SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16778 / October 25, 2000
SECURITIES AND EXCHANGE COMMISSION v. ENTERPRISES SOLUTIONS, INC., HERBERT S. CANNON, and DR. JOHN A. SOLOMON, United States District Court for the Southern District of New York, Case No. 00 Civ. 2685 (MGC)
The Securities and Exchange Commission announced today that on October 16 the United States District Court for the Southern District of New York permanently enjoined defendant Enterprises Solutions, Inc. from violating the antifraud provisions of the Securities Exchange Act of 1934 and ordered the company to comply with its undertaking to amend its registration statement. This concludes the Commission's action against Enterprises Solutions, but its action against company president John A. Solomon and another defendant continues.
According to the Commission's pleadings: During April and May 1999, Enterprises Solutions, a new company purporting to be in the Internet security business, issued a series of press releases baselessly projecting $30 million to $50 million in revenues and falsely claiming to have entered into multi-million-dollar contracts. Six months later, in November 1999, Enterprises Solutions filed a Form 10-SB registration statement that among other material misrepresentations and omissions failed to disclose that the company was controlled by defendant Herbert S. Cannon, a convicted felon. Although Cannon established and controlled Enterprises Solutions in all material respects, neither his involvement with the company nor even his name was publicly disclosed in Enterprises Solutions' registration statement, on the company's Internet web site, in any of the company's press releases, or in any other information available to the investing public (prior to the filing of the Complaint). In addition, Enterprises Solutions claimed on its Internet web site to have developed products and to have customers when it had neither. During the fraud, Cannon sold hundreds of thousands of shares of the company's stock and netted millions of dollars in profits.
On March 30, 2000, the Commission suspended trading in Enterprises Solutions' stock. One week later, on April 6, the Commission filed an emergency action in the United States District Court for the Southern District of New York against Enterprises Solutions, Cannon, the company's president John A. Solomon, and two relief defendants, Gibraltar companies through which the Commission alleges Cannon sold stock. The Court froze more than $2.3 million from the relief defendants' brokerage accounts and, on May 1, 2000, the Court entered a preliminary injunction extending the asset freeze until trial.
As described above, last week, on October 16, the Court entered a Final Judgment as to Enterprises Solutions. Enterprises Solutions consented, without admitting or denying the Complaint's allegations, to be permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. This injunction was the relief the Commission requested in its Complaint. Enterprises Solutions further consented to amend its Form 10-SB registration statement to disclose, among other things, that:
The Commission's action against defendants Cannon and Solomon is pending. (See Litigation Release Nos. 16506, April 7, 2000; 16543, May 9, 2000; and 16607, June 23, 2000.)