U.S. Securities and Exchange Commission
Litigation Release No. 18263 / July 30, 2003
Accounting and Auditing Enforcement
Release No. 1826 / July 30, 2003
SEC Settles Financial Fraud Charges Against Raece Richardson
Securities and Exchange Commission v. Richardson, et al., Civil Action No. 1:02CV00426 (PLF) (D.D.C. March 2002)
The Securities and Exchange Commission announced today that on July 10, 2003, the Honorable Paul L. Friedman, United States District Judge for the District of Columbia, entered a final judgment of permanent injunction and other relief as to Raece Richardson, formerly President of Freedom Surf, Inc. (now known as Freestar Technologies) in the Commission's accounting fraud action against Richardson and others. Richardson, 39, is an Australian citizen living in Huntington Beach, California California.
The Commission's Complaint (filed on March 6, 2002; See Litigation Release No. 17397) alleged that Richardson orchestrated a scheme to inflate Freedom Surf's assets with certain equipment located in Costa Rica and fraudulently valued at $5.18 million. During the relevant period, this equipment comprised virtually all of Freedom Surf's assets. Freedom Surf purportedly acquired the equipment in exchange for stock and a note in December 1999. Richardson had a friend of his fabricate and sign an appraisal, which valued the equipment at $5.18 million. This appraisal was then given to Freedom Surf's auditor, who failed to perform an audit and instead relied on the fabricated appraisal to issue an audit opinion for Freedom Surf's financial statements. Subsequently, Freedom Surf reported the sale of the equipment in a sham transaction with another company controlled by Richardson. Freedom Surf included the fraudulent equipment valuation or the sham sale of the equipment in a registration statement, periodic reports, and other filings with the Commission between January and November 2000.
Without admitting or denying the allegations of the complaint, Richardson consented to the entry of a final judgment which permanently enjoins him from future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 12(g), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13, 13b2-1, and 13b2-2 thereunder. The order also permanently bars Richardson from serving as an officer or director of any public company, and orders him to pay a civil monetary penalty of approximately $75,000 (the penalty in this case represents the balance of Richardson's assets that are frozen in the registry of the court for the United States District Court for the Southern District of Texas after the payment of a $100,000 penalty assessed against Richardson in a separate enforcement action in SEC v. First Americap Corp, et. al., Civil Action No. H 01-1153 (S.D. Tex.), Lit. Release No. 16960 (April 12, 2001).