UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16235 / August 2, 1999
SECURITIES AND EXCHANGE COMMISSION v. Arete Industries, Inc. et al., Civil Action No. 99B1487 (D. Colo.)
The Commission filed a complaint charging Arete Industries, Inc. (Arete), a microcap company, and three former or current officers with misrepresenting the status of a planned acquisition and the business prospects of that acquisition target. The three officers are Thomas P. Raabe, Arete's current chairman and chief executive officer, Stephen E. Cayou, then its president, and Jeffrey R. Skinner, then its chief financial officer.
The complaint alleges that, from approximately January through March 1998, Arete, then known as Travis Industries, Inc., and the three officers violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by falsely representing in press releases: (1) that Planet Sports, Inc., a private entity that Arete had tentatively agreed to acquire, had reached a preliminary agreement to acquire a private sports apparel company, Next Level Sportsystems, Inc. (Next Level); (2) that Next Level had accounts with, orders in hand from, or would soon become a confirmed vendor for J.C. Penney & Co. and other major retailers; and (3) that Next Level would achieve sales for 1998 of over $10 million and, by the year 2000, sales in excess of $60 million. The complaint alleges, moreover, that the respondents failed to timely issue a corrective press release when they received additional information contradicting prior press releases. Finally, the complaint alleges that, from January 1988 to April 1999, Arete violated Section 15(d) of the Exchange Act and Rules 15d-1 and 15d-13 thereunder by failing to file, or filing late, at least 37 required periodic reports and that Cayou and Skinner caused these violations.
The complaint, filed in the U.S. District Court for the District of Colorado, seeks to permanently enjoin Arete, Raabe, Cayou, and Skinner from further violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Additionally, the complaint seeks to enjoin Arete, Cayou and Skinner from violating Section 15(d) of the Exchange Act and Rules 15d-1 and 15d-13 thereunder. The complaint also seeks civil penalties in regard to all defendants.http://www.sec.gov/litigation/litreleases/lr16235.htm