U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21228 / September 30, 2009
Accounting and Auditing Enforcement Release No. 3060 / September 30, 2009
Securities and Exchange Commission v. Michael A. Rivers and ARKR Trust LLC, Case No. 6:09-CV-1674-ORL-35DAB (Middle District Fla., filed Sept. 29, 2009)
SEC Charges the Former CEO of Florida Software Company with Fraud
On September 29, 2009, the Securities and Exchange Commission filed fraud charges against Michael A. Rivers, the former Chief Executive Officer of IBSG International Inc., alleging he directed IBSG to issue multiple press releases announcing fictitious software licensing agreements and to file periodic reports with the Commission that falsely recognized more than $23 million in revenues from the purported agreements. Rivers contemporaneously sold over one million shares of IBSG stock, generating approximately $1.23 million in illicit proceeds.
The Commission's complaint alleges that, between January 2006 and January 2009, IBSG, which discontinued all of its operations earlier this year, marketed an Internet-based business software it had developed for small businesses. According to the complaint, Rivers directed IBSG to issue a series of press releases disclosing the purported sale of licenses for the software to various entities in South Africa, Hungary and Finland, as well as the revenues the company would allegedly generate from the licenses. The complaint alleges that, contrary to the press releases, the licenses either did not exist or that IBSG had agreed to waive the licensing and service fees required by the agreements. The complaint further alleges that Rivers directed IBSG to file periodic reports with the Commission that falsely reported the company had generated $23.4 million in revenues from the purported license agreements.
In addition, the complaint alleges that Rivers, while directing IBSG to report the false license agreements and revenues, sold over one million shares of IBSG stock from brokerage accounts that he and he wife maintained in the name of a nominee company, Relief Defendant, ARKR Trust, LLC. The stock sales generated approximately $1.23 million in proceeds.
The Commission's complaint charges Rivers with violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, 13a-14, 13b2-1 and 13b2-2, and with aiding and abetting IBSG's violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11 and 13a-13. In its complaint, the Commission seeks a permanent injunction, an accounting, disgorgement, a civil penalty and an officer and director bar against Rivers. The Commission also seeks disgorgement against Relief Defendant, ARKR.
The Commission acknowledges the assistance of the Financial Services Board of South Africa, the Financial Supervisory Authority of Hungary, and the Financial Supervisory Authority of Finland with this investigation.