SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16960 / April 12, 2001
SECURITIES AND EXCHANGE COMMISSION V. FIRST AMERICAP CORPORATION, CAPITAL RELATIONS GROUP, LLC, STEPHEN HARRISON THOMAS, ROBERT DOUGLAS WILLIAMS, TIJI THOMAS, CYRUS INDUSTRIES, INC., f/k/a ICON TRADING, INC., RAECE B. RICHARDSON and BYTEAUDIO.COM, INC., Defendants. Civil Action No. H 01-1153 (USDC/S.D. Tex.)
On April 6, 2001, Judge Vanessa D. Gilmore, U.S. District Court for the Southern District of Texas, Houston Division, granted the Commission's request for a temporary restraining order against Capital Relations Group, L.L.C. ("Capital Relations"), Stephen Harrison Thomas, Robert Douglas Williams, Tiji Thomas and ByteAudio.com, Inc. ("Byte"). Judge Gilmore also entered an order freezing the assets of First Americap Corporation ("First Americap"), Capital Relations, Stephen Thomas, Robert Williams, Tiji Thomas, Cyrus Industries, Inc. ("Cyrus"), and Raece Richardson. The Commission's complaint alleges that the defendants fraudulently sold more than $8 million of stock in two companies to 1400 investors nationwide using high-pressure, boiler-room sales tactics.
The defendants named in the Commission's Complaint are:
First Americap, Corp. is a Houston-based, Texas corporation that was formed in July 1999. Its officers, directors and owners are Stephen Thomas and Robert Williams. Though not registered with the Commission as a broker-dealer, First Americap raised funds for Cyrus and Byte. The company, as well as other defendants, has been the subject of multiple state enforcement actions for its money-raising activities.
Capital Relations Group, L.L.C. is a Houston-based, Texas limited liability company that was formed by Stephen Thomas and Robert Williams in July 2000, immediately after the Texas State Securities Board and the Harris County District Attorney executed a search warrant on First Americap's offices. Though not registered with the Commission as a broker-dealer, Capital Relations raised funds for Byte.
Stephen Harrison Thomas, age 51, of Houston, is an officer, director and owner of First Americap and a managing member of Capital Relations. He is not licensed to sell securities and has been the subject of a Washington state cease-and-desist order for his involvement in these money-raising activities.
Robert Douglas Williams, age 33, of Houston, is an officer, director and owner of First Americap and a managing member of Capital Relations. He is not licensed to sell securities and has been the subject of multiple state enforcement actions for his involvement in these money-raising activities.
Tiji Thomas (unrelated to Stephen Thomas), age 33, of Houston, is the vice president of sales for First Americap and Capital Relations. He made sales to investors and supervised other salespersons for both companies. Tiji Thomas is not licensed to sell securities.
Cyrus Industries, Inc., is a Nevada corporation which holds itself out as a distributor of various types of apparel. Richardson is Cyrus' president and largest shareholder. Cyrus stock is currently quoted in the Pink Sheets and was fraudulently sold by defendants in an unregistered offering.
Raece Richardson, age 37, is an Australian citizen living in Huntington Beach, California. He is the president and majority shareholder of Cyrus, and the founder of Icon, Cyrus' predecessor.
ByteAudio.com is a Florida corporation headquartered in Pompano Beach, Florida; it purportedly develops and markets Internet-based audio software. Its stock is not quoted, but was fraudulently sold by defendants in an unregistered offering.
The Complaint alleges that from April 1999, First Americap and Capital Relations participated in the fraudulent sale of so-called "pre-IPO" stock in Cyrus and Byte. As part of their sales efforts, First Americap and Capital Relations cold called prospective investors throughout the country and made false and misleading claims about, among other things, impending IPOs for the two issuers. Many of the thousands of investors pitched by First Americap and Capital Relations were led to believe that their pre-IPO stock would substantially increase in value after the imminent IPO. Cyrus investors were additionally promised that they would receive a full refund of their investment if Cyrus did not conduct an IPO. In reality, neither Cyrus, nor Byte, which both also maintained their own sales forces to solicit investors, has conducted an IPO and investors stand to lose millions of dollars, while First Americap and Capital Relations have reaped approximately $1 million in commissions for selling the stock. First Americap, Capital Relations and the sales forces of Cyrus and Byte raised over $8 million from approximately 1400 investors.
The SEC's complaint charges First Americap, Capital Relations, Stephen Thomas, Robert Williams, Tiji Thomas, Cyrus and Richardson with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Further, the Commission charges Byte with violations of Sections 5(a) and 5(c) of the Securities Act. Lastly, First Americap, Capital Relations Group, Stephen Thomas, Robert Williams and Tiji Thomas are charged with violations of Section 15(a) of the Exchange Act. In addition to the emergency relief set out above, the Commission seeks preliminary and permanent injunctions, disgorgement and civil penalties against each of the defendants.
In bringing this action, the SEC worked closely with the Texas State Securities Board and would like to acknowledge its assistance.