SEC Charges Pervasive Fraud at Company Controlled by Criminal Recidivists; Commission Obtains Emergency Relief in District Court, Suspends Trading


Commission Obtains Emergency Relief in District Court,<br>Suspends Trading

New York, New York, November 13, 2002 -- The Securities and Exchange Commission filed an enforcement action today to halt what it alleges is a pervasive, ongoing fraud at Inc., a purported Internet retailer listed on the Over-the-Counter Bulletin Board. The Commission's complaint, filed in U.S. District court in Manhattan, names 800America and two criminal recidivists: David Elie Rabi, CEO, CFO, and a director of 800 America, convicted in 1997 of securities fraud in Kentucky; and Tillie Ruth Steeples, an undisclosed control person of 800America, convicted in 1996 of smuggling drugs into a prison.

In its action, the Commission seeks preliminary injunctions, asset freezes and other emergency relief. Pending the court's determination of the Commission's motion for preliminary injunctions, the court issued an order temporarily restraining the defendants from future violations of the securities laws, freezing defendants' assets, and appointing a receiver over 800America, among other relief. Also today, the Commission issued an order suspending all trading in the stock of 800America.

The Commission alleges that the defendants falsified financial results for 800America since at least 2000, unlawfully sold unregistered stock through nominee accounts, failed to disclose the criminal histories of Rabi and Steeples and made other misrepresentations. Specifically, the complaint alleges that:

  • To create the image of a vibrant enterprise, the defendants fraudulently reported millions in fictitious earnings, revenues, expenses, and assets. To conceal the true results, they created fictitious periodic bank statements, checks, invoices and a general ledger, which they supplied to 800America's auditor.
  • Rabi and Steeples are selling unregistered 800America stock through nominee accounts in violation of the registration provisions of the securities laws, and at a substantial profit to themselves. Rabi and Steeples also misappropriated company assets.
  • 800America issued a press release falsely denying Rabi's criminal past and failed to disclose that Steeples is a control person of the company. The company's most recent 10-KSB lists as officers and directors several individuals who either have left the company or cannot be located by the company.

Wayne M. Carlin, Regional Director of the Commission's Northeast Regional Office, said: "This case is about hardened criminals who controlled a small public company and used it as a vehicle for a truly outrageous, blatant fraud. Defendants fabricated operating results, manufactured corporate books and records, dumped unregistered stock on the public, and stole corporate assets."

In an application filed today, the Commission has asked the district court to grant emergency relief including, among other measures, preliminary injunctions against the defendants, asset freezes, and other interim relief. As final relief, the complaint seeks, among other remedies, permanent injunctions, permanent officer and director and penny stock bars against Rabi and Steeples, disgorgement of ill-gotten gains, and civil penalties. In addition to fraud charges, the Commission's complaint alleges violations of the registration provisions of the Securities Act of 1933, and books and records and reporting provisions of the Securities Exchange Act of 1934.

Barry W. Rashkover, an Associate Regional Director at the SEC's Northeast Regional Office, said: "In this case, the Commission is seeking emergency relief against the defendants in federal court, while simultaneously issuing an order suspending trading in 800America's stock. By proceeding on two fronts, the Commission maximizes its ability to swiftly and effectively prevent further investor harm."

The Commission would like to thank the United States Attorney's Office for the Southern District of New York; the U.S. Postal Inspection Service; the Nashville, Tenn., Office of the District Attorney General; and the Kentucky Office of the Commonwealth's Attorney for their assistance and cooperation in this matter.


Barry W. Rashkover
Associate Regional Director
Northeast Regional Office

David Rosenfeld
Assistant Regional Director
Northeast Regional Office


Last modified: 11/13/2002