U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20277 / September 13, 2007
SEC v. Sure Trace Security Corporation et al., Civil Action No. 07-CV-01619 (D.D.C.) (JR)
SEC Files Settled Action Against Sure Trace Security Corporation and Others for Fraudulent Press Releases and Repeated Securities Registration Violations
The Securities and Exchange Commission today filed a settled civil action in the United States District Court for the District of Columbia against Sure Trace Security Corporation and Peter Leeuwerke, a former chief executive officer and consultant to Sure Trace, for their alleged violations of the antifraud and registration provisions of the federal securities laws, and against Michael Cimino, Sure Trace's vice-chairman and president, for his alleged violations of the registration provisions. Sure Trace is a development stage company that sells purported technology that allows identification images to be permanently imprinted on an object. The Commission's complaint alleges that on September 14, 2004, Sure Trace issued a press release claiming it had signed a contract for $6 million gross annual revenue, when, in fact, it had not secured the contract. Sure Trace issued two other press releases in 2004 that allegedly omitted material facts about Sure Trace's negotiations to acquire Sensor Media Corporation. Leeuwerke had a role in drafting each release.
The Commission's complaint also alleges that Sure Trace made several attempts to evade securities registration requirements. According to the complaint, from 2002 to 2003, Sure Trace attempted to use at least three Forms S-8 to register the issuance of stock, purportedly to give to its employees and consultants under the auspices of various employee stock option plans. Many of the shares Sure Trace registered on Forms S-8 and issued to "consultants" were never intended to compensate the so-called "consultants" for their services, but rather were designed from the outset to make a market in the company's stock. Sure Trace also violated the registration requirements in May 2006 when it spun off shares of its subsidiary, True Product ID. Cimino effected the spin-off.
Sure Trace, without admitting or denying the allegations in the complaint, consented to a final judgment enjoining it from violating Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and ordering disgorgement of $933,750 and pre-judgment interest of $165,150.75, provided that the Commission waive the payment of disgorgement and pre-judgment interest and not impose a civil penalty based on Sure Trace's Sworn Statement of Financial Condition. Leeuwerke, without admitting or denying the allegations in the complaint, consented to a final judgment enjoining him from violating Sections 5(a) and 5(c) of the Securities Act, and from violating, and aiding and abetting violations of, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and ordering disgorgement and pre-judgment interest, provided that the Commission waive the payment of disgorgement and pre-judgment interest and not impose a civil penalty based on his Sworn Statement of Financial Condition. Cimino, without admitting or denying the allegations in the complaint, consented to a final judgment enjoining him from violating Sections 5(a) and 5(c) of the Securities Act.
The Commission's investigation into the conduct of others is continuing. The Commission acknowledges the assistance of the Royal Canadian Mounted Police's Integrated Market Enforcement Team in Vancouver.