U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20301 / September 27, 2007
SEC v. ProVision Operation Systems, Inc., Robert T. Fletcher III, Richard C. Hill, James W. Stock, and Lawrence D. Morris, Civil Action No. SACV-07-1130-AHS (JWJx) (C.D. Cal.)
SEC Files Charges Against Provision Operation Systems, Inc., Robert T. Fletcher III, Richard C. Hill, James W. Stock for Multi-Million Dollar Offering Fraud, and Against Lawrence D. Morris for Related Charges
The Securities and Exchange Commission filed federal securities fraud and related charges yesterday against ProVision Operation Systems, Inc. ("ProVision"), Robert T. Fletcher III ("Fletcher"), Richard C. Hill ("Hill") and James W. Stock ("Stock"). Fletcher founded ProVision, a development-stage company, purportedly in the business of providing real estate investment advice and training, as well as investment opportunities. Fletcher was ProVision's chief executive officer, chairman and president from approximately July 2003 until March 2005. The Commission's complaint alleges that ProVision and Fletcher fraudulently raised millions of dollars from investors, and then Fletcher used the money for personal expenses and to support his lavish lifestyle, including purchasing jewelry and clothing, and for gambling. According to the complaint, Hill, the company's "Stock Education Consultant," and Stock, who owned an investor relations company, fraudulently promoted and solicited investments in ProVision's stock and other investment opportunities. The complaint also alleges that Lawrence "Larry" D. Morris ("Morris"), a ProVision salesman, earned commissions from ProVision of more than $500,000 for selling ProVision stock. The complaint further alleges that he acted as a broker in these transactions without being registered as required by the federal securities laws.
The Commission's complaint also alleges that:
- While raising funds from investors, ProVision and Fletcher fraudulently represented that the company was successful and expanding. They made materially false or misleading statements about ProVision's business operations, profitability and financial condition. ProVision and Fletcher falsely claimed to own or control, or have the ability to acquire, yachts, real property, and millions of tons of a mineral substance called "humate," which they fraudulently claimed was worth $137,000,000.
- Hill made materially false or misleading statements about ProVision's future financial condition. Hill and Stock failed to disclose that they were compensated to promote the company. Moreover, they fraudulently represented that they were independent from ProVision.
The complaint alleges that ProVision, Fletcher, Hill and Stock violated the antifraud provisions of the Securities Exchange Act of 1934 ("Exchange Act"), which are Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5. The complaint further alleges that ProVision, Fletcher and Hill violated the antifraud provision of the Securities Act of 1933 ("Securities Act"), specifically, Section 17(a). Moreover, according to the complaint, Stock violated the antitouting provision of the federal securities laws, Section 17(b) of the Securities Act. The complaint further alleges that ProVision, Fletcher and Morris violated the offering and registration provisions of the federal securities laws, including Sections 5(a) and 5(c) of the Securities Act, and that Morris violated the broker-registration provision of the federal securities laws, specifically, Section 15(a) of the Exchange Act.
The Commission's complaint seeks an order permanently enjoining each of the defendants from violating the provisions of the federal securities laws detailed above. This order would also require ProVision, Fletcher, Morris and Stock to disgorge, along with prejudgment interest, all ill-gotten gains they obtained as a result of their actions. It would also require ProVision, Fletcher, Stock and Morris to pay civil money penalties and would permanently bar Fletcher, Hill, Stock and Morris from participating in an offering of a penny stock and permanently bar Fletcher from serving as an officer and director of any public company. Further, it would require Fletcher to account for his current financial condition.
Hill, without admitting or denying the allegations in the complaint, consented to a final judgment enjoining him from violating Section 10(b) of the Exchange Act and Exchange Rule 10b-5, and Section 17(a) of the Securities Act, but which does not impose a civil penalty based on his sworn representations concerning his financial condition. This settlement is subject to court approval.
