SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Litigation Release No. 15952 / October 27, 1998 SECURITIES AND EXCHANGE COMMISSION v. BRIAN M. VOLMER, JOHN R. SWITZER, INTERNATIONAL ALLIANCE TRADING, INC., and SUN PACIFIC CAPITAL GROUP, INC., Civil Action No. 98- 8698JFL(MCX)(West. Div.)(C.D. Cal. October 27, 1998). SEC SUES PROMOTERS WHO TOUTED STOCK ON THE INTERNET AND IN NEWSPAPER ADVERTISEMENTS In a case that illustrates the migration of illegally conducted stock touting from traditional print media to the internet, the Securities and Exchange Commission today announced that it had filed a civil injunctive action against four southern California defendants involved in promoting the stock of microcap issuers. The complaint alleges that the defendants -- Brian M. Volmer, John R. Switzer, International Alliance Trading, Inc. ("International Alliance"), and Sun Pacific Capital Group, Inc. ("Sun Pacific") -- accepted stock and cash payments from the issuers in exchange for favorable and purportedly independent reviews published in three newspaper advertisements and, later, on the internet website "Investors Edge." The Commission's complaint, filed in the United States District Court for the Central District of California, alleges that Volmer, through his company, International Alliance, wrote and placed a newspaper advertisement touting the stock of Cetacean Industries, Inc., a company that claimed to be engaged in diamond exploration and mining in Brazil. Crafted to appear as an independent research report, the advertisement appeared in Investor's Business Daily on October 17, 20 and 24, 1997. The complaint alleges that the advertisement failed to disclose that International Alliance had received options to buy Cetacean shares in exchange for promoting its stock, in violation of Section 17(b) of the Securities Act of 1933 ("Securities Act"). That provision of the Securities Act requires that anyone giving publicity to a security in return for compensation from an issuer or underwriter must disclose the receipt and amount of that compensation. In addition, the complaint alleges that, in two versions of the advertisement, Volmer and International Alliance knowingly or recklessly misrepresented that Cetacean's stock had been the subject of a buy recommendation issued by a prominent, New York-based investment management firm, when, in fact, that firm had neither issued a buy recommendation for Cetacean nor authorized the use of its name in the advertisement. The complaint also alleges that Volmer and International Alliance knowingly or recklessly misrepresented that the issuer had acquired the mineral and mining rights to a certain Brazilian property, which was described as containing a minimum of two million carats and yielding minimum revenues of $40 million. The complaint further alleges that, acting contrary to their simultaneous buy recommendation to public investors, Volmer and International Alliance sold the shares they had received as compensation from Cetacean, profiting in excess of $64,000. As a result, the complaint alleges that Volmer and International Alliance violated the anti-fraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission's complaint also alleges that Volmer, Switzer and Sun Pacific violated Section 17(b) of the Securities Act in connection with an on-line research report posted on "Investors Edge," an internet website that Volmer and his company, Sun Pacific, began operating this year. Prepared by Volmer and Switzer, Investors Edge has posted purported research reports touting the stocks of several microcap issuers, including Juina Mining Corporation, whose principal assets are the Brazilian diamond operations previously owned by Cetacean. The complaint further alleges that the Juina Mining report, which first was posted in or about July of this year, failed adequately to disclose the full extent of the compensation that the defendants had received, directly and indirectly, from the issuer in exchange for touting its stock. In its complaint, the Commission seeks an injunction against the defendants to prevent further violations of the federal securities laws, disgorgement of undisclosed compensation, prejudgment interest, and civil penalties. Investors are advised to read the SEC's "Cyberspace" Alert before purchasing any investment promoted on the Internet. The free publication, which alerts investors to the telltale signs of online investment fraud, is available on the Investor Assistance and Complaints link of the SEC's Home Page on the World Wide Web . It can also be obtained by calling 800-SEC-0330. Investors are encouraged to report suspicious Internet offerings (or other suspicious offerings) via e-mail to . A user-friendly form to assist you in making a report is available at the Enforcement Complaint Center on the Enforcement Division link of the SEC Home Page . Investors can also mail a report to the SEC Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth Street, Washington, D.C. 20549. 1