Thursday, March 01, 2018 5:41:01 PM
The judgments require Troy J. Flowers, his business partner Sean P. Nevett and Flowers’ company Fruition Inc. to pay disgorgement, interest and civil monetary penalties in amounts to be determined upon request by the SEC at a later date. Fruition and the two men are also banned by the judgments from participating in any future penny stock offerings.
All three defendants consented to the judgments without admitting or denying the allegations from the SEC’s complaint in the case. Andrew B. Holmes, an attorney for Nevett, also noted to Law360 that the decision to leave the monetary portion of the judgments to be filled in later means his client can challenge the dollar amounts when the SEC eventually makes a request to the court.
“We look forward to our hearing on that aspect, and in all other regards, Mr. Nevett is simply happy to simply move on with his life, and to start putting this action behind [him],” Holmes said.
The SEC filed its suit against Flowers, Fruition and Nevett in July, alleging that they engaged in a “matched trading” manipulation scheme in shares of Licont Corp. and Artec Global Media Inc. between 2012 and 2014.
“Flowers and Nevett first arranged for the purchase of the public shell companies Licont and Artec,” the SEC alleged in its complaint. “They then used multiple accounts held in the names of third parties, which Flowers and Nevett controlled, to engage in matched trading, artificially increase the price of the stock, and create the false appearance that there was an active market and real demand for the shares of Licont and Artec.”
The SEC said Flowers, Fruition and Nevett ultimately sold the shares they controlled on the open market, generating about $3.8 million in illegal proceeds.
Licont, a San Diego insurance company, is no longer a going concern, the SEC has said. Artec, a San Diego online marketing and web services solutions company, is now an essentially worthless issue, the SEC has said.
Both Flowers and Nevett have had previous run-ins with regulators, according to the agency.
Flowers pled guilty in 2003 to a count of fraud by a broker-dealer to induce the sale of a security in California and was sentenced to five years of probation, the SEC said in its complaint, which said he also was permanently barred by the predecessor to the Financial Industry Regulatory Authority thereafter.
Nevett, meanwhile, was censured by a regulator in 1997 and settled SEC charges in 2003, the agency’s complaint said.
The SEC does not comment on pending litigation.
Counsel for Flowers and Fruition did not immediately return requests for comment on Monday.
The SEC is represented in-house by John B. Bulgozdy and Adrienne D. Gurley.
Flowers and Fruition are represented by Joel Athey and Nicholas Brian Melzer of Holland & Knight LLP.
Nevett is represented by Andrew B. Holmes of Holmes Taylor Scott & Jones LLP.
The case is SEC v. Flowers et al., case number 3:17-cv-01456, in the U.S. District Court for the Southern District of California.
--Additional reporting by Pete Brush. Editing by Alanna Weissman.
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