UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16502 / April 5, 2000
Securities and Exchange Commission v. Solv-Ex Corporation, et al., Civil Action No. Civ. 98-860-LH (USDC D. New Mexico)
The Commission announced today that on March 31, Judge Bruce D. Black of the District of New Mexico issued a ruling that Solv-Ex Corporation, a New Mexico company, its chief executive officer, John S. Rendall, and the company's vice-president, Herbert M. Campbell II engaged in a pattern of issuing fraudulent statements that created the false impression that each of three technologies being developed by the company were unqualified successes.
Judge Black made findings that from 1995 though 1997, Solv-Ex, Rendall and Campbell represented that the company's plant in Alberta, Canada had developed operational technology which produced salable bitumen from oil sands on a commercial scale, that this bitumen extraction process also yielded industrial minerals of marketable quality and volume, and that Solv-Ex had successfully tested a revolutionary electrolytic cell capable of producing metallic aluminum. Judge Black ruled: "Collectively read, the press releases, shareholder letters, and other statements, which Defendants disseminated on a virtually weekly basis, created the false impression that Solv-Ex was on the verge of generating revenues from each of the three technical areas described above. In fact, the evidence demonstrates that at the time these statements were disseminated, Solv-Ex was in various stages of research and development with respect to each of those three technologies, but that commercial exploitation of any of them was never more than a theoretical possibility." In his opinion, Judge Black concluded that Rendall controlled all aspects of Solv-Ex's business and was responsible for the company's misleading and incorrect statements. Similarly, the Court found that Campbell had access to all of the negative information about the company's technology testing but chose to ignore that information in drafting press releases which created a misleadingly optimistic picture of Solv-Ex's prospects.
While Solv-Ex, Rendall and Campbell were disseminating these false and misleading statements, the price of the company's stock, which traded on the Nasdaq Small Cap Market, rose from approximately $5 per share to as high as $38 per share.
Judge Black ruled that Solv-Ex and Rendall violated the antifraud and issuer reporting provisions, Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(a) of the Securities and Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder, and Campbell violated the antifraud provisions and aided and abetted Solv-Ex's reporting violations. The Commission seeks injunctions against Solv-Ex, Rendall and Campbell as well as civil money penalties against Rendall and Campbell.