U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20080 / April 18, 2007 SEC v. Aquacell Batteries, Inc. and Michael J. Naste, Civil Action No. 6:07-CV-0608-ORL-22-DAB (M.D. Fla.) SEC Obtains Order Halting $4.7 Million Offering Fraud The Securities and Exchange Commission ("Commission") announced today that on April 13, 2007 it filed an emergency action to halt an ongoing fraud involving the sale of stock and loan agreements by Aquacell Batteries, Inc. ("Aquacell"), and its principal, Michael J. Naste, a resident of New Smyrna Beach, Florida. The Commission charged Aquacell and Naste, and also charged as Aquacell Batteries Florida, Inc., Eternergy, Inc., Gaming Software Corporation (f/k/a Bet-Net Enterprises, Inc.), Gaming Software International, Godfather's, Inc., Mighty Muscle Cars, Inc., Hollywood Movie Hair Products, Inc. (collectively "relief defendants"), shell companies controlled by Naste into which Naste improperly funneled investor funds. Acting on the Commission's request for emergency relief, on April 14, 2007, Judge Ann Conway of the United States District Court for the Middle District of Florida issued temporary restraining orders, asset freezes and other relief against the defendants. The Court also appointed Michael L. Gore, Esq. as Receiver over Aquacell and the relief defendants.
The Commission's complaint alleges that, from at least May 2002 through the present, the defendants raised at least $4.7 million from over 35 investors nationwide by conducting a fraudulent offering of securities of Aquacell, a New Smyrna Beach company purportedly in the business of developing and marketing alternative energy sources and products. According to the complaint, the defendants falsely claimed to have an experienced management team and a highly-qualified staff of scientists and engineers; to have developed a new energy source that which will replace oil, gas, coal and other sources of energy within 15 years, among other breakthrough products; and to have extremely lucrative licensing and development opportunities. Defendants' claims were patently false because Aquacell has no management team or employees other than Naste, and no patents, licenses, contracts or products. Additionally, the complaint alleges that the defendants have failed to disclose to investors that the state of Pennsylvania issued cease-and-desist orders and a bar against them for state securities violations. Moreover, contrary to defendants' assurances that they would use investor funds to expand Aquacell's research and development facility and bring Aquacell's products to market, the complaint alleges that Naste has misappropriated millions of dollars in investors' funds to bankroll his lavish lifestyle, and has funneled hundreds of thousands of dollars to his family and to accounts he controls.
The Commission's complaint alleges that Aquacell and Naste violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court's April 14 Order provides that the temporary restraining order and asset freeze would remain in effect until April 24, 2007, at which time the Court scheduled a hearing on the Commission's motion for a preliminary injunction. In addition to the interim relief already granted by the Court, the Commission seeks a final judgment against the defendants enjoining them from future violations of the foregoing antifraud and securities registration laws, ordering them to disgorge all ill-gotten gains, and assessing civil penalties.
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20079 / April 18, 2007 SEC v. Kevin J. Heron, United States District Court for the Eastern District of Pennsylvania, Civil Action No. 07-cv-01542-HB SEC Charges Former General Counsel of Amkor Technology, Inc. with Insider Trading The Securities and Exchange Commission today filed a civil injunctive action against Kevin J. Heron of Phoenixville, Pennsylvania, the former general counsel, corporate secretary, and chief insider trading compliance officer of Amkor Technology, Inc. The Commission's complaint alleges that from October 2003 through June 2004, Heron engaged in a pattern of insider trading by trading in Amkor securities prior to five Amkor public announcements relating to financial results and company business transactions. During this period, Heron executed more than fifty illegal trades in Amkor stock and options on the basis of material, nonpublic information that Heron had learned as a result of his position as general counsel. Heron executed nearly all of these illegal trades while he and other company employees were subject to company blackout periods that prohibited them from trading in Amkor stock. Even though Heron was the person at Amkor who was responsible for administering these blackout periods, Heron routinely violated Amkor's blackout periods by trading on inside information. Heron's trading yielded profits, and losses avoided, totalling approximately $290,000. Heron was terminated from his positions at Amkor in September 2005.
Heron is charged with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, which are the general antifraud provisions of the federal securities laws. The Commission is seeking injunctive relief, disgorgement, and money penalties against Heron, as well as an order prohibiting Heron from serving as an officer or director of a public company.
The Commission acknowledges the assistance of the United States Attorney's Office for the Eastern District of Pennsylvania and the Federal Bureau of Investigation, which conducted their own separate, parallel investigation resulting in criminal charges against Kevin Heron.
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20078 / April 18, 2007 SEC v. Concorde America, Inc., et al., Civil Action No. 05-80128-CIV-ZLOCH (S.D. Fla.). Final Judgments of Permanent Injunction Entered Against Defendants Paul A. Spreadbury, Concorde America, Inc. and Hartley Lord The Securities and Exchange Commission announced that on February 9, 2007 and February 12, 2007, Chief Judge William J. Zloch, United States District Judge for the Southern District of Florida entered Final Judgments of Permanent Injunction and Other Relief against Defendants Paul A. Spreadbury, Concorde America, Inc. and Hartley Lord, respectively. The Final Judgments, which were entered with the consents of the Defendants, enjoin them from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Final Judgments against Spreadbury and Lord permanently enjoin them from participating in a penny stock offering. In addition, Lord is enjoined from acting as an officer or director of a public company. The Court also ordered disgorgement, prejudgment interest and civil penalties against each of the defendants in amounts to be determined by the Court upon the Commission's motion.
The Commission commenced this action by filing its complaint on February 14, 2005, against Spreadbury, Concorde and Lord, among others.
For additional information, see Litigation Release No. 19085 (February 16, 2005) and Release No. 19948 (December 18, 2006).
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20077 / April 18, 2007 SEC v. Nu Star Holdings, Inc. et al., Civil Action No. 2:07-cv-00506-LDG-RJJ (D. Nev.) SEC Sues Recidivists Gerald and Marie Levine and Others for Fraudulent Scheme Involving Sale of Shares in Nu Star Holdings, Inc., and Other "Pink Sheet" Companies Fraudulent Sales Accomplished Through Boiler Room Operations On April 17, 2007, the Securities and Exchange Commission filed a civil fraud action against Nu Star Holdings, Inc. ("Nu Star"), seven individuals and four relief defendants. According to the complaint, Nu Star, recidivists Gerald and Marie Levine, along with Alan Copeland, Mary Ann Metz, Darin Metz and Isaac Morley, engaged in a fraudulent scheme to sell shares of Nu Star and other "Pink Sheet" companies to innocent investors. The complaint alleges that from late 2003 through 2005, certain of the defendants established "boiler rooms" in Barcelona, Spain and Santa Ana, California to sell shares of the relevant companies primarily to overseas investors. The complaint also states that defendants Gerald and Marie Levine and Bruce Rothenberg sold Nu Star stock to several investors in western New York. The complaint alleges that the defendants' fraudulent conduct resulted in sales of securities of at least $4 million, and that four entities controlled by the Levines and the Metzes, Wire to Wire, Inc., Public Highway, Inc., the 1975 Trust and Global Environmental Systems, Inc., received proceeds from the fraudulent stock sales.
The complaint alleges that to induce investors to buy shares of Nu Star, the defendants artificially inflated its share price through numerous, small-volume purchases of its stock, and then offered Nu Star's shares to the public at a purported "discount" to the "market" price. The complaint further alleges that the defendants made false statements about Nu Star by issuing a fabricated "independent" research report recommending that investors buy Nu Star, preparing company reports that far overstated its prospects, and failing to disclose that commissions for boiler room sales of Nu Star and other companies were as high as 70 percent of the purchase price of the stocks. In addition to the anti-fraud violations charges, the Commission's complaint charges Gerald and Marie Levine, Mary Ann Metz and Isaac Morley with selling shares of Nu Star without complying with the registration provisions of the federal securities laws, and Gerald and Marie Levine and Bruce Rothenberg with acting as unregistered brokers in selling shares of Nu Star. Specifically, the complaint charges that Nu Star, Gerald Levine, Marie Levine, Alan Copeland, Isaac Morley, Mary Ann Metz and Darin Metz violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also charges that Nu Star, Gerald Levine, Marie Levine, Alan Copeland, Isaac Morley and Mary Ann Metz violated Sections 17(a)(1), (2) and (3) of the Securities Act of 1933 ("Securities Act"). The complaint also charges that Nu Star, Gerald Levine, Marie Levine, Isaac Morley and Mary Ann Metz violated Sections 5(a) and (c) of the Securities Act. Finally, the complaint charges that Gerald Levine, Marie Levine and Bruce Rothenberg violated Section 15(a) of the Exchange Act.
The Commission seeks permanent injunctions, disgorgement with prejudgment interest and civil money penalties against Nu Star and each individual defendant. The Commission also seeks penny stock bars against each individual defendant. Additionally, the Commission seeks officer and director bars against Gerald and Marie Levine, Alan Copeland, Mary Ann Metz, Darin Metz and Isaac Morley. Finally, the Commission seeks disgorgement with prejudgment interest from the four relief defendants.
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