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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23855 / June 8, 2017

Securities and Exchange Commission v. David N. Fuselier, Roy W. Erwin and Integrated Freight Corporation, No. 17-cv-04240 (S.D.N.Y.)

SEC Charges Chief Executive Officer and Issuer with Using a Rigged Transaction to Improve Financials

The Securities and Exchange Commission has charged a chief executive officer with perpetrating a fraudulent scheme to create the false appearance of improvement in the financial statements of two publicly traded companies by removing significant liabilities.

The SEC's complaint, filed in federal court in New York, N.Y. on June 6, 2017, alleges that beginning in 2012, David N. Fuselier, then-chairman, chief executive officer, and principal financial and accounting officer of Integrated Freight Corporation and New Leaf Brands, Inc., arranged for both companies purportedly to sell non-performing subsidiaries each with liabilities greater than assets. According to the complaint, Fuselier convinced a long-time friend and business associate, Roy W. Erwin, to be in charge of the purchaser, a new company formed and controlled by Fuselier that had no assets. Fuselier hid the true nature of the transactions from the companies' auditors and, from July 2012 to April 2015, reviewed, approved, and signed SEC filings containing false and misleading information about the related-party nature of the sales and the issuers' financial condition. As a result, Integrated Freight and New Leaf filed with the SEC materially false and misleading reports.

The SEC's complaint charges:

  • Fuselier and Integrated Freight with violating Sections 17(a)(1) and (3) of the Securities Act of 1934 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;
     
  • Fuselier with violating Section 17(a)(2) of the Securities Act and Exchange Act Rules 13a-14, 13b2-1 and 13b2-2 and with aiding and abetting New Leaf's and Integrated Freight's violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1 13a-11 and 13a-13 thereunder;
     
  • Integrated Freight with violating Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11 thereunder; and
     
  • Erwin with aiding and abetting Fuselier's violations of Sections 17(a)(1), (2) and (3) of the Securities Act and Section 10(b) and Rule 10b-5 thereunder.

Erwin has agreed to settle the SEC's charges by accepting a three-year officer and director bar and a penny stock bar, and by paying a $25,000 penalty. The settlement is subject to court approval.

The SEC also issued an order temporarily suspending trading in Integrated Freight's common stock and instituted administrative proceedings pursuant to Section 12(j) of the Exchange Act to determine whether it is necessary and appropriate for the protection of investors to suspend or revoke Integrated Freight's SEC-registered securities.

The SEC's investigation has been conducted by Kristin M. Pauley, Melissa A. Coppola, Lisa Knoop, Michael D. Birnbaum, Joseph P. Ceglio, Joshua Geller, Scott B. York and Adam S. Grace in the New York office. The litigation will be led by Mr. Birnbaum and Ms. Pauley. The case is being supervised by Lara Shalov Mehraban.

SEC Complaint

 

https://www.sec.gov/litigation/litreleases/2017/lr23855.htm


Modified: 06/08/2017