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U.S. Securities and Exchange Commission


Litigation Release No. 16947 / March 29, 2001

SECURITIES AND EXCHANGE COMMISSION v. SEAN EDWARD ST. HEART, Civil Action No. 01-CV-00695 (D.D.C.) (TPJ) (filed March 29, 2001)


On March 29, 2001, the Commission filed a complaint in the United States District Court for the District of Columbia alleging that Sean E. St. Heart, age 25, engaged in an illegal cyber smear by posting a false message about NCO Group, Inc. on the Yahoo! Finance Internet message board. St. Heart's message had a dramatic impact on NCO's stock price, causing its market capitalization to drop by over $200 million.

The Commission's complaint specifically alleges that on Friday night, December 3, 1999, St. Heart posted a false message on Yahoo! in which he claimed that he, as the President and CEO of St. Heart Productions, together with twelve other companies, had prepared a $20 million lawsuit against NCO for its "business practices." The message was false in that St. Heart (1) had not prepared such a lawsuit, (2) had not joined with any other company in connection with such a lawsuit, and (3) had no basis to claim that he had been damaged in the amount of $20 million.

The complaint alleges that on the same day, St. Heart received a telephone call about an unpaid debt from someone engaged by NCO, a public company engaged in accounts receivable management services. Several hours after he received that call, St. Heart posted his fraudulent message with the knowledge, or reckless disregard of the fact, that the message would materially impact NCO's stock price.

The complaint alleges that St. Heart's message had a dramatic impact on NCO's stock price. Over the next two trading days, NCO's stock price dropped $12 3/16, or 28 percent, to $34 5/16 from its closing price of $49 9/16 on Friday, December 3, 1999, representing a loss of over $200 million of NCO's market capitalization. NCO's trading volume also surged to 2.9 million shares on December 7, 1999 - representing a ninefold increase relative to the average three-month daily volume.

Simultaneously with the filing of the Commission's complaint, St. Heart, without admitting or denying the Commission's allegations, consented to the entry of a judgment permanently enjoining him from violating the antifraud provisions of the federal securities laws - Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. St. Heart further consented to the entry of a judgment that waives the imposition of a monetary penalty based on his demonstrated inability to pay.