SEC target Peever says U.S. judgment not enforceable
2012-01-12 13:58 ET - Street Wire
by Mike Caswell
Vancouver promoter William Todd Peever, who is facing a $4.5-million collection lawsuit in B.C. from the U.S. Securities and Exchange Commission, says U.S. laws are not enforceable in B.C. courts. (All figures are in U.S. dollars.) Mr. Peever argues that the SEC is improperly asking the B.C. courts to enforce "foreign penal laws."
Mr. Peever is responding to a lawsuit he faces in the Supreme Court of British Columbia, in which the SEC is seeking a local judgment to collect fines that Mr. Peever and another Vancouver promoter, Phillip Curtis, agreed to pay in August, 2008. The fines stemmed from the 2003 manipulation of SHEP Technologies Inc., an OTC Bulletin Board company that purportedly had a new form of anti-lock brakes. According to the SEC, Mr. Peever, Mr. Curtis and others secretly sold three million shares of the company after paying for favourable coverage in tout sheets. They made $3.1-million from the scheme. Without admitting any wrongdoing, Mr. Peever and Mr. Curtis agreed to permanent penny stock bans and fines to settle the allegations.
The SEC claims that neither man has since paid the fines. In a brief notice of claim filed at the Vancouver courthouse on Nov. 25, 2011, the regulator sought enforcement orders against the men, who the SEC listed as residents of West Vancouver and New Westminster. The brief claim said little else, other than a brief summary of the allegations.
Mr. Peever's Jan. 10 response to the claim is equally brief. In it, he admits that he consented to the U.S. judgment, and he then repeats more than once his contention that U.S. laws are not enforceable in B.C. courts. He provides no basis for his argument. Vancouver lawyer Paul Hilderand of Wilcox & Company Corp. filed the response on Mr. Peever's behalf.
The SHEP Technologies case
Full details of the case against Mr. Peever and Mr. Curtis are contained in a civil complaint that the SEC filed on Dec. 19, 2007, in the Southern District of New York. The defendants included Bermuda brokerage LOM (Holdings) Ltd. and its principals, brothers Scott and Brian Lines, as well as Florida newsletter writer Robert Chapman.
The SHEP scheme, as described by the complaint, began in January, 2002, when Mr. Peever and Mr. Curtis acquired an undisclosed 83-per-cent interest in a SHEP predecessor for $400,000. They concealed their ownership using accounts at LOM that Brian Lines provided. In February, 2003, they began paying for favourable coverage in tout sheets, including an electronic newsletter called the OTC Journal, the SEC said. In a March 29, 2003, report, it stated, "If you want upside potential in a microcap, you won't find any story more exciting."
Another tout sheet they paid for, called The Intrepid Investor, promoted the stock through hard copy newsletters sent to about one million potential investors. It claimed that the company was "on the edge of a potential BILLION DOLLAR ROYALTY GUSHER." Neither sheet disclosed that Mr. Peever and Mr. Curtis paid for the touting and that they intended to sell their stock.
Despite the favourable coverage, the promotion had a slow start, the SEC said. The complaint quoted a Feb. 24, 2003, phone call in which Mr. Peever complained to Scott Lines about shorters. "Jesus Christ ... we haven't sold a fucking share," he said. "I mean [OTC Journal's publisher] I think just brought the fucking shorts to us."
Scott Lines later assured him that the shorting troubles would end, saying: "Give them a day. I mean, fuck, if they get shorter today, you get more buying and then I think ... they'll start covering. They'll have to cover up because they don't want to be short at the end of the month." (It is not entirely clear where the phone transcripts came from. Evidence presented early in the case indicated that LOM had an internal system that recorded some phone conversations.)
As Scott Lines predicted, the promotion went smoother in the following months. According to the complaint, Mr. Peever, Mr. Curtis and the Lines brothers were able to sell three million shares between February and June, 2003. (The stock hit a $2.98 high in June, 2003, and fell to 55.5 cents by the end of the year. It was last at 0.01 cent.)
In addition to the SHEP manipulation, the complaint described another Vancouver-linked manipulation that included the Lines brothers, that of Sedona Software Solutions Inc. While the SEC made no allegations against Mr. Peever and Mr. Curtis for that promotion, it said that Vancouver's Anthony Wile and his uncle, Wayne Wew, both had roles. The SEC claimed that Mr. Wile helped manipulate the stock to $10 in 2003 with misleading news and paid touts. The Lines brothers then sold $1.4-million worth of stock, the complaint stated.
Settlements
The case is now finished, at least in New York, with the SEC having settled or obtained default judgments against all of the defendants. Mr. Wile agreed to pay $35,000 and to serve a five-year officer and director ban. The Lines brothers agreed to disgorge $1.2-million "representing profits gained as a result of the conduct alleged in the Complaint" and to pay $654,000 in interest. The penalties applied to them and to various LOM-connected entities. None of the men admitted to any wrongdoing.
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