U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19013 / December 22, 2004
SECURITIES AND EXCHANGE COMMISSION v. MAXXON ET AL., Civil Action No. 02-CV-975 H(J) (U.S.D.C., N.D. Okla.)
FEDERAL JURY FINDS THAT MAXXON, INC., AND ITS PRESIDENT GIFFORD M. MABIE, JR., ENGAGED IN SECURITIES FRAUD; MAXXON MANAGER ENTERS INTO SEPARATE SETTLEMENT WITH SEC
On November 18, 2004, a federal jury in Tulsa, Oklahoma, found that Maxxon, Inc., a Tulsa-based company, and its president, Gifford M. Mabie, Jr., violated fraud provisions of the federal securities laws by making false or misleading statements in various media about the company and a "safety syringe" it was attempting to develop. The jury reached its verdict after a two-week trial in the United States District Court for the Northern District of Oklahoma. The jury declined to find defendant Dr. Thomas R. Coughlin, Jr., Maxxon's Medical Advisor, liable for securities law violations.
The jury found that Mabie and Maxxon violated Section 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5 beginning on October 7, 1998, by knowingly or recklessly making false or misleading statements or omissions of material fact. The jury also found that Mabie and Maxxon violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act") in 2002 by negligently making false or misleading statements in filings with the Commission.
Rhonda R. Vincent, Maxxon's Financial Reporting Manager, reached a separate settlement with the Commission before the trial. The Commission alleged that from February 20, 2002, through July 15, 2002, Vincent made materially false or misleading statements and omissions of material fact regarding the Maxxon syringe in filings with the Commission, and sold shares at inflated prices during that time period. Without admitting or denying the allegations of the Complaint, Vincent consented to the entry of a final judgment that permanently restrains and enjoins her from violating Section 17(a)(2) and (3) of the Securities Act and from aiding and abetting any violation of Section 13(a) of the Exchange Act. Vincent also agreed to pay disgorgement plus prejudgment interest totaling $33,267.18, and a civil penalty of $25,000. Chief Judge Sven Eric Holmes entered a final judgment regarding Vincent's settlement on December 7, 2004.
The Commission's Complaint alleged that while Maxxon and Mabie made misleading statements and omissions, Mabie sold more than 1 million Maxxon shares at inflated prices and made profits of more than $1 million. A hearing on the remedies to be imposed against Maxxon and Mabie has not yet been scheduled. The Commission is seeking permanent injunctions against both Maxxon and Mabie, and disgorgement of ill-gotten gains, prejudgment interest, and a civil money penalty against Mabie. The Commission also seeks to bar Mabie from acting as an officer or director of any public company or participating in an offering of penny stock.
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.