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U.S. Securities and Exchange Commission


Litigation Release No. 17081 / July 30, 2001


SEC Charges Ives Health Company, Inc., Two Officers and a Stock Promoter for Roles in Internet Manipulation Scheme

The Securities and Exchange Commission announced today that it filed a civil injunctive action charging Ives Health Company, Inc., two company officers and a promoter for their roles in an Internet market manipulation scheme. Ives Health is a regional producer and distributor of nutritional supplements and other unregulated health products, based in Claremore, Oklahoma, according to the Commission's complaint. The Commission charges that the defendants pumped up the price of Ives Health stock through false press releases and Internet message board postings, claiming the company had a proven treatment for HIV and AIDS. The promoter is charged with dumping his holdings of the stock on the public, reaping almost $500,000 in illicit gains. According to the complaint, Ives Health repeatedly made false statements in its public filings with the Commission concerning the testing and efficacy of the purported AIDS treatment.

Charged in the Commission's complaint filed in the U.S. District Court for the Southern District of New York, were the following:

  • M. Keith Ives, age 44, of Claremore, Oklahoma, the founder and president of Ives Health;

  • Michael Harrison, age 46, of Tulsa, Oklahoma, the former CEO of Ives Health;

  • James Kosta, age 26, of Reno, Nevada, the "investor relations" and "financial consultant" of Ives Health.

The Commission's complaint alleges as follows:

As part of the scheme to pump up the price of Ives Health stock, the defendants made the following false and misleading statements:

Press Releases On February 15, 2001, Ives Health issued a press release announcing the release of a "drug," called T-Factor, which according to Ives Health's website, contains "bovine glandulars." Ives Health claimed in the press release that in tests purportedly done in affiliation with the World Health Organization, T-Factor had been proven to initiate "profound and sustained suppression of HIV replication." Within the next week, Ives Health issued two more press releases, which made reference to the great response from the HIV community and the "sheer amount of excitement" surrounding T-Factor. These representations were false. No such tests had been performed and T-Factor had never been proven to have any effect on HIV.

Internet Message Board Contemporaneously with the publication of the false press releases, Kosta posted nearly 200 messages on a Raging Bull message board devoted to Ives Health. Using a screen name, Kosta posed as an average investor with no other affiliation with Ives Health. In fact, Kosta was receiving millions of shares of company stock from Ives Health. Kosta's messages disseminated the false press releases, and urged shareholders to buy more, and not to sell any, Ives Health stock. Kosta never disclosed the stock compensation he was receiving from Ives Health or the fact that, at the time he was posting his messages, he was selling stock. Kosta generated almost $500,000 from his sales before the Commission suspended trading in Ives Health stock on March 5, 2001.

The Commission seeks the following relief: (i) permanent injunctions against Ives Health, Keith Ives and Harrison from further violations of the antifraud provisions (Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b05 thereunder), registration provisions (Section 5 of the Securities Act) and reporting provisions of the federal securities laws (Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 12b-25, 13a-1 and 13a-13); (ii) permanent injunction against Kosta from further violations of the antifraud and registration provisions, as well as Section 17(b) of the Securities, which prohibits undisclosed touting; (iii) civil monetary penalties against Keith Ives, Harrison and Kosta; (iv) disgorgement from Keith Ives, Harrison and Kosta; and (v) an order barring Keith Ives from serving as an officer or director of a public company.

For tips on how to avoid Internet "pump-and-dump" stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm. For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.


Modified: 07/30/2001