SEC settles with Metz, Robinson for Prime Time
2010-06-14 14:27 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-HGLC) Hunt Gold Corp
by Mike Caswell
The U.S. Securities and Exchange Commission has reached settlements with Troy Metz and Dallas Robinson, the two Canadians facing a civil suit in Florida for the Prime Time Group Inc. fraud. In a motion filed on June 10, 2010, SEC lawyers have asked the judge to push back pending deadlines in the case while they secure final approval from the commission for the deal. The men had been discussing a settlement since at least December, 2009, when the judge ordered them to mediation.
The SEC claims that Mr. Metz and Mr. Robinson were the president and chief executive officer of Prime Time when it issued several misleading news releases in 2006 and 2007. The company touted a 7-Eleven chain, a cellphone accessory business and a rent-to-own car enterprise. Most of the deals were greatly exaggerated or simply did not exist, the SEC said.
The regulator has not yet disclosed details of the settlements. The SEC sought civil penalties and penny stock bans against both men, but did not seek any disgorgement of ill-gotten gains. In addition to settling with the two Canadians, the SEC has reached a deal with John Mattera, a Florida man who was a shareholder of Prime Time. As with the other deals, the commission has not yet approved the settlement so it has not released any details.
SEC's complaint
The SEC filed civil fraud charges against the men on June 25, 2009, in the Southern District of Florida. The complaint identified Mr. Robinson as a resident of B.C. and Mr. Metz as a resident of Saskatchewan. The SEC also named a fourth defendant, Florida resident Johnny Ray Arnold, who was the company's chairman. According to the complaint, Prime Time published several misleading news releases over a two-year span and issued millions of shares based on bogus promissory notes.
The first business the men touted was a 7-Eleven chain in Puerto Rico, which the company acquired in August, 2005. The SEC said the company failed to disclose that it had to pledge a 92-per-cent interest in the stores as collateral for a loan to complete the acquisition. In April, 2006, the company defaulted on the loan and its interest in the stores was reduced to 8 per cent. According to the complaint, the company failed to disclose that it lost its interest and continued mentioning the stores in news releases until December, 2007, without stating the change in ownership.
The next business the company touted was a wireless division in Canada. In October, 2006, Prime Time acquired Robinson Wireless Inc., a private company that purportedly had exclusive marketing agreements with Virgin Mobile, Fido and T-Mobile. The company issued news releases touting rising sales from the division without disclosing that it had incurred significant losses, the SEC said. In addition, the marketing deals with Fido and T-Mobile did not exist, according to the complaint.
The complaint described similarly misleading news about a rent-to-own car business called Southern Wheel Workz Inc. and a cellphone accessory company called Xpress Your Cell USA LLC. Prime Time claimed to have acquired Xpress Your Cell, but it actually only had an agreement that provided for further negotiations, the SEC said.
The stock traded between 14 cents and 45 cents in 2006, when the company was touting the 7-Eleven deal, and had a run from three cents to 36 cents in 2007. (The company has since changed its name to Hunt Gold Corp. and rolled back 1:3,000. It last traded for 0.01 cent.)
The SEC also claimed that during the scheme, Mr. Mattera received 44 million shares by relying on fraudulently backdated notes. The shares issuances were based on three nearly identical promissory notes with dates in May, August and September, 2005. They purported to memorialize $560,000 in loans to the company. The SEC cited two problems with the notes. First, the lender was a private company called Mattera Reserve, which did not exist in 2005. Second, Mr. Mattera and Mr. Arnold, who both signed the notes, did not meet until 2006.
The SEC sought appropriate civil penalties and penny stock bans against all four men, and disgorgement of profits against Mr. Mattera. The regulator acknowledged the assistance of the B.C. Securities Commission in filing the suit.
Assuming the pending settlements against the two Canadians and Mr. Mattera are approved, there will not be a hearing in the case. The SEC won a default judgment against the only other defendant, Mr. Arnold, because he failed to file an answer to the suit. The judge banned him from penny stocks for life, and invited the SEC to make submissions on an appropriate civil penalty.
