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U.S. Securities and Exchange Commission


Litigation Release No. 20739 / September 25, 2008

SEC v. Video Without Boundaries, Inc. (d/b/a China Logistics Group Inc.), Vernon Jeffery Harrell, and David J. Aubel, Civil Action No. 08-61517-CIV-GOLD/MCALILY (S.D. Fla., filed September 24, 2008)

SEC Brings Civil Action Against Electronics Company, Its Former CEO, and Its Largest Shareholder for Accounting Fraud and Orchestrating a Pump and Dump

The Securities and Exchange Commission (Commission) announced that yesterday it filed a civil injunctive action against Ft. Lauderdale-based Video Without Boundaries, Inc. (also known as China Logistics Group Inc.) (Video), an electronics and entertainment technology company, its former CEO and Principal Financial and Accounting Officer, Vernon Jeffrey Harrell (Harrell), and Video's largest shareholder, David J. Aubel (Aubel), in connection with accounting fraud related to Video's annual and quarterly filings and the issuance of false and misleading press releases.

The Commission's complaint, filed in the United States District Court for the Southern District of Florida, alleges that from at least April 2003 to November 2005, Video, at the direction of its then sole officer and director, Harrell, filed annual and quarterly reports with the Commission that, among other things, materially overstated its revenues, improperly accounted for a failed acquisition, and understated its net losses. Harrell maintained Video's books and records, created its financial statements and, as sole principal executive and financial officer, certified Video's annual reports for 2002 and 2003, and quarterly reports for 2002 to 2004, filed with the Commission, that he knew, or was severely reckless in not knowing, contained material misstatements and omissions.

The complaint further alleges that from November 2003 to September 2006, Harrell and Aubel issued a series of false and misleading press releases about Video. Taking advantage of Video's artificially inflated stock price, Aubel dumped millions of shares of Video stock (acquired at a steep discount from Video) into the market, reaping millions of dollars. Harrell participated in the scheme by signing bogus stock issuance resolutions that allowed Aubel to sell the shares immediately after he received them. Moreover, throughout this time, neither Harrell nor Aubel reported their ownership of Video stock, or changes in their ownership.

The Commission's complaint charges Video, Harrell, and Aubel with violating Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and, alternatively as to Aubel, aiding and abetting Video's violations of the antifraud provisions of the Exchange Act. The complaint further charges Video with violating the reporting, books and records, and internal control provisions of the Exchange Act, and Harrell with aiding and abetting those violations — Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder; charges Harrell with knowingly circumventing or failing to implement a system of internal controls, knowingly falsifying Video's books and records, and falsely certifying Video's Forms 10-KSB for 2002 and 2003 and Forms 10-QSB from 2002 to 2004 filed with the Commission in violation of Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13a-14 thereunder; and charges Harrell and Aubel with violations arising from their failure to report their ownership of Video stock, Sections 13(d) and 16(a) under the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder. The Commission's complaint seeks relief in the form of permanent injunctions against Video, Harrell, and Aubel enjoining them from future violations of the provisions charged, an order requiring that Video and Aubel disgorge their ill-gotten gains, with prejudgment interest, and imposing civil penalties against Harrell and Aubel. The Commission also seeks a penny stock bar against Harrell and Aubel and an officer and director bar against Harrell.

In a related settled action, the Commission filed a complaint against Norman Stumacher, CPA, who conducted audits of Video's financial statements for 2002 and 2003.

SEC Complaint in this matter



Modified: 09/25/2008