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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,

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To: scion who wrote (110336)5/13/2010 8:31:11 PM
From: Buckey   of 122081
 
SEC's Sedona target Chapman facing default judgment
Ticker Symbol: C:*SEC U:*SEC U:SSSI

SEC's Sedona target Chapman facing default judgment

U.S. Securities and Exchange Commission (C:*SEC)
Thursday May 13 2010 - Street Wire

Also U.S. Securities and Exchange Commission (U:*SEC) Street Wire
Also Sedona Software Solutions Inc (U:SSSI) Street Wire

by Mike Caswell

Bob Chapman, the newsletter writer charged for the Sedona Software Solutions Inc. market manipulation, is facing the possibility of a default judgment against him. On May 4, 2010, the judge entered an order to show cause against Mr. Chapman, stating that the newsletter writer has failed to answer the case, despite being properly served.

The charges Mr. Chapman faces are for his role in touting Vancouver-based Sedona in January, 2003. The U.S. Securities and Exchange Commission claims that he predicted the stock would reach $62 in his newsletter, the International Forecaster. He failed to disclose that he owned 370,000 shares of the company, which he had purchased at prices between 25 cents and $1. (All figures are in U.S. dollars.)

The SEC served Mr. Chapman with the suit on Aug. 13, 2009, delivering it by courier and by certified mail to an address in Mexico and to a post office box in Florida. It also served him at the e-mail address for his newsletter, international_forecaster@yahoo.com. He had 20 days to respond.

SEC's complaint
The SEC filed a civil complaint against Mr. Chapman, 72, and others on Dec. 19, 2007, in the Southern District of New York. The regulator claimed that the men touted Sedona and another company, SHEP Technologies Inc., with misleading information and sold $5.8-million in shares. The other defendants are Vancouver residents Scott Peever and William Curtis; West Vancouver promoter Anthony Wile and his uncle, Wayne Wew (formerly known as Wayne Wile); and Bermuda residents Scott and Brian Lines.

The allegations against Mr. Chapman were for the Sedona manipulation. The SEC said that Mr. Wile and the Lines brothers began touting the company in January, 2003, as a gold producer in Latin America. They claimed in news releases that Sedona was about to merge with privately held Renaissance Mining Corp., and that the deal would leave Sedona in a position to produce 75,000 ounces of gold in 2003.

The information was misleading, because nobody had verified the potential of the mines. In addition, Renaissance required millions of dollars to actually acquire the projects. The men also failed to disclose that the Lines brothers secretly controlled over 99 per cent of Sedona through offshore nominees, according to the complaint.

As part of the promotion, Mr. Wile had four newsletter authors write "independent" research reports that conveyed the same false claims about Sedona, the SEC said. The only author named in the complaint was Mr. Chapman, who had purchased 370,000 shares of Sedona through a Bahamian entity named Marathon Industrial Fund Ltd. In November, 2002, one month after acquiring his stock, Mr. Chapman wrote that Renaissance was "an incredible opportunity that could be the largest public offering in the United States for a mining company this year."

He followed this with a Jan. 19, 2003, report which stated that Renaissance was "available to be purchased" under Sedona's symbol, which was SSSI. The report also said that Sedona's current price was $10, and that the company could eventually reach $62.

None of this was true, the SEC said. Renaissance and Sedona had not actually completed their merger, so the public could not actually buy shares of Renaissance. In addition, Sedona had last traded at three cents, not $10. Mr. Chapman also failed to disclose his ownership of Sedona shares, according to the complaint.

The stock began trading two days later, on Jan. 21, 2003, with a prearranged trade between the Lines brothers and Mr. Wew, according to the complaint. The SEC said Mr. Wew bought 5,000 shares at $8.25. Over the next week, the Lines brothers sold 159,300 shares of the company into an artificial market at prices between $9 and $10, the SEC claimed. They had bought the same shares earlier for seven cents.

The promotion ended on Jan. 29, 2003, when the SEC suspended the company, citing questions about the accuracy of information on the Renaissance merger. When the company resumed trading two weeks later, it fell under $1.

The SEC said the Lines brothers, in subsequent interviews, attempted to conceal their Sedona shareholdings. They told investigators that they did not control nominee companies that held Sedona shares. They also directed LOM employees to create and backdate trading records to obscure their control, the complaint stated.

The SHEP manipulation was very similar to that of Sedona, according to the SEC. In that promotion, Mr. Peever, Mr. Curtis and the Lines brothers acquired 80 per cent of the company in 2002. They then paid $600,000 for favourable coverage in two tout sheets, the Intrepid Investor and the OTC Journal. The stock went to $2.98 and, according to the SEC, Mr. Peever and Mr. Curtis sold $4.3-million worth of its shares.

The SEC sought orders permanently banning all of the defendants from participating in penny stock offerings, in addition to appropriate civil penalties and disgorgement.

While Mr. Chapman has not responded to the suit, the other defendants have either settled or are fighting the charges. Mr. Peever and Mr. Curtis settled the case early. On Aug. 29, 2008, they agreed to permanent penny stock bans and to pay civil penalties and disgorgement in amounts to be determined by the judge. They did not admit to any wrongdoing.

The Lines brothers have filed answers to the charges, in which they deny any wrongdoing. Mr. Wew and Mr. Wile also deny any wrongdoing, and have filed motions to dismiss the charges.
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