UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17112 / August 31, 2001
SECURITIES AND EXCHANGE COMMISSION v. LEE E. GAHR AND CHILL TECH INDUSTRIES, INC., Civ. No. CV-S-00-1088-KJD-RJJ (USDC Nevada)
The Commission announced today that on August 21, 2001 the United States District Court for the District of Nevada entered default judgment against Lee E. Gahr, a Vancouver, British Columbia resident and former chief operating officer of Chill Tech Industries, Inc. ("Chill Tech"), a Nevada corporation, finding the defendant had violated the anti-fraud provisions of the federal securities laws by issuing false and misleading press releases between September 1998 and May 2000 and by selling the securities of Chill Tech without filing a registration with the Commission. The Court entered a permanent injunction against Gahr, ordered the defendant to pay a civil penalty of $246,409, and further ordered the defendant to disgorge $246,409 of profits from his fraudulent activities.
The Commission filed a civil injunctive case on September 5, 2000 alleging that between September 1998 and May 2000, Chill Tech and Gahr made numerous false and misleading statements through the company's Internet website (www.chilltech.com), various press releases, phony unsolicited faxes, and a magazine article. According to the complaint, these statements concerned: (1) the "environmentally friendly" nature of, purported testing, and Chill Tech's ability to manufacture, the "Arctic Can," purportedly a self-cooling beverage can; (2) supposed sales presentations of the Arctic Can to various well-known companies and governmental entities and related revenue and earnings projections; (3) financial and stock projections, and predictions of future listing of Chill Tech's common stock on the Nasdaq Stock Market, Inc. ("Nasdaq"); and (4) Chill Tech's receipt of financing commitments and agreements to acquire substantial assets. The complaint alleged that this information was false and misleading because the Arctic Can contained Freon, an environmentally banned substance; Chill Tech neither tested nor had the ability to manufacture the Arctic Can; and the company's sales "presentations" at best consisted of unsolicited correspondence. The complaint further alleged that the financial projections lacked a reasonable basis because, among other reasons, they were predicated on fictitious business relations and undermined by Chill Tech's developmental stage status, lack of a viable product, and lack of significant assets or revenues. Further, according to the complaint Gahr sold his personal holdings of the Chill Tech common stocks into the resulting inflated market for profits of $246,409. This action was part of the fourth nationwide Internet fraud sweep conducted by the Commission since October 1998.
The Commission's complaint alleged that Gahr and Chill Tech violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission further alleged that Gahr also violated Sections 17(a)(1), 17(a)(2), 17(a)(3), 5(a) and 5(c) of the Securities Act of 1934. The Commission sought disgorgement and civil penalties against Gahr and permanent injunctions against both Gahr and Chill Tech.
The Court found in the final judgment that Gahr violated the anti-fraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by issuing the false and misleading press releases and the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act by offering and selling the securities of Chill Tech without filing a registration statement with the Commission. In the same case, the Court previously entered a permanent injunction on December 27, 2000 against defendant Chill Tech finding the defendants had violated the anti-fraud provisions of the federal securities laws by issuing false and misleading press releases between September 1998 and May 2000. Chill Tech consented to entry of a final judgment without admitting or denying the Court's findings.
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. For a description of other SEC enforcement actions involved in this Internet Market Manipulation Sweep, visit http://www.sec.gov/news/headlines/intmm.htm.