Litigation Release No. 16380 / December 7, 1999

Securities and Exchange Commission v. Brent Molovinsky (United States District Court for the District of Maryland, Civil Action No. PJM-963046)

The Securities and Exchange Commission ("Commission") announced today that, on December 2, 1999, the United States District Court for the District of Maryland entered a Final Judgment and Order against Brent Molovinsky ("Molovinsky"), the former president and chairman of the board of TVI Corporation ("TVI"), a publicly held military defense contractor headquartered in Beltsville, Maryland. Entry of the judgment serves to settle the Commission's case against Molovinsky.

Without admitting or denying the Commission's allegations, Molovinsky consented to the entry of the judgment which permanently enjoins him from violating 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 10b-5 thereunder. The judgment also requires Molovinsky to pay disgorgement and prejudgment interest, but waives payment of these amounts and does not impose a civil penalty based on his demonstrated inability to pay. In addition, the judgment bars Molovinsky from acting as an officer or director of any public company.

The Commission alleged that, between October 1992 and April 1995, Molovinsky, who had exclusive control over TVI's day-to-day operations and finances, engaged in a scheme in which he misappropriated more than $1 million of investor proceeds raised from the sale of over $2.9 million of TVI stock to at least 699 investors. The stock was to be offered and sold to existing TVI investors and creditors pursuant to a court-approved plan of reorganization, and was to be subject to a provision in the United States Bankruptcy Code exempting such sales from registration.

In its complaint, the Commission charged that Molovinsky fraudulently stimulated demand for TVI stock by making materially false and misleading statements concerning the company's revenues, earnings and assets. Molovinsky disseminated the misleading information through investor correspondence and a series of TVI press releases which he prepared and issued. Among other things, he overstated TVI's revenues and income during 1992 and 1993, falsely represented that TVI had contracts to build tank gunnery ranges that would generate revenues exceeding $2.5 million, and falsely stated that TVI held patents for low-cost stealth material and thermal targets used in military applications.

According to the complaint, Molovinsky took advantage of the increased demand generated by his false and misleading statements by selling almost all of the 14 million shares of TVI stock issued in the offering without regard to restrictions imposed by the reorganization plan. Among other things, he sold more shares than permitted, and sold shares outside the prescribed 60 day sales period. In addition, at least 8.7 million of the shares were neither registered with the Commission nor subject to the exemption from registration provided by the Bankruptcy Code because they were sold to persons who were neither existing creditors nor shareholders of TVI. The Commission also alleged that Molovinsky misappropriated over $1 million of the proceeds by withdrawing funds from TVI corporate bank accounts and diverting investor checks to bank accounts he controlled.