Cartel Blue Inc (CRTL)

[knight247]

http://www.journalgazette.net/article/20090929/BIZ/309299941/1031/BIZ



SEC targets local firm in fraud probe

Alleges sales of unregistered stock

Marty Schladen | The Journal Gazette



Fort Wayne – The Securities and Exchange Commission has accused four companies, including a Fort Wayne firm, of defrauding investors by selling billions of unregistered stocks.

Enzyme Environmental Solutions Inc. and CEO Jared E. Hochstedler are accused of taking about $600,000 in cash payments in exchange for issuing 1.8 billion shares of stock to the companies that made the payments. The companies then sold the stocks to the investing public for $4.9 million, the complaint says.

Because the stocks weren’t registered with the SEC, Enzyme Environmental didn’t disclose important financial information – such as the effect issuing more than a billion shares might have on the stock’s value, the complaint says.

“When you register, the public has information it can rely on when making an investment decision,” said Paul A. Montoya, assistant director of the SEC’s Chicago office.

Enzyme is cooperating with the investigation, but it’s too soon to respond to the SEC’s allegations, said Dan Bobilya, an attorney hired to represent the company in court.

Revenge Designs Inc., a Decatur company that makes custom cars, also is named in the complaint, but it’s not named as a defendant.

Montoya said the investigation is continuing. Revenge Designs didn’t return calls Monday.

Last Wednesday, the SEC sued the companies and asked for the temporary restraining order.

The SEC is asking the court to bar the defendants from selling penny stocks, freeze their assets and order them to repatriate monies that have been moved offshore.

The agency doesn’t have the authority to bring criminal charges and Montoya declined to say whether a criminal investigation is under way.

Also named in the suit is a former Fort Wayne resident, Stephen W. Carnes, 45, of Apopka, Fla. Two companies he runs, Signature Leisure Inc. and Signature Worldwide Advisors LLC, also are named. Carnes didn’t return phone calls for this story.

Signature Worldwide and another firm, K&L International Enterprises Inc., are accused of making payments to Hochstedler and Enzyme Environmental between February 2008 and June in exchange for almost 2 billion shares of Enzyme stock.

It’s common for the SEC to accuse businesses and individuals of defrauding investors, Montoya said. But one of the two schemes alleged in the complaint filed last week was new to him.

The deals between Enzyme, K&L and Signature Worldwide are described in the SEC complaint as “wrap-around” agreements.

Hochstedler, 33, said his company, Enzyme Environmental, owed him $916,000. K&L and Signature Worldwide agreed to pay $650,000 of that, but ended up paying a little less than $600,000, the SEC said.

Under a “convertibility agreement,” K&L and Signature Worldwide could convert the debt to stock at a discount, which they did before selling the stocks for $4.9 million, the complaint says.

K&L is accused of employing another scheme with Revenge Designs. Between September 2007 and January 2008, K&L lent Revenge $425,000 in the form of promissory notes. The agreement allowed K&L to covert the debt into 352 million shares of Revenge stock, which it sold to the public, yielding a profit of almost $1 million, the complaint says.

Altogether, the schemes alleged in the complaint yielded more than $7 million in illegal profits in two years, the SEC said.

Enzyme Environmental, which sells cleaning products, in April said it was entertaining a buyout offer from a much larger company. Bobilya, an attorney for the company, said he doesn’t think that was an attempt to pump up the stock price.

“We have been told that there were more than two buyout offers,” Bobilya said.



[e-mail]


I guess revenge is still in limbo lmao