U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21577 / June 28, 2010
SEC v. Brian N. Lines, et al., Civil Action No. 1:07-CV-11387 (DLC) (S.D.N.Y., filed Dec. 19, 2007)
Court Enters Permanent Injunction and Penny Stock Bar Against Robert J. Chapman in Market Manipulation Case
The Securities and Exchange Commission today announced that, on June 18, 2010, the Honorable Denise Cote of the United States District Court for the Southern District of New York entered a default judgment imposing a permanent injunction against future violations of the antifraud provisions of the federal securities laws and other relief, including a bar against participating in offerings of penny stocks, against Robert J. Chapman.
This judgment resolves the Commission's claims and grants all relief sought against Chapman (except for the determination of monetary relief) in a civil action filed on December 19, 2007. With regard to the monetary relief, the judgment orders Chapman to pay disgorgement, prejudgment interest, and civil penalties in amounts to be determined by the Court. In its Complaint, the Commission had alleged that Chapman had participated in a fraudulent scheme to manipulate the stock price of Sedona Software Solutions, Inc. ("Sedona"), whose shares traded on the Over-the-Counter Bulletin Board.
The Commission's Complaint alleged, in pertinent part, that during 2002 and 2003, defendant Chapman, together with certain co-defendants, engaged in a scheme to manipulate the price of Sedona, which had no assets or revenues, through distribution of analysts reports that fraudulently led investors to believe that Sedona had merged with a mining entity that owned operating gold mines. The Complaint alleges that Chapman prepared one of the reports that subsequently were distributed to investors by a promoter involved in the scheme.
The judgment (i) permanently enjoins Chapman from future violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5 (general antifraud provision); (ii) permanently bars him from participating in any future offerings of penny stocks, and (iii) orders Chapman to pay disgorgement, prejudgment interest and civil penalties in amounts to be determined by the Court.
For additional information, please see Litigation Release No. 20407 (Dec. 19, 2007).