U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20286 / September 17, 2007
SEC v. Carl R. Rose, et al., Civil Action No. H-04-CV-2799
The Commission announced that on September 5, 2007, the United States District Court for the Southern District of Texas entered a Final Judgment against Defendants David A. Keener, Earl Shawn Casias and Marvin M. Barnwell
In its complaint, the Commission alleged that Keener, Casias and Barnwell, along with ten other individuals, carried out a manipulation of two stocks, EpicEdge, Inc., and EVTC, Inc. The defendants were charged with violating the antifraud provisions of the federal securities laws and for making, aiding and abetting material false and misleading statements.
Prior to trial, Barnwell consented to entry of an injunction without admitting or denying the allegations of the complaint. However, the consent left the issue of remedies to be determined at trial. The Complaint alleged that Barnwell violated the anti-fraud provisions, Rule 102 of Regulation M, Section 13(d)(1) of the Exchange Act of 1934 (Exchange Act) and Rules, 13d-1 and 13d-2 thereunder, Section 16(a) of the Exchange Act and Rule 16a-3 thereunder.
The Court found that Keener participated in ongoing fraud, not just one isolated incident. The court noted the egregious nature of Keener's almost total avoidance of due diligence and his participation in the preparation of numerous SEC filings that contained material errors and misrepresentations. The Court found that Keener's misconduct was recurrent and demonstrated reckless disregard of the fraudulent schemes orchestrated by Harris "Butch" Ballow, a defendant who defaulted and fled the jurisdiction. Ballow's whereabouts are unknown. Additionally, the court noted Keener gave no assurances at trial that future violations would not reoccur or that he recognized the wrongful nature of his conduct.
While Casias also participated in ongoing fraud, the Court found that Casias, as a registered representative and broker-dealer, performed essentially as an instrument Ballow's manipulations. In so finding, the Court concluded Casias's fraudulent trades were not isolated, but executed with great frequency during much of period at issue. The Court found that Casias displayed reckless disregard of the fraudulent schemes and gave no assurances at trial that no future violations would occur. The Court observed that, at trial, Casias displayed no recognition that his conduct was improper.
The Court found that Keener and Casias violated Section 10(b) of the Exchange Act, Rule 10b-5 thereunder; and Sections 5(a), 5(c), 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933. The Court also found that Casias violated Rule 101 of Regulation M. The Court additionally found that Keener aided and abetted EVTC's violation of Section 13(a) of the Exchange Act. Based on the above violations, the court entered permanent injunctions against Keener and Casias.
The Court ordered Barnwell to disgorge $31,700 and prejudgment interest thereon. Casias was ordered to disgorge $334,097. Keener was ordered to disgorge $162,000 and was permanently barred him from acting as an officer or director of any publicly traded company. The Court did not order penalties.