SEC: Ex-Rocky Mountain Energy CEO Manipulated Co Stock
Thursday, April 3, 2003 07:04 PM ET
Dow Jones Newswires
WASHINGTON -- The Securities and Exchange Commission said it obtained an emergency court order Thursday against the former chief executive of Rocky Mountain Energy Corp. (RMEC, news) for allegedly manipulating the company's stock.
A U.S. District Judge in Houston issued a temporary restraining order against the company, John Ehrman and the company's general counsel W. Roderick Johnson, ordering them to halt the alleged stock scam. The judge also froze the company's and Mr. Ehrman's assets.
Rocky Mountain Energy announced Wednesday that it replaced John Ehrman as its chief executive with Michel Clerin who isn't named in the complaint.
According to the SEC, Mr. Ehrman issued "a stream of glowing but false and misleading press releases to artificially inflate the price and trading volume of the company's stock."
The press releases allegedly said the company had made several acquisitions of valuable oil-and-gas properties. Another statement, issued on March 31, claimed that the company acquired assets that had the ability and experience in putting out oil well fires and was "in current negotiations to send oil well fire fighters to the Gulf Region," the SEC said.
However, the agency contends that Rocky Mountain didn't have the assets nor the financing to complete any of the reported acquisitions.
Mr. Ehrman was previously sued by the SEC in the early 1990s over an alleged fraudulent oil-and-gas scheme. He was permanently barred from certain segments of the securities industry, the SEC said.
Spencer Barasch, an associate administrator in the SEC's Fort Worth office, said "it's particularly troublesome that Ehrman didn't get the message the first time the SEC sued him, but we intend to ensure he gets the message this time."
In addition to the asset freeze, the SEC said it will seek an order to have Messrs. Ehrman and Johnson give up any ill-gotten gains plus fines and an order barring Mr. Ehrman from acting as an officer of a public company. Mr. Barasch also said the SEC is seeking an order to permanently prohibit both men from trading in penny stocks.
In the SEC complaint, the agency alleges that Messrs. Ehrman and Johnson controlled 50% of Rocky Mountain Energy shares, and dumped more than $800,000 worth of the company's stock into the market since July 2002 at artificially inflated prices.
In carrying out the fraud Messrs. Ehrman and Johnson filed false corporate reports and registration statements with the SEC, the agency said. Among other things, the filings misrepresented Messrs. Ehrman and Johnson's ownership and sale of about 31 million company shares, the SEC alleged.
Mr. Barasch said the SEC hoped the asset freeze would result in the recovery of the $800,000. But he couldn't provide a dollar amount at this time, explaining that the agency is now in the process of notifying banks about the asset freeze.
Mr. Ehrman's attorney wasn't immediately available to comment and Mr. Johnson doesn't yet have legal representation.
A message left for Mr. Johnson wasn't immediately returned and calls to the company went unanswered.
Mr. Barasch said that the SEC wouldn't halt trading in the company's stock, but would notify market makers of the litigation.
-By Phil McCarty, Dow Jones Newswires; 202-862-9251; Phil.McCarty@dowjones.com
Dow Jones Newswires
04-03-03 1904ET
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