U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19148 / March 21, 2005
SECURITIES AND EXCHANGE COMMISSION v. HARVEY L. CARMICHAEL AND IRVING FREIBERG, Case No. 2:05CV00233 PGC (USDC D. Utah).
The Securities and Exchange Commission ("Commission") announced that it filed a civil injunctive action on March 18, 2005 against Utah resident Harvey L. Carmichael ("Carmichael") and Florida resident Irving Freiberg ("Freiberg"). The complaint alleges that between late 2001 and early 2002, Carmichael secretly acquired as much as 27% of the stock of Gateway International Holdings, Inc. ("Gateway"), which was then a publicly traded shell, without filing mandatory forms with the Commission disclosing his beneficial ownership. Further, the complaint alleges that in November-December 2001, Carmichael manipulated Gateway stock by inducing a trader associated with a registered broker-dealer to repeatedly raise the inside bid price of the stock. Moreover, the complaint alleges that in February 2002, Carmichael hired Freiberg to send false and misleading "spam" e-mail messages to a large number of prospective investors. According to the complaint, Carmichael and Freiberg, who has since pleaded guilty to federal securities fraud charges relating to his touting of Gateway and other microcap stocks, sold restricted Gateway stock that they held into the resulting inflated market for profits of approximately $150,740 and $127,195, respectively, in violation of the securities registration provisions.
The Commission's complaint alleges that Carmichael thereby violated Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(d) and 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13d-1, 13d-2, 16a-2 and 16a-3 thereunder, and that Freiberg thereby violated Sections 5(a) and 5(c) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement and prejudgment interest, penny stock bars, and third-tier civil penalties against both defendants, and an officer and director bar against Carmichael.
Without admitting or denying the Commission's allegations, Freiberg has consented to the entry of an order that would enjoin him from future violations of the foregoing provisions; imposing a penny stock bar and ordering that he pay $145,098 in disgorgement and prejudgment interest, but deeming payment satisfied by his forfeiture of $145,098 or more in settlement of the related criminal case and not imposing a civil penalty based on his anticipated incarceration. See U.S. v. Collardeau et al., Crim. No. 03-800 (D.N.J. Nov. 6, 2003) (indictment issued).
The Commission wishes to thank the United States Attorney's Office for the District of New Jersey and the Federal Bureau of Investigation for their cooperation and assistance in this matter.
The Commission's investigation is continuing.