U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19963 / January 9, 2007
Securities and Exchange Commission v. Jackie Gross, et al, Civil Action No. 3:05CV1251(N) (N.D. Tex.)
Telvest Communications, LLC, Morgan Spaulding, Inc., and Principal Jackie Gross Agree To Disgorge $1.58 Million In Fraud Settlement; Unregistered Broker John Flanders Agrees to Cease and Desist Order and to Pay Over $207,000; Both Individuals Barred as Broker-Dealers
Jackie Gross and two entities he controlled, Telvest Communications, LLC and Morgan Spaulding, Inc., the latter a defunct Texas-based brokerage firm, have consented to the entry of final judgments of the Commission’s fraud case filed against them, without admitting or denying the allegations in the Commission’s complaint. Pursuant to the settlements, which are subject to Court approval, each will be permanently enjoined from violating the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Telvest will also be permanently enjoined from violating the broker dealer registration provision of the federal securities laws, Section 15(a) of the Exchange Act. The settlements require disgorgement of $1,589,000, plus $182,098 in prejudgment interest. Gross will be jointly and severally liable with Telvest for the $1.2 million, plus $137,519 in prejudgment interest, ordered against Telvest; Morgan Spaulding will be liable for $389,000 in disgorgement plus $44,579 in prejudgment interest. The final judgment against Gross imposes a $186,000 civil money penalty against him.
Gross also agreed, on a neither admit nor deny basis, to settle administrative proceedings to be instituted against him based on the entry of the final judgment in the civil action. The Commission’s order permanently bars Gross from associating with any broker or dealer.
The Commission simultaneously instituted and settled administrative proceedings against John Flanders, who the Commission found acted as an unregistered broker-dealer in connection with Telvest’s Regulation S offerings. Flanders, on a neither admit nor deny basis, consented to a Commission order requiring that he pay disgorgement of $165,000, prejudgment interest of $17,245, and a penalty of $25,000. In addition, the Commission barred Flanders from associating with any broker dealer with a right to reapply after three years, without admitting or denying the findings contained in the order. In consideration of the settlement offer, the Commission asked the Court to dismiss its pending civil action against Flanders.
In its complaint filed June 20, 2005, the Commission alleged that from approximately late 2001 through September 30, 2003, Gross, Telvest, and Morgan Spaulding engaged in a fraudulent scheme to distribute nearly $15 million in stock of U.S.-based companies to overseas investors by, among other things, deceiving the investors to believe that nearly all the purchase price would be remitted to the issuing companies when, in fact, approximately 55 to 70 percent was paid to Gross, Morgan Spaulding and Telvest; to overseas brokerage firms as undisclosed commissions; and as “finder fees” to promoters. Only about 30 to 45 percent of the invested proceeds actually made it to the issuers. Written confirmations to investors fraudulently disclosed a fee of only one percent of the purchase price or a flat $50.
For additional information, see Litigation Release No. 19275/June 20, 2005.