Business
SEC Litigation Release No. 20673 / August 7, 2008
SEC Litigation Release No. 20673 / August 7, 2008.
About this update from Zann Corp.
[{"type":"text","content":"U.S. SECURITIES AND EXCHANGE COMMISSIONLitigation Release No. 20673 / August 7, 2008SEC v. Angel Acquisition Corp., et al., Case No. SACV 08-880 JVS (ANx) (C.D. Cal.)SEC v. Global Materials & Services, Inc., et al., Case No. SACV 08-881 DOC (RNBx) (C.D. Cal.)SEC Charges Six Microcap Companies, Four Officers and Four Sham Consultants for Improperly Raising Capital By Abusing Form S-8On August 6, 2008, the Securities and Exchange Commission filed two separate complaints in the U.S. District Court for the Central District of California against six microcap companies, four officers and four sham consultants for engaging in unregistered public offerings that dumped billions of shares on the market through so-called employee stock option and consulting programs.In SEC v. Angel Acquisition Corp., et al., the Commission alleges that five companies -- NW Tech Capital, Inc. (NW Tech), Marshall Holdings International, Inc. (Marshall Holdings), Angel Acquisition Corp. (AAC), Winsted Holdings, Inc. (Winsted Holdings) and Zann Corp. -- violated Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act) when they improperly registered shares issued under their employee stock option programs on Form S-8 registration statements and then received at least 85% of the proceeds from the shares' sales as payment for the options' exercise price. The Commission also alleges that Marshall Holdings' officers, Richard A. Bailey and Florian R. Ternes, and Winsted Holdings' former officer, Mark T. Ellis, violated Section 5 when they implemented and administered their companies' employee stock option programs. Form S-8 statements may be used to register shares issued to compensate employees and consultants and have abbreviated disclosure requirements as compared to statements registering shares used to raise capital. According to the complaints, however, the programs functioned as public offerings in which the companies used their employees as conduits to the market so that they could raise capital without complying with the registration provisions.The complaints further allege that the companies' programs had features that, taken together, virtually guaranteed that the options would be exercised and the underlying shares simultaneously sold to the public at or near the time the options were granted. First, the options' exercise price, which was t...