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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22590 / January 11, 2013

Securities and Exchange Commission v. Exotics.com, Inc., et al., Civil Action No. 2:05-cv-00531-PMP-GWF, United States District Court, District of Nevada

Court Finds in Favor of Three Remaining Defendants in Penny Stock and Accounting Fraud Case

The Securities and Exchange Commission announced today that an enforcement action filed in April 2005 against 13 defendants has concluded with a judgment entered on January 7, 2013, in favor of the remaining three defendants after a trial conducted in March-April 2011.

The civil injunctive action was filed in the United States District Court in Nevada against Exotics.com, Inc., a Nevada corporation based in Vancouver, British Columbia, and 12 additional principal defendants and one relief defendant. The Commission's complaint alleged that, between at least 1999 and 2002, Exotics.com was the subject of a stock manipulation and accounting fraud. The Commission previously obtained judgments against ten of the defendants.

A trial against the remaining defendants, attorneys Daniel G. Chapman and Sean P. Flanagan and consultant James L. Ericksteen, was held in March and April 2011. The Commission's complaint alleged that defendants Chapman, Flanagan, and Ericksteen directly violated and aided and abetted others in violating antifraud provisions of the federal securities laws. In its Findings of Fact and Conclusions of Law, issued on January 7, 2013, the court concluded that although it was "probable that certain of the several Defendants no longer before the Court may indeed have engaged in a manipulative scheme to artificially increase the stock price for Exotics.com, Inc.," the evidence presented at trial was insufficient to prove that defendants Chapman, Flanagan, and Ericksteen committed the violations alleged in the complaint.

For additional information, see Litigation Release Nos. 19207 (April 28, 2005) [civil injunctive action filed], 19645 (April 7, 2006) [judgment by default against Exotics.com], 19699 (May 15, 2006) [judgment by consent against Barry F. Duggan], 19957 (January 4, 2007) [judgment by default against Gary Thomas], 21028 (May 7, 2009) [judgment by consent against Edward James Wexler], 21456 (March 19, 2010) [judgments by consent against Stephen P. Corso and Brian K. Rabinovitz], 21490 (April 16, 2010) [judgments by consent against Ingo W. Mueller and Firoz Jinnah], 21498 (April 22, 2010) [judgment by consent against Marlin R. Brinsky], 21519 (May 6, 2010) [summary judgment against L. Rex Andersen], and Exchange Act Release Nos. 59766 (April 14, 2009) [forthwith suspension of Stephen P. Corso, CPA], 61771 (March 24, 2010) [suspension of Brian K. Rabinovitz, CPA], and 61998 (April 28, 2010) [suspension of Marlin R. Brinsky, CPA].

 

http://www.sec.gov/litigation/litreleases/2013/lr22590.htm


Modified: 1/11/2013