Securities and Exchange Commission
Litigation Release No. 17835 / November 13, 2002
Accounting Auditing Enforcement Release No. 1662 / November 13, 2002
SEC Files Emergency Action to Halt Ongoing Fraud by Company Controlled by Criminal Recidivists SEC v. 800America.com, Inc., et al. (S.D.N.Y. 02 Civ. 9046)
The Commission today brought an emergency action in federal court in Manhattan to halt an ongoing fraud by 800 America.com, Inc. ("800America"), an Over-the-Counter Bulletin Board company and purported internet retailer; David Elie Rabi ("Rabi"), chief executive officer, chief financial officer, and a director of 800America; and Tillie Ruth Steeples ("Steeples"), an undisclosed control person of 800America. The Commission alleges that the defendants falsified financial results for 800America since at least 2000, unlawfully sold unregistered stock through nominee accounts, failed to disclose the criminal histories of Rabi and Steeples, and made other misrepresentations.
The Commission has moved for a temporary restraining order, preliminary injunction and other interim relief to preserve the status quo. Pending the outcome of that motion, on the Commission's application, the court has temporarily restrained the defendants from violating antifraud, registration, and books and records provisions of the Securities Act of 1933 ("Securities Act") and the Securities Exchange Act of 1934 ("Exchange Act"). The court's order also provides that, pending the outcome of the preliminary injunction motion: (a) defendants' assets and certain nominee brokerage accounts are frozen; (b) the defendants are required to submit accountings; (c) a temporary receiver has been appointed over 800America; (d) Rabi and Steeples are temporarily enjoined from acting as officers or directors of public companies and from participating in the offering of penny stocks; (e) the defendants must repatriate assets held abroad; (f) the parties may engage in expedited discovery; (g) the defendants are prohibited from destroying documents and other evidence; and (h) the defendants are prohibited from tampering with witnesses, suborning perjury or otherwise impeding this case.
Specifically, the complaint alleges that:
As to the three defendants, the complaint alleges that:
1. 800America is a Nevada corporation, has an executive office in New York, and has operations at 1301 North Mount Juliet Road, Mount Juliet, Tennessee. 800America purports to own and operate several Internet websites that retail various products, particularly clothing, or that provide links to websites of other retailers.
2. Rabi, age approximately 62, is the Chief Executive Officer, the Chief Financial Officer, a Director, and the majority shareholder of 800America. Rabi also served as 800America's President for most of the period from July 9, 1999 through January 2002. On January 3, 1997, Rabi pleaded guilty in McCracken County, Kentucky, to state felony charges of securities fraud, acting as an unregistered broker-dealer, and selling unregistered securities. Rabi was sentenced to four years imprisonment, which was commuted, based on the four years Rabi had already served in Tennessee state prison fighting extradition to Kentucky on these charges.
3. Steeples, age 55, is not disclosed as having any affiliation with 800America in 800America's public filings, but is acting as an undisclosed control person of the company. Among other things, she controls some of 800America's bank accounts, and represents that she is 800America's Secretary, both in her own name and under the alias "Ruth Walley." On November 14, 1996, in Nashville, Tennessee, Steeples pleaded guilty to delivering cocaine into a prison. Steeples was sentenced to six years imprisonment for this conduct, and was incarcerated from January 1, 1997 to November 24, 1999.
The complaint charges violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, Sections 10(b), 13(a), and 13(b)(2), 13(b)(5) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 13a-13, Rules 13b2-1 and 13b2-2 thereunder. As final relief, the Commission seeks permanent injunctions, disgorgement of all ill-gotten gains plus prejudgment interest; civil penalties; and, against Rabi and Steeples, final penny stock and officer and director bars and a forfeiture of stock under their control. The litigation is pending.