SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16343 / October 27, 1999
SECURITIES AND EXCHANGE COMMISSION v. KENNETH SILVERMAN, Civil Action No. 99-CV-2844 (D.D.C.)
SECURITIES TRADER TO BE ORDERED TO PAY $2.9 MILLION IN SETTLEMENT OF CHARGES OF SELLING UNREGISTERED SHARES OF SYSTEMS OF EXCELLENCE STOCK
The Securities and Exchange Commission today filed a Complaint against Kenneth Silverman ("Silverman"), a professional securities trader, alleging that he illegally sold unregistered shares of Systems of Excellence, Inc. ("SOE") stock between August 1995 and October 1996. The Complaint, filed in United States District Court for the District of Columbia, alleges that in three separate transactions negotiated with SOE Chairman Charles O. Huttoe ("Huttoe"), Silverman acquired over 2.7 million shares of newly-issued SOE stock at a total cost of $600,000. Huttoe, who the Commission previously accused of orchestrating a massive market manipulation of SOE securities, used the funds, among other things, in connection with SOE's acquisition of a video teleconferencing company. Silverman soon sold nearly all of those newly issued shares for profits totaling $2,457,718. The Complaint further alleges that the shares Silverman sold were neither registered nor exempt from registration, and that he violated Section 5(a) and 5(c) of the Securities Act of 1933.
Simultaneously with the filing of the Complaint, Silverman, without admitting or denying the SEC's allegations, settled the action by consenting to a Court Order that: (i) permanently enjoins him from violating Sections 5(a) and (c) of the Securities Act of 1933; (ii) requires him to disgorge his illegal profits of $2,457,718, plus prejudgment interest of $462,494, to a Court-appointed Receiver; and (iii) requires him to pay a civil penalty of $50,000.
The Commission previously has made several announcements concerning these matters. See Lit. Rel. 15996 (December 9, 1998); Lit. Rel. 15906 (September 24, 1998); Lit. Rel. 15888 (September 18, 1998); Lit. Rel. 15617 (January 14, 1998); Lit. Rel. 15600 (December 22, 1997); Lit. Rel. 15571 (November 25, 1997); Lit. Rel. 15490 (September 12, 1997); Lit. Rel. 15286 (March 12, 1997); Lit. Rel. 15237 (January 31, 1997); Lit. Rel. 15185 (December 12, 1996); Lit. Rel. 15153 (November 7, 1996); Securities Exchange Act Rel. No. 33791 (October 7, 1996).
The Commission is cooperating with separate investigations in this matter carried on by the United States Attorney's Offices for the District of Nevada and the Eastern District of Virginia, and the Criminal Investigation Division of the Internal Revenue Service.
The Commission's investigation in this matter is continuing.
This enforcement action is part of the Commission's four-pronged approach to minimizing 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.http://www.sec.gov/litigation/litreleases/lr16343.htm