years later not much new
SEC target Wile files motion to dismiss
2009-09-10 15:44 AT - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
Anthony Wile, the West Vancouver promoter facing civil fraud charges in New York for the alleged manipulation of Sedona Software Solutions Inc., has filed a motion to dismiss the case. He says delays by the U.S. Securities and Exchange Commission's lawyers have unfairly prejudiced his defence. The SEC did not file the case until nearly five years after the alleged fraud, and then it did not serve Mr. Wile with the suit until 20 months after that.
The SEC claimed that it had been unable to serve Mr. Wile with its complaint because the process server could not find a way past the walls and gate at his West Vancouver home. The SEC sought and received special permission from the judge to serve Mr. Wile by e-mail and by courier. It sent him the documents on Aug. 13, 2009.
Another recently served defendant, Wayne Wew (formerly known as Wayne Wile), has filed a motion seeking to have the charges dropped on similar grounds. He too says the trial schedule gives him little time to prepare, and the delay is prejudicial to his defence. His motion also notes that the complaint incorrectly identifies him as Wayne Wile. He changed his name in 2005.
SEC's complaint
The SEC filed a civil fraud complaint on Dec. 19, 2007, against Mr. Wile, Mr. Wew and others in the Southern District of New York. The defendants included newsletter writer Robert Chapman, Bermuda brokerage LOM (Holdings) Ltd., LOM principals Scott and Brian Lines, and Vancouver residents Scott Peever and William Curtis. The SEC claimed the men manipulated Sedona and another company, SHEP Technologies Inc., in 2002 and 2003. They allegedly grossed $1.5-million from the Sedona scheme and $4.3-million from SHEP. (All figures are in U.S. dollars.)
The allegations against Mr. Wile and Mr. Wew were for the alleged Sedona manipulation. The SEC claimed that Mr. Wile issued a series of misleading news releases ahead of a merger between Sedona and Renaissance Mining Corp., a private company that he controlled. The news releases allegedly stated that Renaissance had acquired gold mines in Central America and was a leading producer of gold, when it was not. According to the complaint, he also arranged for several tout sheets that promoted Sedona. They included one written by Mr. Chapman, which allegedly stated that the stock could hit $62.
In addition to the newsletter allegations, the men carried out manipulative trades to boost Sedona, the complaint stated. The trades, which were between the Lines brothers and Mr. Wew, happened when the stock began trading on Jan. 21, 2003, the SEC said. That morning, at 9:12 a.m., LOM allegedly placed an order to sell 20,000 shares at $9. (The stock had last traded at three cents.) Thirteen minutes later, Mr. Wew placed an order to buy 5,000 shares at $8.25. In the ensuing week of market activity, the Lines brothers sold 159,300 shares at prices between $9 and $10, the SEC claimed. They had bought those shares for seven cents.
The SEC halted Sedona on Jan. 29, 2003, citing concerns about the accuracy of publicly available information on the company. The stock quickly fell under $1 when it resumed two weeks later.
The SHEP manipulation was similar to Sedona, according to the complaint. In that scheme, Mr. Peever and Mr. Curtis allegedly acquired control of a public shell that would become SHEP. They, along with the Lines brothers, secretly held nine million shares of the company, or over 80 per cent of its tradable shares, the SEC claimed.
As with Sedona, they allegedly paid for several touts to write about the company. One claimed that SHEP's product, a new form of car brakes, was the greatest automobile discovery since anti-lock brakes, and was a "billion dollar royalty gusher." The tout sheets did not disclose that Mr. Peever and Mr. Curtis had paid for the coverage and that they intended to sell their shares.
The stock traded between $1 and $2 for much of 2003. During the first half of the year, Mr. Peever, Mr. Curtis and the Lines brothers sold their stock, generating $4.3-million in illegal proceeds, the complaint alleged. The men did not report their sales, and Brian Lines filed several false and misleading reports with the SEC in an attempt to conceal the selling, the SEC said.
The SEC sought orders permanently banning all of the defendants from participating in penny stock offerings, as well as appropriate civil penalties and disgorgement orders. Mr. Peever and Mr. Curtis settled the case before it went to trial. Without admitting any wrongdoing, they agreed to a permanent penny stock ban and yet-to-be-determined civil penalties and disgorgement.
The Lines brothers filed separate answers, in which they denied in any wrongdoing. Scott Lines filed his on May 16, 2008. In it, he admitted that accounts at LOM held shares of SHEP, but denied that the shares were held for his benefit. Brian Lines, in his answer, issued a general denial of the allegations. Both brothers asked that the complaint be dismissed with costs.
Motions to dismiss
Mr. Wile filed his motion to dismiss the case on Sept. 2, 2009. In it, he notes that the SEC waited five years, until just before the expiration of the statute of limitations, to file the suit. Then, on the eve of the discovery deadline, it finally served him with the complaint. He says that because of the SEC's procrastination, it is virtually impossible to properly defend himself.
Now, Mr. Wile's lawyers must examine the substantial evidence in the case while facing a discovery deadline of Dec. 18, 2009. He says the SEC's evidence includes 12,000 documents, including 30 transcripts of testimony. Additionally, LOM has produced 1,500 documents totalling 6,400 pages. "With only a few months to go before the close of discovery, and seven years since the conduct complained of allegedly occurred, to require Wile to now defend himself, given the Commission's actions (and inactions) would be grossly unjust and inequitable," the motion reads. He says that the complaint should be dismissed for failure to prosecute and for failure to make timely and sufficient service.
Mr. Wew, in his motion, repeats the same argument. He adds that the SEC illegally served him via e-mail in Switzerland, where he is now a citizen. He says such service is not permitted in Switzerland, because it is seen as circumventing the jurisdiction of local authorities. As a result, any judgment obtained by the SEC would not be enforceable in that country.
The judge has not yet set a date to hear the motions.
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