U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19765 / July 20, 2006
Steven Misner, Civil Action No. 06CV5465 (S.D.N.Y.)
SEC Charges Steven Misner, Former CEO of Southwestern Water Exploration Co., With Securities Fraud
The Securities and Exchange Commission ("Commission") yesterday filed a civil injunctive action in the United States District Court for the Southern District of New York against Steven Misner ("Misner"), the former CEO of now-bankrupt Southwestern Water Exploration Co. ("Southwestern").
The Commission's complaint alleges that Misner engaged in a scheme to inflate Southwestern's stock price by creating the false impression that Southwestern owned water of great value. The complaint's allegations include the following:
- Misner made materially false and misleading statements in Southwestern's July 16 and November 4, 2002 press releases, claiming that Southwestern owned rights to, and was developing, a large freshwater underground reservoir worth hundreds of millions of dollars.
- Misner knew, or was reckless in not knowing, that Southwestern did not own any rights to the water, the press releases grossly overstated the value and amount of water in the reservoir, and Southwestern had made no effort - and did not intend - to develop the reservoir.
- Just three days before the November press release, Misner wrote an e-mail stating:
If this project blows up in our face . . . we, the company, need to ensure that we have taken every step possible to both maximize the return to the company and limit our liability. . . . [R]emember that everyone, including [our large investor] and the majority of our shareholders, think that we have at least 100 million of water for sale which is not the case . . .
In the action, the Commission seeks a final judgment permanently enjoining Misner from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission also seeks an order requiring Misner to account for and disgorge all ill-gotten gains he received by virtue of his misconduct, with prejudgment interest; directing Misner to pay civil penalties; barring Misner from acting as an officer or director of a public company; and barring Misner from any future participation in the offering of any penny stock.