U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19153 / March 23, 2005
Securities and Exchange Commission v. Ronald J. Bauer, Civil Action No. 3:05-CV-0426-H, United States District Court for the Northern District of Texas, Dallas Division.
SEC SUES RONALD J. BAUER IN $1.5 MILLION INTERNATIONAL MARKET MANIPULATION SCHEME
On March 2, 2005, the Securities and Exchange Commission filed securities fraud charges against 30-year-old Ronald J. Bauer, the alleged architect of a $1.5 million pump-and-dump scheme. In a civil enforcement action filed in the United States District Court for the Northern District of Texas (Dallas Division), the Commission is seeking fines and disgorgement of ill-gotten gains, including the $1.5 million in proceeds of the fraud.
The Commission's complaint alleges that Bauer masterminded a pump-and-dump scheme. From November 2002 through January 2003, Bauer pumped the stock of The Bauer Partnership Inc. (the "Bauer Partnership") by issuing false and misleading press releases, while secretly dumping tens of millions of Bauer Partnership shares into the inflated market that he had created.
Specifically, the Commission charges that:
- During the relevant period, Bauer was the CEO, president and a director of the Bauer Partnership, a public company that traded on the Over-the-Counter Bulletin Board. Bauer controlled the corporation and directed its activities.
- Beginning in November 2002, with Bauer at the helm, the Bauer Partnership issued a series of false and misleading press releases announcing a dizzying array of purported acquisitions in a diverse range of industries. Among the purported business prospects arising from the claimed acquisitions were a Panamanian reforestation venture, a play-for-pay amateur golf league, an Australian artificial turf manufacturer and an alleged developer of a state-of-the-art nutritional supplement.
- While busy announcing acquisitions, Bauer failed to disclose that the Bauer Partnership was cash-strapped and debt-laden. As Bauer knew, the hyped acquisitions - not one of which came to fruition - were well beyond the means of the Bauer Partnership.
- The misleading press releases, which Bauer released simultaneously with similarly misleading e-mails, faxes and newsletters, had the desired effect of stimulating demand, supporting the Bauer Partnership share price, and increasing its trading volume.
- In late 2002 and early 2003, Bauer filed SEC Form S-8 registration statements with the Commission and issued some sixty million purportedly free-trading shares. The shares were issued principally to his nominees, which included several offshore shell companies, a Panamanian paralegal and various Bauer accomplices. Shortly after receiving the shares, Bauer's nominees secretly began dumping them through a Dallas-based clearing broker into the inflated market and transferring the proceeds to Bauer.
- Bauer received ill-gotten gains of approximately $1.5 million from the scheme and used the proceeds to fund an extravagant lifestyle, such as making $15,000 monthly payments on a vacation home in the Cayman Islands and funding a down payment on a luxury residence in South Beach, Miami.
According to the complaint, Bauer - a self-proclaimed "financier" - refused to cooperate with the Commission's investigation. He declined to give a statement to the Commission staff and denied his attorney authorization to disclose his whereabouts. The Commission effected service of process on March 20, 2005 at Bauer's luxury condominium in Vancouver, British Columbia.
The complaint alleges that Bauer violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933; Sections 10(b), 13(d) and 16(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 13d-1 and 16a-3 thereunder; and aided and abetted the Bauer Partnership's violations of Section 13(a) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder. The complaint seeks a permanent injunction, officer-and-director and penny-stock bars, disgorgement with pre-judgment interest and a civil money penalty.
