U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20276 / September 12, 2007

SEC v. Smart Online, Inc., et al., Civil Action No. 07-CV-07960 (PKC) (S.D.N.Y.)

SEC Charges Smart Online, Its President and CEO Dennis Michael Nouri, and Five Others in Connection With a Broker-Bribery Scheme.

The Securities and Exchange Commission announced today that it filed a civil injunctive action against Smart Online, its CEO and president, Dennis Michael Nouri ("Michael Nouri"), Michael Nouri's brother, Reeza Eric Nouri ("Eric Nouri"), and four brokers, alleging that Michael and Eric Nouri paid cash bribes to the brokers to sell Smart Online stock to create volume and demand for the Smart Online's stock.

The complaint alleges that Smart Online stock began trading publicly on the OTC Bulletin Board in April 2005. Defendant Michael Nouri, the CEO of Smart Online, sought to qualify the company for listing on the NASDAQ by increasing the number of shareholders and trading volume of Smart Online stock. In order to do so, Michael Nouri began paying bribes to stock brokers, including defendants Anthony Martin, James Doolan, Ruben Serrano, and Alain Lustig, to solicit customers to purchase Smart Online stock.

The complaint alleges that between May 2005 and January 2006, Michael Nouri paid over $170,000 to brokers who sold more than 267,000 shares of Smart Online stock (or approximately 10% of the trading volume during the period) to investors. The complaint also alleges Eric Nouri, an employee of Smart Online, also negotiated bribe payments with a broker to solicit purchases of stock at various amounts and prices. Michael Nouri concealed the bribes as "consulting fees" paid pursuant to sham consulting agreements. The complaint further alleges that the brokers did not disclose to their customers that they were receiving bribes to sell Smart Online stock, and that Michael Nouri understood that the brokers were concealing the bribes from their customers.

By late 2005, Smart Online had qualified for listing on the NASDAQ. On January 17, 2006, the day that Smart Online was scheduled to begin trading on the NASDAQ, the Commission suspended trading of the stock. Smart Online stock did not trade on the NASDAQ.

The complaint charges the defendants with violating 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. In its enforcement action, the Commission is seeking an order permanently enjoining the defendants from committing future violations of the foregoing federal securities laws and a final judgment ordering the individual defendants to disgorge their ill-gotten gains and to pay civil penalties. The Commission is also seeking an order permanently baring Michael Nouri from serving as an officer or director of a public company.

The Commission's investigation is continuing.

SEC Complaint in this matter