SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16543 / May 9, 2000
SECURITIES AND EXCHANGE COMMISSION v. ENTERPRISES SOLUTIONS, INC., et al., Case No. 00 Civ. 2685 (Cedarbaum, J.) (U.S.D.C., S.D.N.Y.)
COURT GRANTS PRELIMINARY INJUNCTION EXTENDING FREEZE ON $2.3 MILLION IN PROCEEDS FROM SALES OF ENTERPRISES SOLUTIONS STOCK
The Securities and Exchange Commission announced today that on May 1, 2000, in a securities fraud case brought by the Commission against Enterprises Solutions, Inc. ("ESI"), Herbert S. Cannon, and Dr. John A. Solomon, the United States District Court for the Southern District of New York entered an preliminary injunction freezing approximately $2.3 million in assets held in the securities accounts of two Gibraltar companies, Rowen House Limited and Montville Limited, which are named in the complaint as relief defendants. The frozen assets represent proceeds from sales of ESI stock made shortly before the Commission issued an order, on March 30, 2000, temporarily suspending trading in ESI's stock. The Court's order extends until trial a temporary asset freeze obtained by the Commission when it filed its complaint on April 6, 2000.
The Commission's complaint alleges that ESI was established and secretly controlled by defendant Cannon, that the defendants fraudulently concealed Cannon's extensive role from the investing public, and that the defendants knowingly or recklessly made false and misleading claims about ESI's products and customers. It further alleges that, during the relevant period, Cannon controlled the securities accounts of several offshore entitities, including the frozen accounts of Rowen House and Montville. The Commission's complaint charges the defendants with securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks injunctions, disgorgement, and civil penalties, along with a constructive trust upon all proceeds from ESI stock sales being held in the Rowen House and Montville accounts. See Litigation Release No. 16506 (April 7, 2000).
A week before filing its complaint in federal court, the Commission issued an order, pursuant to Section 12(k) of the Exchange Act, temporarily suspending trading in the stock of ESI because of questions concerning the accuracy and completeness of assertions made by ESI in its filings with the Commission, in its recent press releases, and on its Internet website, including questions about the identity of persons in control of the operations and management of the company. See Release No. 34-42593 (March 30, 2000).
This enforcement action is part of the Commission's four-pronged approach to attacking 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. Information on trading suspensions is available at http://www.sec.gov/enforce/tsuspend.htm.