HUMMM Slap on wrist - NOT ALWAYS. Loving this one. He who lauigh last..........
SEC's case against Wile, Lines set for Oct. 12
2010-07-07 15:30 AT - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
The U.S. Securities and Exchange Commission's market manipulation case against West Vancouver promoter Anthony Wile, his uncle Wayne Wew and the Lines brothers of Bermuda has been scheduled for trial by jury. The hearing will start on Oct. 12, 2010, at 9:30 a.m. in New York. At trial, SEC lawyers will argue that the men manipulated Vancouver-based Sedona Software Solutions Inc. to $10 with misleading news releases and paid touts, and that the Lines brothers sold $1.5-million worth of stock. (All figures are in U.S. dollars.)
The trial date comes after the judge rejected motions by Mr. Wile and the Lines brothers to have the majority of the SEC's case thrown out. They unsuccessfully argued that there was no evidence that they did anything wrong, and claimed that Sedona's news accurately described a deal to acquire mining properties in South America. They said that that the SEC contributed to that deal's failure by halting the stock. The judge denied their motions in a June 23, 2010, decision, without giving any reasons.
SEC's complaint
The SEC launched the case on Dec. 19, 2007, when it filed a civil complaint in the Southern District of New York. The defendants included Mr. Wile, Mr. Wew, newsletter writer Bob Chapman, and Scott and Brian Lines. Also named was LOM (Holdings) Ltd., a Bermuda brokerage run by the Lines brothers.
According to the complaint, the Sedona manipulation took place in January, 2003, after the Lines brothers secretly acquired 99 per cent of the company's shares through nominees. The SEC said they enlisted friends to act as signature directors for offshore companies that bought the shares. The men then touted the company in news releases as a gold producer with the rights to three mines in South America. The SEC said the news was misleading, because Sedona had not actually closed its deal for the mines, and it still had to raise $6-million to satisfy the terms of the agreement.
The complaint also described how the Lines brothers and Mr. Wew carried out a prearranged trade on Jan. 21, 2003, in which Mr. Wew bought 5,000 shares at $8.25 from accounts the Lines brothers controlled. The stock had last traded at three cents. Over the next week, the Lines brothers sold 159,300 shares at prices between $9 and $10, the SEC said.
Fuelling demand for the stock, according to the SEC, were "independent" research reports that Mr. Wile paid for. The author of one of these reports was Mr. Chapman, who failed to disclose that he had bought 370,000 shares of the company under $1, the SEC said. He then predicted that Sedona would reach $62, touting it as "an incredible opportunity that could be the largest public offering in the United States for a mining company this year."
The promotion ended on Jan. 29, 2003, when the SEC halted the company, citing questions about the accuracy of its agreement to acquire rights to the mines. When it resumed trading two weeks later, Sedona fell under $1.
The SEC sought orders permanently banning all of the defendants from participating in penny stock offerings, as well as appropriate civil penalties and disgorgement of profits.
Motions to dismiss
The Lines brothers denied any wrongdoing, and filed a motion for summary judgment against the SEC on Feb. 1, 2010. In it, they asked the judge to dismiss most of the case on the grounds that the SEC had not provided sufficient evidence to show that the company's news was misleading.
According to the motion, the mines Sedona proposed acquiring were a valuable asset that had once belonged to Greenstone Resources Ltd., a public company that operated them during the 1990s. At one point it had a $1-billion market cap. Greenstone started having problems in 1999 when gold fell to $250 per ounce, and it eventually went bankrupt.
In 2002, Mr. Wile reached a deal to acquire a 90-per-cent interest in the mines through a private company called Renaissance Mining Corp. The terms called for Renaissance to obtain $5.5-million in financing, which it proposed raising by going public. The company would merge with Sedona in a reverse takeover.
Immediately after Sedona announced the agreement, the SEC began investigating. According to the motion, the regulator phoned Mr. Wile and Brian Lines as well as several investors. At least one investor was scared to the point where he immediately sold his shares, the motion stated. Seven days after the company announced the deal, the SEC issued the suspension order. With the stock halted and a major investigation under way, closing the deal became impossible, the Lines brothers said. The mines eventually went to RNC Gold Inc., a Toronto Stock Exchange listing that raised $30-million and was later taken over by Yamana Gold Inc.
Mr. Wile and Mr. Wew filed similar motions on Jan. 25, 2010, also asking the judge to dismiss the majority of the SEC's case.
Settlement talks
There remains the possibility that the men could reach a settlement before the trial. On July 2, 2010, the judge referred all sides to a magistrate judge to facilitate settlement discussions. Should those talks fail, the trial will begin as scheduled.
One of the defendants who will not be participating in the settlement talks or the trial is Mr. Chapman. On June 18, 2010, the SEC won a default judgement against the 72-year-old newsletter writer after he failed to respond to the suit. The judge banned him from penny stocks, and invited the SEC to file an application for appropriate civil penalties.
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