Securities and Exchange Commission Suspends Trading in Ten Issuers for Failure to Make Required Periodic Filings
The U.S. Securities and Exchange Commission announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on Feb. 12, 2009, and terminating at 11:59 p.m. EDT on Feb. 26, 2009.
The Commission temporarily suspended trading in the securities of these ten issuers due to a lack of current and accurate information about the companies because they have not filed periodic reports with the Commission in over two years. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
The Commission cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.
Brokers and dealers should be alert to the fact that, pursuant to Exchange Act Rule 15c2-11, at the termination of the trading suspensions, no quotation may be entered relating to the securities of the subject companies unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer is uncertain as to what is required by the rule, it should refrain from entering quotations relating to the securities of these companies that have been subject to a trading suspension until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. Any broker or dealer with questions regarding the rule should contact the staff of the Securities and Exchange Commission in Washington, DC at (202) 551-5720. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider the need for prompt enforcement action.
If any broker, dealer or other person has any information which may relate to this matter, they should immediately communicate it to the Delinquent Filings Branch of the Division of Enforcement at (202) 551-5466, or by e-mail at DelinquentFilings@sec.gov. (Rel. 34-59397)
SEC Suspends Trading in the Stock of Avicena Group, Inc., Northern Ethanol, Inc., Hydrogen Hybrid Technologies, Inc. and Stock-Trak Group, Inc.
The U.S. Securities and Exchange Commission announced the temporary suspension of trading of the securities of the following issuers, commencing at 9:30 a.m. EST on Feb. 12, 2009, and terminating at 11:59 p.m. EST on Feb. 26, 2009:
The Commission temporarily suspended trading in the securities of the foregoing companies because of questions that have arisen concerning trading in the companies' stocks and the accuracy and adequacy of publicly available information regarding the ownership and control of each company. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).
The Commission cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.
Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspensions, no quotation may be entered unless and until the broker or dealer has strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not it has complied with the rule, it should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, it should refrain from entering quotations relating to the securities of these companies until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation that is in violation of the rule, the Commission will consider the need for prompt enforcement action. (Rel. 34-59399)
RULES AND RELATED MATTERS
Interactive Data for Mutual Fund Risk/Return Summary
On February 11, the Commission issued a release adopting amendments to provide for mutual fund risk/return summary information to be filed with the Commission in interactive data format. In the release, the Commission also adopted amendments to permit investment companies to submit portfolio holdings information under the Commission's interactive data voluntary program without being required to submit other financial information. (Rels. 33-9006; 34-59391; 39-2462; IC-28617)
Commission Orders Hearings on Registration Suspension or Revocation Against Ten Companies for Failure to Make Required Periodic Filings
In conjunction with today's trading suspension, the Commission today also instituted two separate public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registration of each class of the securities of ten companies for failure to make required periodic filings with the Commission:
In the Matter of Minex Resources, Inc., et al., Administrative Proceeding File No. 3-13370
In the Matter of Carlyle Gaming & Entertainment Ltd., et al., Administrative Proceeding File No. 3-13371
In each Order, the Division of Enforcement (Division) alleges that the respective respondents are delinquent in their required periodic filings with the Commission.
In each of these proceedings, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the judge will hear evidence from the Division and the respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a), and Rules 13a-1 and 13a-13 thereunder, are true. The judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of the securities of these respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in each proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-59398); In the Matter of In the Matter of Minex Resources, Inc., et al., File No.3-13370; In the Matter of Carlyle Gaming & Entertainment Ltd., et al., File No. 3-13371)
Don Warner Reinhard Sanctioned
Don Warner Reinhard (Reinhard), of Santa Rosa, Florida, has been barred from association with any broker or dealer or investment adviser. The sanctions were ordered in an administrative proceeding before an administrative law judge, following a court-ordered injunction against him. In October 2008, Reinhard was enjoined from violating the antifraud provisions of the federal securities laws based on his misconduct while associated with a registered investment adviser, Magnolia Capital Advisors, Inc., and a registered broker-dealer, Paragon Financial Group, Inc. (Initial Decision No. 370; File No. 3-13280)
In the Matter of Meridian Holdings, Inc., Anthony C. Dike and Michelle V. Nguyen (CPA)
The Commission announced that the Honorable Dean D. Pregerson, United States District Court Judge for the Central District of California, entered final judgments, by consent, permanently enjoining Meridian Holdings, Inc. (Meridian), Anthony C. Dike (Dike) and Michelle V. Nguyen (Nguyen) from future violations of Sections 10(b), 13(a) and 13(b)(2)(A) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20 and 13a-13 thereunder. In addition, both Meridian and Dike were permanently enjoined from future violations of Section 302(b) of Regulation S-T, and Dike was further permanently enjoined from future violations of Exchange Rule 13a-14. Dike was also ordered to pay a civil penalty in the amount of $25,000, and is prohibited for five years from the date of the judgment from acting as an officer or director of a public company. Nguyen was ordered to pay a civil penalty in the amount of $15,000 and, in a separate administrative proceeding, was suspended from appearing or practicing before the Commission as an accountant, with the right to request reinstatement after three years.
Meridian, which was located in Culver City, California, owned interests in companies that engage in e-commerce in the medical industry, and provided management services to those companies. The Commission's complaint, filed on Sept. 28, 2007, alleged that the financial statements filed with Meridian's 2004 second and third quarter reports caused Meridian to materially overstate it assets and represent it had significant gains, when, in fact, it should have reported losses. Meridian also backdated officer certifications required by the Sarbanes-Oxley Act, the Commission alleged.
The Commission's complaint alleged that during the second and third quarters of its 2004 fiscal year, Meridian improperly recognized a $30 million default judgment and interest as assets and income when it had no reasonable basis to believe the judgment was collectible. As a result, Meridian turned quarterly losses of seven cents per share into earnings of $2.12 per share. Similarly, Meridian recognized additional interest on the default judgment during the third quarter of 2004. The complaint alleged that this improper recognition again turned quarterly losses into quarterly gains.
In addition to Meridian, the complaint alleged that Dike, Meridian's chairman and chief executive officer, and Nguyen, a CPA, and Meridian's former principal financial officer and interim chief financial officer, prepared Meridian's misleading financial statements by booking the $30 million default judgment when neither had any reasonable basis to believe the judgment was collectible. The complaint further alleged that when Dike filed Meridian's second and third quarter reports, he included Nguyen's name on the Sarbanes-Oxley Act certifications filed with the reports even though he knew Nguyen had not signed them. While Nguyen is alleged to have signed the certifications included with Meridian's second quarter report after it had been filed, she never signed the certifications included with Meridian's third quarter report. Meridian also provided the Commission staff with backdated certifications filed with its 2004 annual report.
On, Oct. 30, 2009, Meridian filed with the Commission a certification and notice of termination of its registration under Section 12(g) of the Exchange Act. [SEC v. Meridian Holdings, Inc., Anthony C. Dike and Michelle V. Nguyen, Case No. CV 07-06335 DDP (SSx) (C.D. Cal.)] (LR-20898; AAE Rel. 2936)
SEC Charges George Georgiou, a Canadian Citizen, for Market Manipulation Schemes
The Commission announced that on February 12, it charged George Georgiou, of Toronto, Ontario, with manipulating the market in four separate microcap stocks -- Avicena Group, Inc., Neutron Enterprises, Inc., Hydrogen Hybrid Technologies, Inc., and Northern Ethanol, Inc.
The Commission's action, filed in federal district court in Philadelphia, alleges that, from 2004 through September 2008, Georgiou, who controlled the publicly-traded stock of each company, manipulated the market for the purpose of artificially inflating each company's stock price or to create the false appearance of an active and liquid market. In order to do so, Georgiou used many nominee accounts that he either directly or indirectly controlled at offshore broker-dealers and banks, and used a variety of manipulative techniques, including matched orders and wash sales. Ultimately, Georgiou realized at least $20.9 million in ill-gotten gains from his manipulation schemes.
In addition to the enforcement action, the Commission today entered an order suspending trading in the securities of the four manipulated stocks for a ten day period commencing 9:30 a.m. Feb. 12, 2009. The U. S. Attorney for the Eastern District of Pennsylvania today separately announced criminal charges against Georgiou involving the same conduct.
The Commission's complaint alleges that Avicena Group is headquartered in Palo Alto, California, and that the other three companies are headquartered in Canada. Each of the manipulation schemes followed a similar pattern. Georgiou controlled all or a large percentage of the unrestricted, publicly-traded stock of each company. He had influence with management, access to confidential shareholder lists, and was able to coordinate the release of company news with his illegal trading. In recorded conversations and through his own e-mails, Georgiou admitted his intent to manipulate each of the stocks, and gave directions to his nominees.
The complaint further alleges that Georgiou used many nominee accounts at offshore broker-dealers in Canada, the Bahamas, Turks and Caicos, and other locations. Georgiou asserted direct control over some accounts by issuing trading and wiring instructions directly to broker-dealers, and indirect control over others by communicating trading instructions to nominees who, in turn, executed Georgiou's trading instructions. Through these accounts, Georgiou used a variety of manipulative techniques in each scheme, including controlling the trading volume through promises of profits to nominees, executing or directing matched orders, wash sales, or other prearranged trades, marking-the-close, and paying illegal kickbacks in exchange for purchases.
The complaint alleges that Georgiou's manipulation of Hydrogen Hybrid Technologies was in the nature of a pump and dump scheme, in which Georgiou arranged and paid for the publication of a promotional mailer sent to seven million addresses across the U.S. Georgiou coordinated manipulative trading with the publication of the mailer, and ultimately received more than $3.8 million when he dumped his shares into the artificially inflated market. The complaint also alleges that part of Georgiou's manipulation of Northern Ethanol stock involved the payment of an illegal kickback to a person Georgiou believed was a corrupt registered representative, but who was in reality an undercover FBI agent.
The complaint alleges that Georgiou also defrauded two offshore broker-dealers by obtaining margin loans, using the manipulated stocks as collateral, that further funded his manipulations and allowed him to withdraw cash that he wired to offshore bank accounts. Georgiou's total ill-gotten gains from his stock purchases in, and cash withdrawals from, the fraudulently obtained margin accounts was at least $17.1 million.
The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains, together with prejudgment interest, civil penalties, and a penny stock bar against Georgiou.
The Commission acknowledges and appreciates the assistance of the U.S. Attorney's Office for the Eastern District of Pennsylvania and the Federal Bureau of Investigation in connection with this matter. [SEC v. George Georgiou, Civil Action No. 09-CV-616 (MMB) (E.D. Pa.)] (LR-20899)
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