stehvestor, your a little behind the times, Peter has already announced that hes backing down from his earlier threats of legal action, here, for your enjoyment...

SunnComm backs down from lawsuit against a computer science grad student

Josh Brodie
Princetonian Staff Writer

SunnComm Technologies, Inc. announced yesterday morning it would sue first-year graduate student John Halderman over his recent critique of the company's new CD copy-protection method, but by the end of the day SunnComm president and CEO Peter Jacobs said he changed his mind.

Jacobs said in an interview late last night that a successful lawsuit would do little to reverse the damage done by the paper Halderman published Monday about his research, and any suit would likely hurt the research community by making computer scientists think twice about researching copy-protection technology.

"I don't want to be the guy that creates any kind of chilling effect on research," Jacobs said.

SunnComm plans to make that announcement this morning.

Halderman's paper hit SunnComm hard. Since Monday its stock value has dropped $10 million — one-third of the company's total worth.

"I just thought about it and decided it was more important not to be one of those people. The harm's been done . . . if I can't accomplish anything [with a lawsuit] I don't want to leave a wake," he said.

In the increasingly bitter wars between those advocating stronger anti-piracy protections and those who favor less stringent copyright enforcement, the decision against legal action represents one of a precious few instances of companies looking past their bottom line.

"I think it's a sensible decision given the situation, given that what [Halderman] was doing was perfectly legitimate," said computer science professor Edward Felten. "[Jacobs is] to be commended for not wanting to interfere with research."

Felten and some of his colleagues had been in a similar situation in 2001 when the Recording Industry Association of America — the same group that sued Dan Peng '05 last semester for running a campus file-sharing website — strongly urged the research group not to publish their work on another copy-protection technology.

The RIAA said publishing the work would violate the Digital Millennium Copyright Act.

SunnComm's press release threatened to use the same law against Halderman.

SunnComm had also initiatially decided to sue Halderman because the company thought he had unfairly critiqued their product after misunderstanding their intent in designing it. Throughout its development, the company's software, MediaMax, was designed to be a step toward curbing casual copying rather than a silver bullet, Jacobs said.

However, Halderman claimed the company's allegations of "incredible security" were overstated. As he pointed out, the system would not have worked on any computer where autorun — the feature in Microsoft Windows that automatically launches a program when a CD is inserted — was disabled.

When The Daily Princetonian informed Halderman that the suit was not going to proceed, he was relieved.

"I think that's a horrible precedent," he said. "A large amount of security research is critiques of existing security systems . . . The worst thing in the world is a false sense of security."

Last November Halderman said he was concerned about presenting his junior paper research to an audience of scientists for fear of being sued under the DMCA. He said at the time the existence of the DMCA forced him to carefully word his research so as to avoid a lawsuit.

Halderman plans to continue his research toward a doctorate and hopes to pursue a career in computer security afterwards.

Even before Halderman published his paper, SunnComm had planned to release a new version of its software that addresses many of the same concerns Halderman raised.

"I don't want to be the people my parents warned me to stay away from," said Jacobs of his decision. "It's 10 million bucks, but maybe I can make it back, and maybe [Halderman] can learn a little bit more about our technology so as not to call it brain dead."

Sunncomm will install spyware on unsuspecting users computers...

Jacobs said SunnComm’s attorneys would refer the case to local federal authorities, who could make the decision on how to proceed on the DMCA issue. He said the company was also exploring a civil suit based on damage to the company’s reputation, since Halderman concluded that the technology was ineffective without knowing about future enhancements.

Future versions of the SunnComm software would include ways that the copy-protecting files would change their name on different computers, making them harder to find, Jacobs said. Moreover, the company will distribute the technology along with third-party software, so that it doesn’t always come off a protected CD, he added.

jrhndrsn, It was a research paper and he is entitled to publish his own work...

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Titan, ROTFLMAO!!!!!! I wonder if Peters lawyers informed him just how deep discovery can go into the plaintiffs affairs, maybe BMG "suggested" that they better get this off of the front pages, or perhaps he just realized that if he sues the guy he admits that the guy is right since he really has no claim if the guy is wrong, ROTFLMAO!!!!!!!!!!!!

"this was the First release ever in the US of ANY sort of technology that adresses CD copy/sharing problem." Ahhhh, no it wasnt!

Voyager546, there were no copyrights infringed on here.

What exactly is a "JDA"?

STEH would have been much better served if they had hire the guy as a consultant instead of approaching him as a combatant, the guy is a fairly well recognized academic researcher in the computer security field, STEHs approach on this is only going to get the company a whole lot of publicity and it isnt going to be the good kind in my opinion, on the other hand, they are going to make him a academic folk hero and probably advance his career immensly with all of the publicity that this will receive, but then on second thought, these are the same people that hired THE PHANTOM to promote their stock.

LMAO, Well this lawsuit should be very interesting since researchers in academic settings are usually provided a great deal of legal leeway in their research projects and papers, and considering that the person in question is working on his Ph.D in computer science with a focus on computer security I personally think that STEH is shooting themselves in the a55 on this one, I really dont think they are going to make it very far with this suit, but hey, as most lawyers say, you first have to run it up the flag pole before you can find out if it will fly, this lawsuit is only going to draw a lot of negative press for this company and its product in my opinion.

bleuduece, allow me to assist you in your quest...

Regards,

Kayleigh

###############################################################

Q: It seems like your technology will simply be a "bump" on the road to limiting CD piracy. Once the technology becomes mainstream, it will only be a matter of time before it is circumvented. A seemingly obvious way to get around the "copy protection" immediately is to plug the audio output of a standard CD player into the sound card and record the audio that way, an act that doesn´t take "radical" thinking to devise. How will your product address this issue?
Greg Mayer (9/13/2003 6:26:33 PM)

A: Dear Greg,

It´s apparent you don´t really understand the purpose of MediaMax. It´s intended to provide CD buyers with a convenient and legal way to share the music they buy - an alternative to copyright infringement rampant with file sharing networks.

With MediaMax, people can now easily and LEGALLY make personal copies and send songs to one another. Prior to MediaMax, providing each CD with a legal framework for copying and sharing music hadn´t been technically possible. Our technology is a "speed bump" (as you put it) that discourages uncontrolled ripping of CD music and, through its simplicity, gives consumers a way to "do the right thing."

Thieves will always find ways to steal, (just like the example you gave above). And, as the lock on your house front door provides some protection by keeping honest people out, the determined thief will always be able to break into your house. That doesn´t mean you go without buying a front door lock, does it?

One of the benefits of MediaMax is that it is infinitely upgradable and backwards compatible so that as thieves find new (and now, illegal) ways of circumventing our protection technology, we are able to make MediaMax smarter.

The technological capabilities of "digital shoplifters" has little to do with the morality of stealing music. If I were capable of anonymously downloading your living room furniture over to my house, it doesn´t mean I should do it. People who rationalize stealing another´s property need to take a long, hard look at themselves in the mirror. Most artists who sell respectable numbers of CDs, make a modest living from their music. You´re stealing from them and the irony is that you LIKE what they´ve created (otherwise, why would you be stealing it in the first place). "With fans like that...who needs enemies?"

This isn´t a game to see who´s smarter...the thieves or the music people. It´s stealing, and just because your PC and Internet connection allow you to do it anonymously, that doesn´t make it morally, ethically, or legally OK, no matter what rationale you may use to justify the stealing.

All we´re trying to do at SunnComm is create a useable technology that works for both, the CD buyer AND the artist, rather than continue to perpetuate a methodology that favors one party over the other.

This is how we feel at SunnComm. Feel free to call anyone at the company and ask them. That´s why our solutions will work. Our hearts are in this thing.

Thanks for writing.

Regards,

Peter


##############################################################

Q: I´m not one of the "lucky" shareholders who purchased at .02 and i´ll leave it at that but I´m very concerned about the large "afterhour" trades of late. I know there is no such thing as afterhour trading on pennies/pinks etc but these arranged trades are always below the ask/bid and most likely "arranged sales". Below is an example from 7/18. Can you tell me if the company is responsible for these trades or if you have an explanation for transactions?
Thanks,
Gary

16:08:37 0.200 250000 OTC BBS at Bid
16:08:18 0.200 250000 OTC BBS at Bid
(7/18/2003 1:43:30 PM)

A: Hello Gary.

A couple of things. There ARE such things as after-hours trades and they happen all the time, at least where SunnComm is concerned. Don´t really know how or why they do...it´s just been that way for quite some time.

The company has absolutely nothing to do with any of those trades. If there are "arranged" sales, they are not arranged by the company. SunnComm does not have unrestricted shares and thus, cannot directly put shares into the marketplace in that fashion.

Sorry you´re not one of the early shareholders, but we´re glad you´re here and will do everything in our power to make SunnComm a market leader in digital content protection.

Thanks for writing,

Peter


#################################################################

Q: July, 1, 03 Dear Mr. Jacobs, I am a new investor. With todays news release may we investors assume that an Amex application is soon to be and if yes do you feel it has a good possibility of acceptance? If not soon, would you leave a clue about when? Thank You, Bruce Ellzey, Melbourne, Fl. (6/30/2003 8:25:01 PM)

A: Hello Bruce,

Our goal with regard to moving up to NASDAQ or the AMEX is to file our Form 10 paperwork following the announcement of SunnComm´s second major music contract. If you dig down the "Ask the Prez" page, you´ll find the same answer.

Awaiting the second contract means the first contract was no accident and that we are truly a leading player in the digital content enhancement and protection marketplace.

Truly, we´re a little "gun-shy" after our last attempt at filing and I´m unwilling to commit the resources to file a new Form 10 until our counsel feels it´s a virtual certainty that we are approved.

Thanks for your support.

Peter

###############################################################

Q: Any update on the progress on listing on NASDAQ ?
Thanks,
Joe Helm, shareholder Milwaukee, WI area (6/18/2003 7:31:06 AM)

A: Hello Joe,

As I´ve mentioned in past responses on "Ask the Prez," our intention at this time is to apply for membership on the American Stock Exchange following the announcement of our second major revenue deal with a major record label (when and if that happens).

The reasoning behind this is that I feel that it would be the best time to emerge as a fully reporting company as there will be no doubt in anyone´s mind (including the SEC´s) that SunnComm is a major player in the digital content protection marketplace.

Best Regards,

Peter

###############################################################

Q: Peter,

What are your major goals for 2003, and how does a shareholder measure your achievement of those goals given that your firm is under no obligation to disclose your operating results through financial reporting?

Thanks,

Glenn (2/28/2003 11:04:28 AM)

A: Thanks for writing, Glen.

Our goals for 2003 are nothing short of winning market leadership for SunnComm in the CD Copy Protection space. I feel we can achieve this through the vending of our MediaMax, StudioMax, and other technologies to a minumum of three major record companies in 2003.

In addition, 60 days after our first piece of major revenue comes through the door, SunnComm will release on a regular basis, an outside audit of its financial position to keep shareholders apprised of the company´s condition. I believe that providing this audit prior to the generating of revenues is not money well-spent since the company´s success and its true value rises or falls on whether its technologies will be deemed valuable enough to pay for by the record companies. Also, a premature release of the audit creates a higher amplitude of "background noise" that would be both unnecessary and distracting given the hostile environment of a handful of people out there who are betting on our company to fail.

Until the audit is released, Kimberly Faulkner, our shareholder relations manager or I will be glad to answer questions regarding the current float, expenses, expections for the year, etc.

For news of SunnComm´s advances with its technology and customers, 2003 will be a year that we´ll release more SunnGramms to shareholders (don´t forget to sign up on our website) and I believe you´ll be seeing more press on the subject of music copy protection, hopefully some with our name in them.

All in all, we think our "stuff" works better than theirs and that we´ll stay small enough to keep up with changing trends, but no one has a crystal ball and the industry and consumer demands are very, very fickle and fluid. We´ll do our best to stay alert.

Thanks for writing Glenn.

Regards,

Peter

################################################################

Q: My home DVD player also plays MP3s. I like to store large music collections onto one CD-R and play the heck out of it. Will I still be able to do this through to format that you and Microsoft are putting together? (9/17/2002 4:40:38 PM)

A: Absolutely. The CDs created with SunnComm’s copy protection technology are 100% compatible with standard music CD’s. Whatever equipment you use to play regular CD’s is guaranteed to play SunnComm protected CD’s. The protection will only prevent you from accessing the full quality audio tracks with your computer but will allow you to play them without any limitation on regular audio equipment. MP3 or any other compressed audio files on a CD will never be affected

Eric Vandewater - CTO

###############################################################

Q: You said our relationship with Microsoft is a matter of record.

Everyone buying a msft produuct has the same relationship and record. What makes ours different than the millions of current msft buyers.

Do we have any revenue producing products currently bringing in revenues. How are we financing our business?

We have approximately two weeks until the audit is completed by your words. Is that the time frame that we can go by.

Are we in serious negotiations with any potential contraxct customers?

Whatever happened to the european deals that were supposed to take place in Dec, Jan Feb Mar etc....

Thanks for your answers. (8/19/2002 4:07:03 AM)

A: Dear Mr. Hall,

I asked Microsoft to email me and tell me what they think of our relationship. Below please find a verbatim reply to your question. Because of its length I´ll endeavor to answer your additional questions in subsequent responses.

Thanks for writing,

Peter

BELOW IS THE MICROSOFT REPLY

-----Original Message-----
From: Ken Cavallon (kencav@microsoft.com)
Sent: Tuesday, August 20, 2002 10:07 AM
To: Peter Jacobs
Subject: The Microsoft and SunnComm Relationship

Dear Peter;

Lately I have been getting inquiries from partners and the marketplace in general as to the quality and depth of the relationship between our companies and I want to take a moment to give some clarification.

SunnComm´s relationship with Microsoft is multi-faceted. Microsoft is committed to helping you and your people succeed in getting to market with your digital content copy protection technology. To this end we have focused support, people, technology and financial resources specifically on SunnComm. These resources include people throughout the company with the heaviest concentration in our Digital Media Division (DMD).

Within the DMD, Christina Calio, Business Development Manager, is specifically goaled on go to market strategies with partners including SunnComm. John Paddleford, Lead Program Manager heads a team that has been focused on creating technologies and extending the Windows Digital Media Platform for SunnComm, enabling you to create a more tightly integrated solution with our Digital Rights Management technologies. It is our hope that we have proven our commitment to you as a partner.

Additionally, we have marketing and PR people (Jennifer Baisch and Erin Cullen respectively) goaled on helping to partner better with SunnComm. Christina Calio has committed Business Investment Funds (BIF) to help you with your go to market strategies on multiple fronts. The efforts that the Digital Media Division are putting forth on your behalf go to the highest ranks within the group and are clearly on the radar of the division´s Corporate Vice President, Will Poole. You met Will on your recent trip to Washington DC when you each provided testimony in front of the House of Representatives.

SunnComm is one of a very limited number of partners admitted to the JDP for our next generation of Windows Media Player codenamed "Corona". We think SunnComm is uniquely qualified so we have been happy to provide you with the earliest releases of the new player, development documentation and technical development assistance. Also, we are looking forward to your unique development of a "Secure Burn Plug-In" using your MediaMaker technology for the new player. This is a solution that we believe the marketplace will respond favorably to and will be truly the first of its kind.

Thank you for your efforts in furthering the Windows Media Platform, we here at Microsoft are excited about SunnComm´s recent breakthroughs and are looking forward to an excellent fall launch of each of our respective digital media solutions.

If you receive any additional inquiries as to the nature of our relationship, please feel free to send them my way and I will ensure that they are connected with the appropriate people within our company.

Ken Cavallon
Engagement Manager
Microsoft Services for ISV Partners

kencav@microsoft.com
( Direct: 425.704.5240
( Fax: 425.936.7329

Microsoft Corporation
One Microsoft Way
SAM-D/5526
Redmond, WA 98052-6399



NOTE: Mr. Cavallon´s name was mistakenly mispelled while entering this letter onto the site. It has been corrected.

WTH??? "We asked SunnComm for comment, but the company did not return our calls."

http://www.theregister.com/content/6/33298.html

STEH TRADE DATA
Last Sale: 0.1000
Change: -0.0240
Percent Change: -19.35
Daily High: 0.1280
Daily Low: 0.0910
Opening Price: 0.1150
Previous Close: 0.1240
Volume: 7,947,600
Annual High: 0.5000
Annual Low: 0.0200

"I think the graduate has some real problems in the immediate future"????

For what? He didnt do anything more than to analyze the STEH scheme, there are no laws broken there, unless your saying that STEH is going to hit him with a SLAPP suit.

http://finance.lycos.com/qc/stocks/charts.aspx?style=overlay&symbols=OTCF:STEH&compsyms=mvsn

STEH TRADE DATA
Last Sale: 0.1060
Change: -0.0180
Percent Change: -14.52
Tick: Down
Daily High: 0.1280
Daily Low: 0.1060
Opening Price: 0.1150
Previous Close: 0.1240
Volume: 937,500
Annual High: 0.5000
Annual Low: 0.0200

I also agree AZ and mcster61.

That research paper has no violations of law in it, its an analysis of the technology, he doesnt provide code or give away any trade secrets, I have yet to find any CD ripping site that says that this protection actually prevented them from copying the disk.

Whos gloating, I am just offering up my honest opinions and sharing DD on this investment, I hate to point out that this report pretty much confirmed everything that my son indicated weeks and months ago on this product.

Analysis of the MediaMax CD3 Copy-Prevention System...


http://www.cs.princeton.edu/~jhalderm/cd3/

WHAT HAPPENED???? see http://www.investorshub.com/boards/read_msg.asp?message_id=1540042

Looks like you wont have to wait long, probably be at your buyin point by next week at this current rate of decline.

Well the 14 cent base didn't last long, maybe a 13 cent base will be more sustainable.

JDOGGIE, you asked for an opinion and I gave mine, heres another, you should have lost no more than 10-15% on this because as an investor you should have had an investment plan before you bought the stock, you should have dumped it the minute it hit the limit that you should have set.

screamineagle, its "SHE" thank you very much!

Well, when the investing public doesnt see real value in the company, PRs will only pump the price up for a short term, it sure didnt help matters though when the Anthony Hamilton CD showed up all over the internet within hours of its release when it was supposed to be copy protected.

YIKES! Look At all of the recent 144 dumping...

REZNICK STEVE SH 9/22/2003
40,418

RIGGS SAMANTHA SH 9/15/2003
25,000

BLACKWELL DONALDSON ... N 9/9/2003
34,721

WICKSON BRIGID N 9/8/2003
232,226

STOREY SAM N 9/4/2003
587,494

WOODS MIKE N 9/3/2003
61,862

AIR PRO LEASING INC SH 8/26/2003
100,000

DODD KENNETH R N 8/25/2003
86,806

BAXLEY RANDY N 8/5/2003
201,962

PEREZ MIKE N 7/25/2003
631,428

GWYTHER DAVID G N 7/22/2003
86,806

STOREY SAM N 7/7/2003
587,494

SIMON VIC N 6/26/2003
46,453

HOWELL MICHAEL UK 6/17/2003
205,886

WICKSON BRIGID N 6/16/2003
232,226

DUNCAN ROBERT BRUCE UK 6/6/2003
300,000

The STEH PR company is in NY, maybe Pete is brainstorming some new fluffy press with them, the big PR push over this last month or so sure hasnt done us any favors in the stock value, its lost almost 40% over the last month.

Of course he could also be up in NY trying to get more capital to keep the company afloat.

billyb, the MM naked short excuse is what many of these OTC companies were using for an excuse for their stock dropping like a rock between 1999 and now, when the market pooped.

Much of the daytrade money they depended on for pump and dump income dried up, suddenly their regular fluffy PRs were not running the price up as they had in the past, suddenly the misguided investors that they used to be able to count on to hold shares long term sold and moved into bonds, suddenly, there was no demand for their shares, nothing to hold up the value, they needed an excuse, since many of these non reporting companies already knew and in some cases regularly used the old short against convertable debentures scam, they decided to blame the MMs as a way to deflect the blame for the miserable stock performance.

Actually, IMO and based on the research Ive done recently, the next big boom, because of these suits, will be Darknets, they are already taking off and they are very hard to trace, I posted about this months ago on RB.


http://www.quicktopic.com/18/D/drkxtY8TMZH6b.html

Good try bleuduece but read it again, pay special attention to this part...

"CRG has been
compensated by third party shareholders or with cash from the company on behalf
of one or more of the companies mentioned in this opinion."

The operation and individual that put out this promotion for STEH was just charged (August 13, 2003, about a month after they put out the STEH recommendation) with fraud charges by the SEC. The SEC states in their filing that...

****that they used the Internet, press releases, spam e-mails, and televised interviews to commit securities fraud through baseless financial projections and the stock promoters' "scalping." Scalping is the practice of recommending the purchase of a stock to the general public while selling the stock at or near the same time.

****that the stock promoters failed to disclose all of the compensation they were to receive under the agreements signed.

so apparently, this operation already has a history of not being forthcoming with who by and if it is paid to pimp stock.

Capital Research Group Announces Investment Opinion:

WESTON, FL, Jul. 07, 2003 (MARKET WIRE via COMTEX) -- Watch FTS Wireless Inc.
(OTC BB: FLIP). FLIP is new to CRG, and just announced great news! Watch this
stock, it has been executing on its growth strategy...it could be a huge gainer
in near-term trading as market participants take notice! Other stock market
standouts include: Sirius Satellite Radio (NASDAQ: SIRI): Market Perform, up 2%
on 49 million shares, Mirant Corporation (NYSE: MIR): Market Perform, up 16% on
20 million shares, Sunncomm Technologies Inc. (NASDAQ: STEH): Market Perform,
down 23% on 20 million shares.

"On the technology front, the Nasdaq composite index finished the session just
about even with where it began, down 2.46 points over the over the course of the
day. Declining consumer sentiment data was blamed for the market's descent,
though analysts said the major averages were due to take a break," stated Peter
Antipatis. More is available at: www.thesubway.com/sub_comm.asp.

All material herein was prepared by Capital Research Group, Inc. (CRG) based
upon information believed to be reliable. The information contained herein is
not guaranteed by CRG to be accurate, and should not be considered to be
all-inclusive. The companies that are discussed in this opinion have not
approved the statements made in this opinion. This opinion contains
forward-looking statements that involve risks and uncertainties. This material
is for informational purposes only and should not be construed as an offer or
solicitation of an offer to buy or sell securities. CRG is not a licensed
broker, broker dealer, market maker, investment banker, investment advisor,
analyst or underwriter. Please consult a broker before purchasing or selling any
securities viewed on www.thesubway.com or mentioned herein. CRG has been
compensated by third party shareholders or with cash from the company on behalf
of one or more of the companies mentioned in this opinion. (crg has received
three hundred thousand shares for flip) CRG intends to sell its shares. CRG has
sold approximately twenty five thousand shares to date. CRG may sell its shares
for less than the target price given in this opinion. CRG's affiliates,
officers, directors and employees may also have bought or may buy the shares
discussed in this opinion and may profit in the event those shares rise in
value. Market commentary provided by Peter Antipatis, CRD number 2955420. CRG
will not advise as to when it decides to sell and does not and will not offer
any opinion as to when others should sell; each investor must make that decision
based on his or her judgment of the market.




CONTACT: Charles T. Tamburello

Capital Research Group Inc., Weston

954-217-9555




Copyright 2003 Market Wire, All rights reserved.

Well, ah, they were recently promoting STEH stock (Charles T. Tamburello and Capital Research Group), why does this company employ questionable stock hustlers?, why is it spending money advertising its stock?, use the money to get an audit done to file with the SEC thus getting this stock listed is going to add far more value to the stock than paying convicted felons (Colangelo AKA "The Phantom") to hustle the stock on chat boards and buying ad space on Alpha Trade will ever add in terms of ROI.

Is this the same guy (Charles T. Tamburello) and company (Capital Research Group) that was promoting and recommending this stock on MARKET WIRE via COMTEX in the Jul. 07, 2003 press release?...

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18286/August 13, 2003
SECURITIES AND EXCHANGE COMMISSION v. DAVID GANE, JEFFREY D. WELSH, SOUTHERN FINANCIAL SERVICES, INC., SOUTHERN WASTE, INC., DBA STRATEGIC INVESTORS GROUP, CHARLES T. TAMBURELLO, AND CAPITAL RESEARCH GROUP, INC., Civil Action No. 03-61533-CIV-SEITZ (S.D. Fla.)
COMMISSION CHARGES FORMER HEAD OF DICOM IMAGING SYSTEMS, INC. AND FIVE FLORIDA PROMOTERS IN FRAUDULENT STOCK MANIPULATION

On August 13, 2003, the Securities and Exchange Commission ("Commission") filed civil charges in federal district court in Miami, Florida against the former president of Dicom Imaging Systems, Inc. (OTCBB: DCIM), and five Florida stock promoters, alleging that they used the Internet, press releases, spam e-mails, and televised interviews to commit securities fraud through baseless financial projections and the stock promoters' "scalping." Scalping is the practice of recommending the purchase of a stock to the general public while selling the stock at or near the same time. The Commission's complaint also alleges that the promoters touted Dicom's stock but did not disclose all of the compensation they were to receive pursuant to signed agreements.

The Commission's complaint names the following defendants:

*

David Gane, D.D.S., age 49, of White Rock, British Columbia, Canada. Gane was Dicom's president, CEO, and a member of the board of directors. Dicom was a provider of dental imaging software from 1999 to 2001 but has ceased operations.
*

Jeffrey D. Welsh, age 53, of Boca Raton, Florida. Welsh wrote investment opinions about Dicom.
*

Southern Financial Services, Inc. ("SFS"), a Florida financial consulting firm run by Welsh that issued investment opinions.
*

Southern Waste, Inc., dba Strategic Investors Group ("SIG"), a Florida financial public relations firm run by Welsh that issued investment opinions.
*

Charles T. Tamburello, age 30, of Weston, Florida. Tamburello wrote investment opinions about Dicom.
*

Capital Research Group, Inc. ("CRG"), a Florida investor relations firm run by Tamburello, which operates www.thesubway.com website. CRG issued investment opinions about Dicom.

The Commission's complaint alleges that Gane had Dicom hire the stock promoters in June and November 1999 to tout Dicom's stock in return for compensation. Gane supplied the promoters with Dicom's financial projections for the next three years: $24.7 million in revenues and $19.7 million in earnings. Two of the promoters, Welsh and Tamburello, each wrote investment opinions that described Dicom as an investment and set progressively higher targets for its stock price. Welsh issued his investment opinions through SFS and SIG, while Tamburello issued his investment opinions through CRG. In January 2000, Dicom announced that it was restating its financial results for the third quarter of fiscal 1999 from a gain to a loss. Nevertheless, the stock promoters continued to repeat the projections in their investment opinions and set even higher targets for Dicom's stock price. In addition, Gane, who had approved the announcement about the restatement, publicly announced even higher three-year revenue projections in January 2000, $50 million and $60 million, during interviews broadcast on television and over the Internet. Dicom's stock price increased from $5.08 per share, when trading began in November 1999, to a high of $36 in March 2000.

The Commission's complaint also alleges that the stock promoters failed to disclose all of the compensation they were to receive under the agreements signed with Dicom and that they engaged in scalping, resulting in their receipt of over $1.1 million in trading proceeds.

The Commission seeks to enjoin Gane, Welsh, SFS, SIG, Tamburello, and CRG from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and to enjoin Welsh, SFS, SIG, Tamburello, and CRG from future violations of Sections 17(a) and 17(b) of the Securities Act of 1933. The Commission also seeks civil penalties against each of the defendants and disgorgement of ill-gotten gains with prejudgment interest from Welsh, SFS, SIG, Tamburello, and CRG. Finally, the Commission seeks a court order permanently barring Gane from serving as an officer or director of a public company.

SEC Complaint in this matter



http://www.sec.gov/litigation/litreleases/lr18286.htm