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Unofficial and Partial copy of Complaint |
SECURITIES AND EXCHANGE COMMISSION
THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
:
Securities and Exchange Commission, :
: 00 Civ. _________
Plaintiff, :
:
v. : COMPLAINT
:
James Sheret, Jr. and Glenn E. Conley, :
:
Defendants. :
:
Plaintiff Securities and Exchange Commission (“Commission”), for its complaint alleges as follows:
SUMMARY
1. From at least November 23, 1999, James Sheret, Jr. and Glenn Conley engaged in multiple fraudulent and deceptive schemes to profit from their touting and trading of the stocks of thinly traded public companies. To accomplish their schemes, they sent to numerous individuals nationwide at least 76 different “spam” e-mail messages touting the stock of the 57 public companies which are identified in “Appendix A”, attached hereto and incorporated herein by reference. All but one of these unsolicited e-mail messages prominently contained the heading “AOL Investment Snapshot” followed by a recommendation that the stock be bought because it was “on the rise”. AOL Investment Snapshot is a name that has been trademarked by America Online, Inc. (“AOL”), which at no time authorized Sheret or Conley to use the trademark. Shortly before sending the e-mails, Sheret and Conley bought large blocks of at least 34 of the touted stocks, creating the appearance of public demand for these stocks. Those stocks and pertinent information regarding trading in those stocks is set forth in “Appendix B”, which is attached hereto and incorporated herein by reference. Following their touts, the prices and volumes of nearly all of the 57 touted stocks increased significantly in the short term, and Sheret and Conley sold their personal holdings at the manipulated prices. Through this trading Sheret realized profits of at least $309,705, Conley realized profits of at least $21,990, and they realized additional profits of at least $7,627 trading in an account that they held jointly.
2. Defendants Sheret and Conley, directly and indirectly, have engaged in, and unless restrained and enjoined by this Court will engage in, transactions, acts, practices, and courses of business that violate Section 10(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) [15 U.S.C. § 78j(b) and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
JURISDICTION AND VENUE
3. The Commission brings this action pursuant to the authority conferred upon it by Section 21(d) and (e) of the Exchange Act [15 U.S.C. §§ 78u(d) and (e)] for an order permanently restraining and enjoining Defendants and granting other equitable relief.
4. This Court has jurisdiction over this action pursuant to Sections 21(e) and 27 of the Exchange Act [15 U.S.C. §§78u(e) and 78aa]. In connection with the transactions, acts, practices, and courses of business described in this Complaint, each of the Defendants, directly and indirectly, has made use of the means or instrumentalities of interstate commerce, of the mails, and/or of the means and instruments of transportation or communication in interstate commerce.
5. Venue lies in this Court pursuant to Section 27 of the Exchange Act because certain of the transactions, acts, practices and courses of business constituting the violations of law alleged herein occurred within this judicial district.
THE DEFENDANTS
6. James Sheret, Jr., age 30, resides in Bayside, New York.
7. Glenn E. Conley, age 30, resides near Portland, Oregon.
FACTS
8. From at least November 23, 1999 Sheret and Conley, separately or in combination, disseminated over the Internet at least 76 unsolicited e-mail messages that recommended the purchase of the stocks of at least 57 thinly traded public companies, which are identified in Appendix A.
9. The prices of these stocks were quoted on the Bulletin Board (a service of the Nasdaq Stock Market, Inc.) or on the National Quotation Bureau’s Pink Sheets.
10. Sheret and Conley disseminated these messages through accounts with at least 20 different Internet service providers located throughout the United States.
11. Sheret and Conley provided false names, addresses and credit card numbers to some of the Internet service providers used to transmit the messages.
12. Each of the e-mail messages disseminated by Sheret and/or Conley was transmitted to AOL subscribers. All but one of the messages contained “AOL Investment Snapshot” in colored large type. All of the messages recommended the touted stock(s) as the “pick(s) of the day”, “today’s stock pick”, “penny stock pick” or “microcap stock pick” and stated a “target price” for the stock representing, in most cases, a significant increase from the current price of the stock.
13. AOL uses “AOL Investment Snapshot,” a name that has been trademarked by AOL, to describe a propriety financial information service offered to its investor subscribers.
14. None of the messages indicated that Sheret, Conley or any person or entity other than AOL was responsible for the “stock pick of the day”.
15. The messages did not originate from AOL or any of its employees.
16. AOL did not authorize Sheret or Conley to use “AOL Investment Snapshot.”
17. Thus, all such messages were materially false and misleading.
18. By using “AOL Investment Snapshot” Sheret and/or Conley knowingly or recklessly misled investors by giving the false impression that the e-mail recommendations emanated from, or were endorsed by, AOL.
19. Each of the e-mails disseminated by Sheret and/or Conley stated at the conclusion of the message: “take a close look at this stock, it’s on the rise!”
20. Sheret or/and Conley made large open market purchases of at least 34 of the touted stocks within days prior to recommending their purchases as more fully described in Appendix B.
21. Defendants’ statements that the stocks were on the rise were materially misleading concerning at least 14 of the 34 previously purchased stocks because Sheret and/or Conley failed to disclose that price and/or volume increases shortly before dissemination of the e-mail messages were caused principally by large open market purchases of the stocks made by one or both defendants.
22. The defendants made these false and misleading statements knowingly or with reckless disregard of their truth.
23. Defendants’ purchases of these stocks were made with manipulative intent or with reckless disregard of the manipulative effect of creating apparent demand for the stocks.
24. Some of the messages suggested a communication between two friends that was inadvertently misdirected (e.g., “Hey Bob...This STOCK is gonna BLOW UP!”).
25. This suggestion was materially false since the same message was delivered to a large number of people on an unsolicited basis and was made by these defendants knowingly or with reckless disregard for its truth.
26. These fraudulent schemes, as set forth above in paragraphs 8 through 25 enabled Sheret and Conley to sell, in many cases at a substantial profit, the 34 previously purchased stocks shortly after disseminating the related e-mail messages.
27. By virtue of the conduct set forth above in paragraphs 8 through 26, defendants manipulated the market price of each of those 57 securities identified in Appendix A and did so with knowingly or with reckless disregard for the manipulative impact their conduct would have upon the market prices of these securities.
29. Sheret realized profits of at least $309,705 from buying and selling recommended stocks.
30. Conley realized profits of at least $21,990 from buying and selling recommended stocks.
31. Sheret and Conley jointly realized profits of, at least, $7,627 from buying and selling recommended stocks in a joint account.
CLAIM FOR RELIEF
(Violations by Defendants Sheret and Conley of Section 10(b) of the Exchange Act and Rule 10b-5 [15 U.S.C. § 78 j(b) and 17 C.F.R. § 240.10b-5])
32. Paragraphs 1 through 31 are hereby realleged and incorporated by reference.
33. Defendants Sheret and Conley directly and indirectly, with scienter, in connection with the purchase or sale of securities, by use of the means or instrumentalities of interstate commerce or by use of the mails, have employed devices, schemes, or artifices to defraud; have made untrue statements of material fact or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or have engaged in acts, practices, or courses of business which have been and are operating as a fraud or deceit upon the purchasers or sellers of such securities.
34. By reason of the foregoing, Sheret and Conley violated, are violating, and unless restrained and enjoined will violate Section 10(b) of the Exchange Act and Rule 10b-5.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court:
I.
Find that the Defendants, and each of them, committed the violations alleged.
II.
Enter an Injunction, in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining each defendant and persons in active concert or participation with them, from violating, directly or indirectly, the provisions of law and rules alleged in this complaint.
III.
Order defendants and their agents, servants, employees and attorneys to account for and disgorge all ill-gotten gains received or benefits in any form derived from the illegal conduct alleged in this Complaint, together with pre-judgment and post-judgment interest as provided by law.
IV.
Order defendants to pay civil penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] and Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] in an amount to be determined by the Court.
V.
Grant such other relief as this Court may deem just or appropriate.
PLAINTIFF SECURITIES AND EXCHANGE COMMISSION HEREBY DEMANDS TRIAL OF ITS CLAIMS BY JURY.
Dated: February 24, 2000
Respectfully submitted,