==========================================START OF PAGE 1====== UNITED STATES SECURITIES & EXCHANGE COMMISSION Litigation Release No. 15183 / December 11, 1996 Accounting and Auditing Enforcement Release No. 862 / December 11, 1996 SECURITIES AND EXCHANGE COMMISSION v. ENVIRONMENTAL CHEMICALS GROUP, INC., CURTIS A. YOUNTS, JR., CALVIN SHENKIR, Jr., and CALVIN MOERBE, Civil Action No. SA 96 CA 1319 (W.D. Texas, San Antonio Div.) SECURITIES AND EXCHANGE COMMISSION v. CURTIS A. YOUNTS, JR., RONALD E. HENDRIX and LITTLEFIELD, ADAMS & COMPANY, SA 95 CA 1100 (OLG) (W.D. Texas, San Antonio Div.) The Securities and Exchange Commission (the "Commission") announced today that it filed a civil injunctive action in the United States District Court for the Western District of Texas, San Antonio Division, charging Environmental Chemicals Group, Inc. ("EnChem"), Curtis A. Younts, Jr. ("Younts"), Calvin Shenkir, Jr. ("Shenkir") and Calvin Moerbe ("Moerbe") with numerous violations of the antifraud, registration and record- keeping requirements of the federal securities laws. EnChem, a Delaware corporation with headquarters in Andrews, Texas, is purportedly engaged in the development and sale of "environmentally friendly" pesticides, fertilizers and safety products. EnChem's common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and is traded over-the-counter on the OTC Bulletin Board. The Commission's Complaint alleges that between 1992 and May 1996, Younts, Shenkir and Moerbe -- as officers and directors of EnChem -- filed periodic reports with the Commission and distributed press releases and other materials that contained materially false and misleading representations about the company's revenues, product lines and business prospects. For example, the Complaint alleges that EnChem touted its principal product, a fire ant pesticide marketed under the name "Rapid Kill," to investors as a newly-developed, highly effective, cost-efficient and environmentally safe product that had been approved for sale by the Environmental Protection Agency. In fact, Younts had learned in 1992 that the EPA had rejected EnChem's application to commercially distribute "Rapid Kill." The Complaint similarly alleges that EnChem repeatedly represented that it had owned a patent for "Rapid Kill" when, in fact, the patent application for "Rapid Kill" had been rejected by the United States Patent and Trademark Office. The Complaint also alleges that Younts and Moerbe issued press releases that falsely represented that EnChem reached lucrative agreements with two purchasers to sell its fertilizer product -- with anticipated revenues totalling over $62,000,000. In fact, the Complaint alleges, EnChem had never had a formal, firm or binding contract to sell any product to either purported purchaser. The Commission also alleges that Younts invented and documented a series of fictitious transactions with a related entity owned by Shenkir -- and then caused those transactions to be recorded as revenue on EnChem's financial statements filed with the company's Form 10-Q for the third quarter of 1995. Those transactions totalled 82% of reported quarterly revenues. The Commission's Complaint further alleges that Younts and Shenkir realized over $150,000 from the sale of EnChem stock while in the possession of material non-public information. Moreover, the Complaint alleges that Younts, Shenkir and Moerbe used solicitation materials containing false and misleading information to sell EnChem stock to individual investors through private placements. The Complaint alleges that Shenkir and Younts told these investors that they were purchasing freely- trading EnChem stock -- when, in fact, the stock was newly- issued, restricted and unregistered. The Commission's Complaint further alleges that EnChem used newly-issued, unregistered, restricted stock to purchase assets, settle lawsuits, compensate employees and pay for other goods and services, thereby flooding the public market with hundreds of thousands of shares of unregistered EnChem stock. In connection with the Commission's allegations of violations of the antifraud and reporting provisions of the federal securities laws by Littlefield, Adams & Company ("LFA"), Shenkir consented in October 1995 to an Order by the Commission requiring him to cease and desist from further violations of Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 ("Exchange Act"). See In re Calvin Shenkir, Jr., Exchange Act Release No. 36446 (Oct. 31, 1995). The Commission's Complaint in SEC v. Environmental Chemicals Group, Inc. et al. alleges that Shenkir violated that cease and desist Order by engaging in the conduct outlined above. Without admitting or denying the allegations, Younts, Shenkir and Moerbe consented to the entry of an order permanently enjoining them from further violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder. In addition to the permanent injunction, Shenkir consented to an Order imposing $45,000 in disgorgement, and pre-judgment interest thereon, and barring him from acting as an officer or director of any issuer required to file reports with the Commission, pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C.  78u(d)(2)]. Based on Shenkir's demonstrated inability to pay, the Order waives payment of all but $15,000 in disgorgement. In addition to the permanent injunction, Moerbe consented to an Order imposing $10,000 in civil penalties. In addition to the permanent injunction in SEC v. Environmental Chemicals Group, Inc., Younts agreed to entry of an Order imposing $114,547 in disgorgement of ill-gotten gains. The Order waives payment of disgorgement and pre-judgment interest thereon, based on (i) Younts' demonstrated inability to pay; and (ii) the additional relief that Younts has consented to in connection with SEC v. Younts, et al., SA 95 CA 1100 (OLG) (NSN) (W.D. Texas, San Antonio Div.), discussed below. The Commission also announced that Younts simultaneously consented to an Order entering final judgment against him in SEC v. Younts, et al. That Order permanently enjoins him from violations of the antifraud, issuer reporting, registration, and books and records provisions of the federal securities laws. The Order further permanently bars Younts from serving as an officer or director of any issuer required to file reports with the Commission, pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C.  78u(d)(2)], and imposes $400,000 in civil penalties and $781,000 in disgorgement of ill-gotten gains, with payment of $581,000 in disgorgement being waived based on Younts' demonstrated inability to pay. The Commission's Complaint in SEC v. Younts, et al. alleged that Younts, former president, chairman and chief executive officer of Littlefield, Adams & Company ("LFA") violated the antifraud, corporate reporting and registration requirements of the federal securities laws by, among other things, misappropriating more than $1.15 million from LFA and engaging in various schemes and fraudulent accounting practices designed to inflate artificially LFA's income and otherwise manipulate LFA's stock price. For further information concerning SEC v. Younts, et al., see SEC Litigation Release No. 14547 (June 27, 1995). ==========================================START OF PAGE 3======