CEASE AND DESIST PROCEEDINGS
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No.
10036 / February 5, 2016
SECURITIES EXCHANGE ACT OF 1934
Release No.
77073 / February 5, 2016
ACCOUNTING AND AUDITING ENFORCEMENT
Release No.
3
740 / February 5, 2016
ADMINISTRATIVE PROCEEDING
File No.
3
-
17104
In the Matter of
BioElectronics Corp.
,
IBEX, LLC,
St. John’s, LLC,
Andrew
J.
Whelan
Kelly
A.
Whelan
,
CPA,
and
Robert P. Bedwell
, CPA
,
Respondent
s
.
ORDER INSTITUTING
ADMINI
STRATIVE AND CEASE
-
AND
-
DESIST PROCEEDINGS
PURSUANT TO SECTION 8A OF THE
SECURITIES ACT OF 1933
,
SECTIONS 15(b)
, 4C
AND 21C OF THE
SECURITIES EXCHANGE ACT OF
1934
AND RULE 102(e) OF THE
COMMISSION’S RULES OF
PRACTICE
I.
The Securities and Exchange Com
mission (“Commission”) deems it appropriate
and in the public interest that public administrative and cease
-
and
-
desist proceedings be,
and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities
Act”)
and
Section
21C of the
Securities Exchange Act of 1934 (“Exchange Act”)
against
BioElectronics Corp., IBEX, LLC, St. John’s, LLC, Andrew J. Whelan
and
Kelly A.
Whelan
, CPA
.
The Commission further deems it appropriate and in the public interest that
administrative and cease and
cease
-
and
-
desist proceedings be, and hereby are, instituted
pursuant to Section 15(b) of the Exchange Act against Andrew J. Whelan and Kelly A.
Whelan, CPA.
The Commission also deems it appropriate
that public administrative and
cease
-
and
-
desist proceedi
ngs be, and hereby are, instituted against Robert P. Bedwell, CPA
pursuant to
Sections 4C
1
of the Exchange Act and
Rule 102(e) of the Commission’s Rules
o
f Practice
.
1
Section 4C provides, in relevant part, that:
2
II.
After an investigation, the Division of Enforcement alleges that:
1.
This matter invol
ves inaccurate
public
disclosure and the unlawful
distribution of securities by BioElectronics Corp
.
(“BIEL”) and related persons and entities.
On March 31, 2010, BIEL filed with the Commission a Form 10
-
K for the period ending
December 31, 2009,
falsely
recognizing
revenue from two “bill and hold” transactions.
These transactions
overstated
BIEL’s revenue by $
366,000
, or
47
%. Additionally, from
at
least August
2009 until at least
November 2014 (“the relevant period”)
, BIEL
and
respondents IBEX, LLC, St.
John’s, LLC, Andrew J. Whelan and Kelly A. Whelan
engaged
in
an
illegal
distribution of purportedly
unrestricted
securities
involving the sale
of
hundreds of millions of
BIEL
shares.
A
ffiliates, IBEX, LLC and St. John’s, LLC, sold
purportedly unrestricte
d shares in unregistered transactions at a discount to then
-
current
market prices. Andrew J. Whelan, President, CEO and
the principal financial officer
of
BIEL, and Kelly A. Whelan, his daughter and the President of IBEX, LLC,
orchestrated
the
illegal
dis
tribution
.
Approximately h
alf of the proceeds of these sales
were
then “loaned”
to BIEL and the other half was retained by the entities. The offerings were not registered
with the Commission.
Robert P. Bedwell
’s failures to detect BIEL’s improper accoun
ting,
as the auditor responsible
for
auditing the financial statements included in
BIEL’s Form 10
-
K
, constitute
s
improper professional conduct
.
RESPONDENT
S
2
.
Respondent
BioElectronics Corp
.
is a Maryland corporation with a sole
location employing app
roximately
twelve
people in Frederick, Maryland.
The company is
engaged in the business of making inexpensive, drug
-
free, anti
-
inflammatory medical
devic
e
s and patches which use electromagnetic energy.
In 2007, BioElectronics entered
into a settlement wi
th the State of Maryland
related to
selling unregistered shares, agreeing
to a permanent cease and desist order and the payment of a $2,500 penalty.
It has a class of
equity securities, previously registered with the Commission pursuant to Exchange Act
Se
ction 12(g),
2
with approximately 4 billion shares issued as of November 2013. On April
18, 2011, BIEL voluntarily withdr
e
w its registration.
BIEL
shares
currently trade on
OTC
Link
,
operated by
OTC Markets Group
, Inc.
During the relevant period, BIEL sh
ares were
The Commission may censure any person, or deny, temporarily or permanently,
to any person the privilege of appearing or
practicing before the Commission in
any way, if that person is found . . . (1) not to possess the requisite qualifications
to represent others . . . (2) to be lacking in character or integrity, or to have
engaged in unethical or improper professional cond
uct; or (3) to have willfully
violated, or willfully aided and abetted the violation of, any provision of the
securities laws or the rules and regulations thereunder.
2
Bio
E
lectronics’ Section 12 reporting obligation arose as a result of its filing a Form
8A
-
12g on
February 12, 2006 in conjunction with a registration statement on Form SB
-
2.
The Form 8A
-
12g
went effective by operation of law under Section 12(g) 60 days after filing, even though the Form
SB
-
2 was subsequently withdrawn.
9
3
8
.
As a result of the conduct described above,
BIEL, IBEX,
and
St. John
’
s
violated, and
Whelan and K
elly
Whelan
willfully
violated
,
Sections 5(a) and
5
(c) of the
Securities Act.
39
.
By
virtue
of the conduct described above,
BIEL violated Section 13(a)
of
the Exchange Act
and Rule 13a
-
1
thereunder
,
which require issuers of
securities registered
with the Commission to file with the Commission accurate annual reports.
Whelan was a
cause of these violations
through his actions as President, CEO and
principal financial
officer
of BIEL
.
4
0
.
BIEL also
violated Sections 13(b)(2
)(A) and 13(b)(2)(B)
of the Exchange
Act
. It violated Section 13(b)(2)(A) by failing to make and keep books and records which
accurately reflected the
transactions
of the company. It violated Section 13(b)(2)(B) by
failing to
design
and maintain
internal
accounting controls
sufficient to provide reasonable
assurances that its revenue was not being
overstate
d
.
Whelan
was a
cause
of
these
violations
as
he knew, or should have known, his conduct or omissions would contribute to
BIEL’s violations.
4
1
.
Rule 13a
-
14 of the Exchange Act requires that each report filed on Form
10
-
K include certifications signed by the principal executive and principal financial officer
of the issuer attesting to the accuracy of the filings and adequacy of internal controls.
As
BIEL’s CEO
,
President
and principal financial officer
, Whelan signed certifications
pursuant to Section 302 of the Sarbanes
-
Oxley Act of 2002 stating: (1) that BIEL’s 2009
10
-
K fairly presented, in all material respects, BIEL’s financial condition and
results, (2)
that BIEL’s 2009 10
-
K was free of material misstatements and omissions, and (3) that he
had designed, or caused to be designed, internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of
financial statements for external purposes in accordance with GAAP. Whelan
willfully
violated Rule 13a
-
14 by signing these false certifications
with knowledge
that the 2009 10
-
K did not fairly present BIEL’s financial cond
ition and results
of operations
in all material
respects
.
Also, Whelan
had knowledge
that BIEL’s 2009 10
-
K was not free of
untrue
statements of a
material
fact, or omitted to state a material fact necessary to make the
statements made, in light of the cir
cumstances under which such statements were made
, not
materially misleading
. And he knew, or should have known, that he had not designed, or
caused to be designed, internal controls over financial reporting that provided reasonable
assurances regarding th
e reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP.
4
2
.
Exchange Act
Rule 13b2
-
1
prohibits any person from directly or indirectly
falsifying or causing the falsification of
any book, record, or account subject to Section
13(b)(2)(A).
Exchange Act Rule 13b2
-
2 prohibits any
director or officer of an issuer from
making or causing to be made, directly or indirectly, any
materially false or misleading
statement to an accountant i
n connection with the preparation or
filing of any required
document or report with the Commission.
Rule 13b2
-
2 can be violated by
misrepresentations or omissions.
Whelan
willfully
violated Rules 13b2
-
1 and 13b2
-
2 by
signing the false certification,
part
icipating in the misconduct,
directing
the preparation of
10
the
inflated revenue
statements, and/or assisting in the creation of a memo
randum
to
BIEL’s auditor that misrepresented
and omitted
facts relevant to the bill and hold
transactions.
4
3
.
Section 4C
of the Exchange Act and
Rule
102(e)(1) of the Commission’s
Rules of Practice provide that the Commission may censure or deny, temporarily or
permanently, any person the privilege of appearing or practicing before it
if that person
engaged in unethical or
improper professional conduct or willfully violated Federal
securities laws or the rules and regulations thereunder.
4
4
.
In light of the
conduct described above
,
Bedwell
engaged in
improper
professional conduct
in violation of
Section 4C of the Exchange
Act and
Rule
102(e)(1)(ii)
of the Commission’s Rules of Practice.
III.
In view of the allegations made by the Division of Enforcement, the Commission
deems it necessary and appropriate in the public interest that public administrative and
cease
-
and
-
desi
st proceedings be instituted to determine:
4
5
.
Whether the allegations set forth in Section II
hereof
are true and, in
connection therewith, to afford
r
espondent
s
an opportunity to establish any defenses to such
allegations;
4
6
.
What, if any, remedial
action is appropriate in the public interest against
r
espondent
s
Whelan
and Kelly Whelan
pursuant to
Section
s
15(b)(6)
and 21B(a)
of
the
Exchange
Act
,
including,
but not limited to,
a censure,
disgorgement
, a civil penalty and a
penny stock
suspension or
bar
;
4
7
.
Whether, pursuant to Section 8A of the Securities Act,
r
espondent
s BIEL,
IBEX, St. John’s, Whelan and Kelly Whelan
should be ordered to cease
-
and
-
desist from
committing or causing violations of and any future violations of
Sections 5(a) and 5(c)
of
the Securities Act
, whether
r
espondent
s
BIEL, IBEX, St. John’s, Whelan and Kelly Whelan
should be ordered to pay a civil penalty pursuant to Section
8A
(g)
of the Securities Act
,
and
whether
r
espondent
s BIEL, IBEX, St. John’s, Whelan and Kelly Whelan
sh
ould be ordered
to pay disgorgement pursuant to Section 8A(e) of the Securities Act
;
48
.
Whether, pursuant to Section 21C of the Exchange Act,
r
espondent
s
BIEL
and Whelan
should be ordered to cease
-
and
-
desist from committing or causing violations of
and a
ny future violations of
Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange
Act
and Rule 13a
-
1 thereunder
,
and whether
r
espondent
s
BIEL
and Whelan
should be
ordered to pay disgorgement pursuant to Sections 21B(e) and 21C(e) of the Exchange Act
;
4
9
.
Whether, pursuant to Section 21C of the Exchange Act,
r
espondent Whelan
should be ordered to cease
-
and
-
desist from committing or causing violations of and any
future violations of
Exchange Act
Rules
13a
-
14,
13b2
-
1 and 13b2
-
2
,
and whether
11
r
espondent
Whel
an
should be ordered to pay disgorgement pursuant to Sections 21B(e) and
21C(e) of the Exchange Act
; and
5
0
.
What, if any, remedial action is appropriate in the public interest against
Bedwell under Section 4C of the Exchange Act and
Rule 102(e)(1)(ii) o
f the Commission’s
Rules of Practice
.
IV.
IT IS ORDERED that a public hearing for the purpose of taking evidence on the
questions set forth in Section III hereof shall be convened
not earlier than 30 days and not
later than 60 days from service of this O
rder
at a time and place to be fixed, and before an
Administrative Law Judge to be designated by further order as provided by Rule 110 of the
Commission's Rules of Practice, 17 C.F.R. § 201.110.
IT IS FURTHER ORDERED that
r
espondent
s
shall file an Answe
r to the
allegations contained in this Order within twenty (20) days after service of this Order, as
provided by Rule 220 of the Commission's Rules of Practice, 17 C.F.R. § 201.220.
If
any
r
espondent fail
s
to file the directed answer, or fail
s
to appear
at a hearing after
being duly notified, th
at
r
espondent may be deemed in default and the proceedings may be
determined against him upon consideration of this Order, the allegations of which may be
deemed to be true as provided by Rules 155(a), 220(f), 221(
f) and 310 of the Commission's
Rules of Practice, 17 C.F.R. §§ 201.155(a), 201.220(f), 201.221(f) and 201.310.
This Order shall be served forthwith upon
r
espondent
s
as provided for in the
Commission’s Rules of Practice.
IT IS FURTHER ORDERED that the
Administrative Law Judge shall issue an
initial decision no later than
300
days from the date of service of this Order, pursuant to
Rule 360(a)(2) of the Commission’s Rules of Practice.
17 C.F.R. § 201.360(a).
In the absence of an appropriate waiver,
no officer or employee of the Commission
engaged in the performance of investigative or prosecuting functions in this or any factually
related proceeding will be permitted to participate or advise in the decision of this matter,
except as witness or counse
l in proceedings held pursuant to notice. Since this proceeding is
not “rule making” within the meaning of Section 551 of the Administrative Procedure Act, it
is not deemed subject to the provisions of Section 553 delaying the effective date of any
final
Commission action.
By the Commission.
Brent J. Fields
Secretary
