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Mr. Chapman failed to respond to the case, so the SEC sought and won a default judgment against him. On June 18, 2010, the judge banned him from penny stocks and invited the SEC to file a motion for appropriate civil penalties.

SEC reaches deal with Sedona's Wile

2010-09-03 14:16 ET - Street Wire
by Mike Caswell
http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1757998&symbol=*SEC&news_region=C

Anthony Wile, the West Vancouver promoter facing civil fraud charges from the U.S. Securities and Exchange Commission for manipulating Sedona Software Solutions Inc., has reached a tentative settlement. In a letter to the judge dated Aug. 31, 2010, Mr. Wile's lawyer has asked that he be relieved of all pretrial obligations while the SEC's lawyers submit a settlement to the commission for approval. The deal comes just weeks before Mr. Wile's trial date.

The charges Mr. Wile faces are for manipulating Sedona to $10 with misleading news releases and paid touts. The SEC said that he issued news releases claiming that Sedona had acquired mines in Central America when the company had not closed any such deal. Two other defendants, Scott and Brian Lines, then sold $1.5-million worth of Sedona shares, the SEC claimed. (All figures are in U.S. dollars.)

It is not clear what the terms of Mr. Wile's settlement could be. The SEC had initially sought an order permanently banning him from penny stocks and banning him from serving as an officer or director of any public company. It had also asked for an appropriate civil penalty and for disgorgement of any ill-gotten gains. The terms of his actual penalty will not become public until the commissioners and the judge approve it.

The trial against the other defendants, meanwhile, remains set to begin on Oct. 12. All parties attended a settlement conference before a magistrate judge on Aug. 16, 2010, but the only deal to arise from the conference so far has been that of Mr. Wile.

SEC's complaint

The case began on Dec. 19, 2007, when the SEC filed a civil complaint against Mr. Wile, the Lines brothers and others in the Southern District of New York. The other defendants included Mr. Wile's uncle, Wayne Wew; 72-year-old newsletter writer Bob Chapman; and the Bermuda brokerage that the Lines brothers control, LOM (Holdings) Ltd.

According to the complaint, the Lines brothers secretly acquired 99 per cent of Sedona's shares in 2002 by using nominee shareholders. They enlisted friends to act as signature directors for offshore companies, which acquired the shares in the months before the touting began.

Then, in January, 2003, the men started touting the deal for mines in Central America. According to the company's news releases, Sedona had merged with a private company called Renaissance Mining Corp. The SEC said the news was misleading, as Sedona had not actually closed the deal, and still had to raise $6-million to uphold its end of the agreement.

As the company issued the news, the Lines brothers and Mr. Wew carried out a prearranged trade, the SEC claimed. Mr. Wew bought 5,000 shares at $8.25 from accounts that the Lines brothers controlled. The stock, which had last traded at three cents, remained near $10 for the rest of the week. The Lines brothers sold 159,300 shares into this artificial demand, the SEC claimed.

At the same time, Mr. Chapman prepared an "independent" research report which, according to the SEC, Mr. Wile paid for. The report predicted that Sedona would reach $62 and that it was "an incredible opportunity that could be the largest public offering in the United States for a mining company this year." He failed to disclose that he had previously bought 370,000 shares of the company at less than $1, the SEC said.

The SEC halted Sedona on Jan. 29, 2003, bringing the promotion to an end. The regulator cited concerns about the accuracy of its agreement with Renaissance. When the company resumed trading two weeks later, it fell to under $1.

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

Motions to dismiss

The Lines brothers, along with Mr. Wile and Mr. Wew, denied any wrongdoing. In a motion to dismiss filed on Feb. 1, 2010, the Lines brothers claimed that the SEC scuttled the company's deal for the mines by halting the stock. They said the mines were a valuable asset, having once belonged to a public company that had a $1-billion market cap. Sedona's deal for the mines called for it to raise $5.5-million, but coming up with the money became impossible once the SEC halted the stock.

The regulator also started calling potential investors as part of its investigation and scared at least one away, the brothers claimed. The mines eventually went to RNC Gold Inc., a Toronto Stock Exchange listing that is now part of Yamana Gold Inc.

Mr. Wile and Mr. Wew filed similar motions on Jan. 25, 2010.

While Mr. Wile will likely not be participating in the trial, another defendant will also not be present. Mr. Chapman failed to respond to the case, so the SEC sought and won a default judgment against him. On June 18, 2010, the judge banned him from penny stocks and invited the SEC to file a motion for appropriate civil penalties.

http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1757998&symbol=*SEC&news_region=C