SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17352 / February 5, 2002
SEC v. Wayne F. Gorsek, Lyndell Parks, P. Brenden Gebben and Troy Justus, U.S. District Court for the Central District of Illinois, C.A. No. 99 CV 3072 (JES)
Jury Finds P. Brenden Gebben Liable for Unlawful Stock Touting,
On Wednesday, January 30, 2002, after deliberating for two hours, a jury in the federal district court for the Central District of Illinois in Springfield, Illinois, found that defendant P. Brenden Gebben ("Gebben") violated Section 17(b) of the Securities Act of 1933 ("Securities Act"), the anti-touting provision of the Securities Act. The previous day, on January 29, 2002, U.S. District Court Judge Jeanne E. Scott directed a verdict in the Commission's favor on its claim that Gebben violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act").
Gebben was the "Lead Analyst" and "Assistant Director of Research and Communications" of Strategic Investment Advisory ("SIA"), a company based in Springfield, Illinois. The Commission's complaint alleged that Gebben, along with co-defendants Wayne F. Gorsek, Lyndell Parks, and Troy Justus, fraudulently promoted approximately 20 microcap companies through SIA. The Complaint alleged that SIA deceived investors into believing that it was an independent securities research firm providing objective investment advice about "undiscovered" companies. In fact, the SEC alleged, SIA was merely a paid promotional firm that uncritically published glowingly optimistic recommendations of the securities of its clients in exchange for cash and securities.
In April 2001, Judge Scott granted the Commission's motion for summary judgment against defendants Gorsek and Parks and found them liable for violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 17(b) of the Securities Act for their conduct at SIA. The Court will hold further proceedings on the Commission's claims that Gorsek and Parks defrauded their brokerage customers in violation of Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, while they were registered representatives and owners of Strategic Investments, Inc., a Springfield, Illinois-based broker-dealer.
The Court also previously entered a consent judgment against defendant Justus that permanently restrained and enjoined him from violating Sections 17(a) and (b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. Justus also consented to issuance of a Commission order that barred him from association with any broker or dealer with a right to reapply after three years.
After the conclusion of the brokerage fraud claims against defendants Gorsek and Parks, the Court will hold further proceedings on the remedy to be imposed against defendants Gorsek, Parks and Gebben.