U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No.17383 / February 27, 2002
SECURITIES AND EXCHANGE COMMISSION v. VICTOR INDUSTRIES, INC., RONALD PELLETT, PENNY SPERRY, AND XION, INC., United States District Court for the District of Montana, Civil Action No. CV 02-37-M-DWM
S.E.C. CHARGES MONTANA FERTILIZER COMPANY, EX-STOCKBROKER IN SCHEME TO DISTRIBUTE UNREGISTERED STOCK
The United States Securities and Exchange Commission ("Commission") today charged a Missoula, Montana fertilizer company and two of its principals in a scheme to distribute nearly 20 million shares of stock to the public, in violation of the registration provisions of the federal securities laws. Named in the Commission's lawsuit was Victor Industries, Inc. (OTCBB: VICI); Penny A. Sperry, Victor's President and CEO; and Sperry's ex-husband Ronald N. Pellett, a former stockbroker who served as a consultant to the company. Also named was Xion, Inc., a separate company that Pellett and Sperry used to trade in Victor stock. Simultaneous with the filing of the Commission's complaint, Victor, Sperry, Pellett and Xion, without admitting or denying the allegations in the complaint, agreed to a court order enjoining them from future violations of the registration provisions of the federal securities laws, and other relief.
The Commission's lawsuit alleges that, beginning in May 2000, Sperry and Pellett conducted a sham offering of Victor securities designed to funnel 20 million shares of Victor stock into nominee accounts they secretly controlled. Between August and November 2001, as a result of increased investor interest in Victor following a series of press releases, Pellett and Sperry began selling millions of shares of Victor stock to the public and transferring millions more to various third parties, primarily stock promoters. Victor never filed with the Commission a registration statement for any of the shares that Pellett and Sperry sold or disseminated. Had Victor done so, investors would have known that the vast majority of the stock being offered for sale during this period represented sales by insiders Pellett and Sperry and stock promoters they had retained.
The Commission's complaint charges Victor, Pellett, Sperry and Xion with violations of the registration provisions of the federal securities laws, Sections 5(a) and 5(c) of the Securities Act of 1933. All four defendants, without admitting or denying the allegations, agreed to a court order enjoining them from future violations of Section 5. In addition, Pellett, Sperry and Xion agreed to disgorge their proceeds from the illegal stock sales and pay civil penalties, in amounts to be determined by the court. Pellett and Sperry also agreed to the issuance of a Commission order in a separate administrative proceeding permanently barring them from participating in any future penny stock offerings.