SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16448 / February 24, 2000
SECURITIES AND EXCHANGE COMMISSION v. PETER C. LYBRAND f/k/a PETER C. TOSTO, RICHARD S. KERN, DONALD R. KERN, CHARLES WILKINS, ADMIRAL INVESTMENTS LTD., COMPULINK INTERNATIONAL CORP., DRAWBRIDGE INVESTMENTS LTD., GLITTERGROVE INVESTMENTS LTD., GRAFTON INVESTMENTS LTD., GREENFORD INVESTMENTS LTD., McDONALDS LTD., OASIS ENTERPRISES LTD., INVESTOR RELATIONS, INC., TELLERSTOCK, INC., CONVERSANT ENTERPRISES, INC., EFI CORP. a/k/a ELECTRONIC FUNDS, INC., BARCLAY BANKCARD, INC., CANYON VISTA CORP., AND SALTEAUX LTD. a/k/a FIRST AMERICAN SECURITY CORP. a/k/a FIRST AMERICAN SECURITIES CORP., Defendants, and HANNAH G IRREVOCABLE TRUST AND HANNAH R TRUST, Relief Defendants, U.S. District Court for the Southern District of New York, 00 Civ. 1387 ( ) (S.D.N.Y.)
SEC CHARGES PETER LYBRAND (f/k/a PETER TOSTO) WITH MARKET MANIPULATION
The Securities and Exchange Commission today filed a complaint against Peter C. Lybrand, formerly known as Peter C. Tosto, charging him, and three other persons, with securities fraud and selling unregistered securities in a complex market manipulation that netted the defendants a total of over $12 million. The Complaint charges that, from June 1998 through January 1999, Lybrand manipulated the securities of three shell companies: Polus, Inc., Citron, Inc., and Electronic Transfer Associates Inc. ("ETA"), and that he sold securities of those companies in unregistered transactions. The complaint alleges that Lybrand carried out this scheme through eight foreign entities and three domestic entities that he controlled and/or owned, all of which are also named as defendants in today's action.
Lybrand, who has a residence in Madison, Georgia, is a recidivist securities law violator. He is currently awaiting sentencing in the United States District Court for the Southern District of New York, after pleading guilty on May 14, 1998 to one count of conspiracy to commit securities fraud in connection with his role in a broker-kickback scheme, unrelated to today's charges. He has been the subject of two earlier SEC enforcement actions, and in 1997 was barred from association with any broker dealer.
In today's action, the Commission also charged Richard S. Kern, of Aurora, Colorado, his brother Donald R. Kern, also of Aurora, and Charles Wilkins, of Scottsdale, Arizona, alleging that they too sold the stock of the shell companies in unregistered transactions and aided and abetted Lybrand's manipulation by participating in matched transactions. Finally, the complaint also charges four entities associated with the Kerns and Wilkins (EFI Corp, Barclay Bankcard, Inc., Canyon Vista Corp., and Salteaux Ltd.) with selling unregistered securities.
Specifically, the complaint alleges that:
The Commission charges that Lybrand's conduct violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. He and his entities also sold the shell companies' securities in violation of Section 5 of the Securities Act, the registration provision of the federal securities laws. For their part, the Kerns and Wilkins are charged with violations of Section 5 of the Securities Act, and with aiding and abetting Lybrand's violations of Section 10(b) of the Exchange Act and Rule 10b-5.
The relief sought by the Commission in this action includes permanent injunctions against future violations, disgorgement and civil penalties. In addition, the Commission today also filed a motion for a preliminary injunction to freeze the assets of the Kerns, Wilkins, and the relief defendants, two trusts alleged to be created by the Kerns for the benefit of their children.
The Commission has taken prior action with respect to matters related to this complaint. Previously, on January 29, 1999, the Commission had temporarily suspended trading in the securities of Polus, Citron, and ETA for a ten-day period due to concerns about the adequacy and accuracy of publicly-available information concerning those companies. Approximately two weeks later, the Commission filed a civil action against Glittergrove Investments, Ltd., a defendant in today's action alleged to be one of Lybrand's foreign entities, and ultimately obtained disgorgement of $2.5 million that had been frozen as the proceeds of sales of Citron and ETA stock by Glittergrove. A distribution plan has been approved by the Honorable Sidney H. Stein in that matter. (See Litigation Release Nos. 16064 (February 18, 1999) and 16216 (July 22, 1999)). Thus, of the $6.4 million that Lybrand realized, $2.5 million has already been disgorged.
Also today, the United States Attorney for the Southern District of New York announced that Lybrand has been arrested based on charges related to the facts alleged in the Commission's complaint.
The Commission acknowledges the assistance of NASD Regulation, Inc. in this matter.
This enforcement action is part of the Commission's four-pronged approach to attacking microcap fraud; enforcement, inspections, investor education and regulation. For more information about the SEC's response to microcap fraud, visit the SEC's Microcap Fraud Information Center at http://www.sec.gov/news/extra/microcap.htm. Information on trading suspensions is available at http://www.sec.gov/enforce/tsuspend.htm.