 51, is a resident of Broomfield, Colorado.

13. Mark Allen DiSalvo, 51, of Shell Beach, California, was a registered representative of a broker-dealer during the relevant period.

DEFENDANTS' UNREGISTERED STOCK SALES

A. Background

14. During the relevant period, the defendants were in the business of forming "shell companies," companies with no operations aside from the issuance of publicly-traded stock. These entities, also known as "blank check companies," were created for the sole purpose of merging with private companies through a process called a "reverse merger." In a reverse merger, the private company acquires the stock and assumes control over the shell company, in effect becoming a publicly traded company without undergoing an initial public offering.

15. The federal securities laws require public stock offerings, including initial public offerings, to be registered with the Commission. The registration requirements are aimed at providing important information to investors to be weighed in deciding whether to invest in the stock, including, among other things, business plans, financial information, investment risk factors, and information about selling shareholders.

16. The defendants structured the reverse mergers to evade the registration requirements of the federal securities laws and conceal the control over the corporate stock by the defendants and the company affiliates to whom they had sold shares. As a result, the defendants enabled themselves and company affiliates to sell millions of dollars of company stock without disclosing their sales to investors.

17. As alleged below, the defendants arranged two such reverse mergers in 1999, resulting in the formation of two publicly-traded companies: M & A West, Inc. and Workfire.com, Inc. Following each merger, the defendants and the company affiliates to whom they had sold shares unloaded the stock on the investing public. By circumventing the registration requirements of the federal securities laws, the defendants and company insiders effected public distributions of stock while concealing their control over the shares and personal profits from the stock sales.

B. The Merger Between Buffalo Capital IV And M & A West

18. Joiner incorporated Buffalo Capital IV, Inc. ("BC4") in 1996 as a blank check company. Defendants Joiner, Peck, Sessions and DiSalvo each owned approximately one-quarter of the outstanding shares of BC4 stock. Joiner served as legal counsel, Peck served as the company's President, and Sessions served as the company's Secretary and Treasurer.

19. In April 1999, defendants entered into an agreement to merge BC4 with M & A West, Inc. ("MAWI"), a private company. MAWI purported to be an "Internet incubator" based in San Bruno, California. Under the terms of the merger, MAWI assumed control over the merged entity.

20. At approximately the same time, defendants entered into separate stock purchase agreements whereby they sold over 3 million shares of stock to persons designated by MAWI. Under the agreements, the defendants retained 440,000 shares of stock.

21. The newly organized company, named M&A West, Inc., was first quoted on the OTC Bulletin Board in May 1999 under the symbol MAWI. Defendants began trading almost immediately, ultimately selling all of their 440,000 shares of MAWI stock to the public. In addition, persons affiliated with MAWI sold millions of shares of stock to the public.

22. By failing to properly register the sales (and thereby provide the public disclosures required under the securities laws), defendants concealed from the investing public the fact that most or all of the MAWI stock sold to investors originated from persons affiliated with BC4 and MAWI.

B. The Merger Between Buffalo Capital VII And Workfire.com, Inc.

23. Joiner incorporated Buffalo Capital VII, Inc. ("BC7") in 1997 as a blank check company. Peck, Sessions and Joiner each owned approximately 28% of the outstanding shares of BC7 stock, while DiSalvo owned approximately 9%. Joiner served as legal counsel, Peck served as the company's President, and Sessions served as the company's Secretary and Treasurer.

24. In May 1999, one week after the closing of the BC4/MAWI merger, defendants entered into an agreement to merge BC7 with Workfire.com, Inc. ("Workfire"), a private Internet-related software firm that had retained MAWI to assist it in going public.

25. At approximately the same time, defendants entered into separate agreements whereby they sold approximately 2.9 million shares of stock to persons designated by MAWI. Under the agreements, the defendants retained 611,484 shares of Workfire.

26. The newly organized company, named Workfire.com, Inc., was first quoted on the OTC Bulletin Board in June 1999 under the symbol WKFR. Once again, the defendants began trading almost immediately, ultimately selling over 465,000 shares of Workfire stock to the public. In addition, persons affiliated with MAWI sold over 335,000 shares of stock to the public.

27. By failing to properly register the sales (and thereby provide the public disclosures required under the securities laws), defendants concealed from the investing public the fact that most or all of the Workfire stock sold to investors originated from persons affiliated with BC7 and MAWI.

CLAIM FOR RELIEF

Violations of Section 5(a) and 5(c) of the Securities Act

(Against All Defendants)

28. Paragraphs 1 through 27 are incorporated by this reference.

29. From approximately April 1999 to January 2000, Joiner, Peck, Sessions and DiSalvo, directly or indirectly, made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer and sell securities through the use or medium of a prospectus or otherwise when no registration statement had been filed or was in effect as to such securities and no exemption from registration was available.

30. Defendants' stock sales were not exempt from registration because the defendants were affiliates of BC4 and BC7.

31. Defendants structured the reverse mergers so that it appeared - falsely - that defendants were not affiliated with BC4 or BC7 at the time they sold or offered to sell their stock to persons affiliated with MAWI. Defendants dated the stock purchase agreements after the merger agreements so that it appeared that the defendants were no longer affiliated with the companies at the time they agreed to sell the stock. Joiner, acting as counsel for the merged entities, provided letters to the transfer agent representing that the defendants were not affiliated with the companies at the time of the stock sales.

32. In reality, the reverse mergers and the stock purchase agreements were negotiated in tandem. The mergers were contingent on defendants' sale of stock to the persons designated by MAWI. The defendants were thus affiliated with the issuers at the time they agreed to sell the shares to the corporate insiders designated by MAWI. Under the registration provisions of the federal securities laws, sales by affiliates are not exempt from registration.

33. Moreover, the deals were specifically structured to provide purportedly "free-trading" stock to the MAWI designates as well as to the defendants, and the agreements contemplated that the mergers would be followed by the sale of stock to the public. The transactions thus constituted public offerings, and the defendants, as necessary participants in the distribution of the stock to the public, were statutory underwriters for purposes of the federal securities laws. These stock transactions, therefore, required registration with the Commission.

34. By reason of the foregoing, Joiner, Peck, Sessions and DiSalvo, directly or indirectly, violated, and unless enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court:

a. Enjoin each of the defendants from future conduct that violates the provisions of the federal securities laws alleged in this complaint;

b. Order defendants to disgorge an amount equal to their unjust enrichment as a result of their conduct alleged herein, plus prejudgment interest thereon;

c. Order defendants to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)];

d. Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court; and

e. Grant such other and further relief as this Court may deem appropriate.

DATED: August 7, 2002

Respectfully submitted,

_____________________________________
HELANE L. MORRISON
ROBERT L. MITCHELL
MARC J. FAGEL
ANDREW B. HOLMES


http://www.sec.gov/litigation/complaints/comp17665.htm

Modified: 08/08/2002