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Strategies & Market Trends : Paid Mailer Stocks

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To: Mr. Park who wrote (1190)7/18/2011 1:52:52 PM
From: StockDung  Read Replies (1) of 1589
 
Fox news Charles Payne SEC rap sheet:

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 15371 / May 22, 1997

ACCOUNTING AND AUDITING ENFORCEMENT
RELEASE NO. 915 / May 22, 1997

SEC v. MEMBERS SERVICE CORPORATION, et al., 97-CV-01146 (May 22, 1997)
United States District Court for the District of Columbia

The Securities and Exchange Commission today filed a civil action
in the U.S. District Court for the District of Columbia against
Members Service Corporation, Philip Sung, John R. Silseth II, Union
Securities Ltd., David Gilbert, Todd H. Moore, Charles V. Payne, Wall
Street Strategies, Inc., Joseph Lanza, and Kenneth O'Neal alleging
violations of the antifraud, registration, and reporting provisions of
the federal securities laws.

Members, which was based in Winter Park, Florida, purported to
acquire and operate private companies engaged in various businesses,
including oil and gas production, the sale of cellular fax machines,
and the development of a synthetic blood substitute. The complaint
alleges that, beginning in 1992, certain defendants issued false and
misleading press releases, prepared false and misleading financial
statements, and made undisclosed payments to salesmen and others to
manipulate the price of Members stock from $2.50 to a high of $12 per
share.

According to the complaint, the scheme began when stock promoter
Sung and Arthur Feher, Jr., the now-deceased former president of
Members, obtained 1.4 million shares of unregistered Members stock in
sham transactions designed to circumvent the registration provisions
of the federal securities laws. In one transaction, Feher allegedly
caused Members to issue 200,000 shares to his nominee, a 96-year-old
retired nursemaid who lived with him in Florida. In an effort to
invoke Regulation S, which provides exemption from registration for
sales made abroad, Feher allegedly caused Members to issue the stock
to the woman as payment for consulting services that she had not
performed, and moreover caused records to reflect that she lived
abroad. The complaint alleges that the unregistered stock was
deposited in nominee accounts at Union Securities in Vancouver,
British Columbia, where Gilbert worked as a stockbroker.

The complaint alleges that Sung, Feher, Moore, Lanza, and Gilbert
met in Boca Raton in May 1992 and agreed to undertake a series of
actions to raise Members' share price artificially, to sell more than
one million shares of unregistered Members stock that Sung and Feher
controlled at Union Securities, and to share the proceeds from the
sales. Members thereafter allegedly issued various false and
misleading press releases about its involvement with companies that
were developing synthetic blood and producing oil and gas. The
complaint alleges that, in one press release, Members falsely stated

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that it had acquired a synthetic blood company when, in fact, it had
not. In another press release, Members allegedly predicted that
drilling on its oil and gas properties would generate substantial
revenues, but the release failed to disclose that there was no
reasonable basis for the prediction.

As part of the alleged scheme, Moore and Payne caused Wall Street
Strategies, a New York investment adviser, to recommend the purchase
of Members stock to its clients, and Lanza recommended the purchase of
Members stock to others. According to the complaint, Wall Street
Strategies, Payne, and Moore failed to disclose the compensation that
they received for promoting the stock. The complaint alleges that
Lanza was paid at least $540,000, that Moore was paid $282,000, and
that Payne was paid nearly $70,000 for promoting the stock. The
complaint also alleges that First New England Securities, a Boca Raton
brokerage firm that Silseth controlled, sold Members stock to
customers at prices that included excessive, undisclosed compensation
to the brokers. The complaint further alleges that, as part of the
scheme, Sung provided Silseth with several hundred thousand dollars to
help finance the operations of First New England.


The complaint alleges that Sung, Feher, Silseth, Moore, and Lanza
obtained illegal profits of more that $5 million from sales of
unregistered Members stock into the manipulated market. In addition,
according to the complaint, Union Securities and Gilbert received
approximately $350,000 in commissions for transactions in Members
stock.

The complaint alleges that O'Neal, who was then a certified
public accountant, participated in deficient audits of Members'
financial statements for 1991 and 1992. According to the complaint,
the financial statements materially overstated Members' assets and
materially understated Members' liabilities. The complaint alleges
that O'Neal knew, or was reckless in not knowing, that the audits were
deficient and that Members' financial statements had not been prepared
in accordance with professional standards.

The complaint alleges that Members, Sung, Silseth, Moore, Union
Securities, Gilbert, and Lanza violated Sections 5(a), 5(c) and 17(a)
of the Securities Act, Section 10(b) of the Exchange Act, and Rule
10b-5. The complaint also alleges that Members made materially false
and misleading filings with the Commission in violation of Section
13(a) of the Exchange Act and Rules 12b-20 and 13a-1. In addition,
the complaint alleges that O'Neal violated Section 10(b) of the
Exchange Act and Rule 10b-5, that Sung failed to disclose his
beneficial ownership of 5% of Members stock in violation of Section
13(d) of the Exchange Act and Rule 13d-1, and that Wall Street
Strategies and Payne violated Section 17(b) of the Securities Act.
The complaint seeks disgorgement of illegal profits, civil penalties,
and permanent injunctions against further violations. See also Lit.
Rel. No. 14901 (May 6, 1996); Accounting and Auditing Enforcement Rel.
No. 779 (May 6, 1996).

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