SECURITIES AND EXCHANGE COMMISSION
Litigation Release 16233/ August 2, 1999
SEC v. Kanakaris Communications, Inc. et al., Civil Action No. CV-S-99-0967-JBR-LRL.
The Commission announced that on August 2, 1999, it filed a complaint seeking permanent injunctions against Kanakaris Communications, Inc. ("KCI"), Alexander Frank Kanakaris ("Kanakaris"), David R. Valenti ("Valenti") and Shawn F. Hackman ("Hackman"), alleging violations of Sections 5(a), 5(c) and 17 (a) of the Securities Act of 1933 and Section 10 (b) of the Securities Exchange Act of 1934 and Rule l0b-5 thereunder. The Commission's complaint also seeks disgorgement from Hackman and civil penalties against Kanakaris, Valenti and Hackman. KCI, Kanakaris and Valenti have agreed to settle the action by consenting, without admitting or denying the allegations of the complaint, to be enjoined from future violations of the registration and antifraud provisions of the federal securities laws; Kanakaris and Valenti also have agreed to pay civil money penalties of $25,000 each.
The complaint alleges that from January 1997 through January 1998, Kanakaris and Valenti both officers of KCI, fraudulently sold the securities of KCI and its predecessor company to individuals in several states. In soliciting investments, it is alleged Kanakaris and Valenti made misrepresentations regarding KCI's financial condition and operations. It is also alleged that Kanakaris and Valenti misrepresented to investors that KCI had a joint venture agreement with Microsoft Corporation. Some of these misrepresentations were allegedly also posted on KCI's web site.
In addition, it is alleged that Hackman, a Las Vegas attorney, prepared a false offering memorandum for KCI, sold KCI stock using the offering memorandum, and collected and distributed the proceeds of those sales, retaining a substantial portion of those funds for his own use. It is further alleged that Hackman, without authorization from KCI, prepared and filed a registration statement with the Commission which, among other things, misrepresented the shareholdings of KCI's management and major shareholders, stated that no unregistered offerings of KCI's securities had been made within the previous year and, rather than including audited financial statements, contained a review of KCI's financial statements without obtaining the consent of the accountants who prepared the review.