SEC target Wile loses motion to dismiss
2009-10-06 14:33 ET - Street Wire
by Mike Caswell
West Vancouver promoter Anthony Wile has lost his motion to have civil fraud charges in New York dismissed. Mr. Wile had sought to have a market manipulation case dismissed on the grounds that the SEC took five years to file it, and then another 1-1/2 years to serve him. Judge Denise Cote, in a decision dated Sept. 30, 2009, has found that the SEC was reasonably diligent in efforts to locate Mr. Wile and serve him with its complaint. The charges are for the manipulation of Sedona Software Solutions Inc. in 2003. The SEC initially filed the suit on Dec. 19, 2007, but it was unable to serve Mr. Wile. A process server could not get past the walls and a gate at Mr. Wile's home, and an investigator was unable to observe anybody matching Mr. Wile's description entering the house. The SEC was only able to serve Mr. Wile on Aug. 29, 2009, after the judge granted special permission to serve him by e-mail and courier. Shortly after receiving the complaint, Mr. Wile filed a motion to have it dismissed.
Judge Cote's decision
Judge Cote, in denying that motion, says it is not appropriate to dismiss the case given that Mr. Wile has known about it since early 2008. She says he chose to gamble that the SEC would be unable to find and serve him. "While Wile was entitled to make that choice, it ill behooves him to complain of the delay in service in such circumstances," the decision reads.
The judge's decision contains a brief history of the events leading up to the motion. Prior to filing the initial complaint, the SEC had been in communication with Mr. Wile's lawyer, Leonard Bloom of Miami, about the possibility of charging him for manipulating Sedona. Mr. Bloom responded to the potential lawsuit with two Wells submissions, documents in which a potential defendant is permitted to argue his side of the case before charges are filed. In some instances, this persuades the SEC that a suit is not necessary.
In Mr. Wile's case, the submissions did not prevent charges. The SEC filed the complaint against him and others on Dec. 19, 2007. After filing the case, the SEC approached Mr. Bloom, and asked if he would accept service on Mr. Wile's behalf. Mr. Bloom said he was not authorized to do so, and refused to provide the SEC with Mr. Wile's address.
The judge has ruled that the SEC's subsequent efforts to to locate and serve Mr. Wile were appropriately diligent. The delay in serving him was caused by circumstances outside of the SEC's control, including the fact that Mr. Wile moved out of the United States. (He previously lived in Boca Raton, Fla.)
In addition, Judge Cote says Mr. Wile has presented little evidence showing that the delay caused him any serious prejudice. For example, he argued that lawyers for the SEC and the other defendants interviewed three witnesses in Canada recently without his participation. He did not, however, identify any question that he would have asked the witness that the other lawyers did not ask.
In addition to rejecting Mr. Wile's motion, Judge Cote has denied a motion to dismiss filed by Mr. Wile's uncle, Wayne Wew (formerly known as Wayne Wile). Mr. Wew had sought to have the case thrown out on similar grounds. The judge rejected his motion on Oct. 2, 2009.
SEC's complaint
The SEC's complaint, filed on Dec. 19, 2007, in the Southern District of New York, claimed that Mr. Wile and others manipulated the market for Sedona and another company, SHEP Technologies Inc. In addition to Mr. Wile and Mr. Wew, the complaint named as defendants Scott and Brian Lines of Bermuda brokerage LOM (Holdings) Ltd.; Vancouver residents Scott Peever and William Curtis; and newsletter writer Robert Chapman. The SEC claimed the men grossed $1.5-million from the Sedona scheme and $4.3-million from SHEP. (All figures are in U.S. dollars.)
The case against Mr. Wile was for the Sedona manipulation. According to the complaint, he issued a series of misleading news releases in January, 2003, for his private company, Renaissance Mining Corp., which was to merge with Sedona. He claimed that Renaissance had acquired producing gold mines in Central South America, the SEC said.
Mr. Wile also recruited several tout sheet authors to repeat those claims, the complaint stated. The only author the SEC named was Mr. Chapman, who purported to be an independent mining analyst. He projected the stock would hit $62. The SEC said Mr. Chapman failed to disclose that he had bought 300,000 shares of the company at 25 cents.
Sedona and Renaissance merged in January, 2003, and the combined company began trading on Jan. 23, 2003. Mr. Wew and the Lines brothers then carried out a series of manipulative trades, according to the complaint. At 9:12 a.m., LOM placed an order to sell 20,000 shares at $9. Thirteen minutes later, Mr. Wew placed an order to buy 5,000 shares at $8.25, the SEC alleged. The activity was unusual, because the stock had last traded at three cents. In the six days after that, the Lines brothers sold 159,300 shares at prices between $9 and $10, the SEC claimed. They had purchased those shares earlier for seven cents.
The SEC halted Sedona on Jan. 29, 2003, citing concerns about the accuracy of its publicly available information. When it resumed trading two weeks later, Sedona quickly fell under $1.
The SHEP manipulation was somewhat similar. Ahead of that manipulation, Mr. Peever, Mr. Curtis and the Lines brothers acquired nine million of the company's shares, or 80 per cent of its tradable stock, the SEC claimed. Then, several paid touts issued recommendations to buy the company. They said its product, a new form of car brakes, was a "billion dollar royalty gusher." The tout sheets failed to disclose that Mr. Peever and Mr. Curtis had paid for the coverage, and that they planned to sell their shares, according to the complaint.
The SHEP scheme continued through the first half of 2003, the SEC claimed. During that time, Mr. Peever, Mr. Curtis and the Lines brothers allegedly sold three million shares. The SEC said they did not report those sales.
The SEC sought orders permanently banning all of the men from participating in penny stock offerings, as well as appropriate civil penalties and disgorgement.
Mr. Peever and Mr. Curtis, without admitting any wrongdoing, settled the case without a trial on Sept. 22, 2008. They agreed to penny stock bans and to financial penalties to be determined by the judge.
The Lines brothers, meanwhile, are fighting the case. They filed separate answers on May 16, 2008, denying any wrongdoing. Scott Lines admitted that accounts at LOM held shares of SHEP, but said they were not held for his benefit.
The judge has not yet set a trial date in the case
