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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
EXCHANGE HEARTSOFT SHELL BUTLER SECURITIES DISTRICT COMPLAINT EXCHANGE ACT AGREEMENTS MARKET UNITED STATES EXCHANGE COMMISSION COMPLAINT ALLEGES MISLEADING SCHOOL DISTRICTS INTERNET FRAUD STOCK VIOLATING THEREUNDER ALLIANCES LICENSING AGREEMENT CHILD SAFE INTERNET WEB BROWSER SWEEP PURCHASE REPORTS AMOUNTS PROFITING ENJOINS |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16685/September 6, 2000
UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. HEARTSOFT, INC.,
BENJAMIN SHELL AND JIMMY BUTLER, Civil Action No. 00-CV-0766-B (M),
USDC (ND OK)
The Securities and Exchange Commission ("SEC") announced today that it
filed suit in the United States District Court for the Northern
District of Oklahoma against a publicly traded educational software
firm and its only two officers and directors. The SEC's Complaint
alleges that in early 1999 Heartsoft, Inc., Benjamin Shell, and Jimmy
Butler perpetrated an Internet "pump and dump" scheme in which the
defendants issued a series of fraudulent press releases that were
simultaneously posted on Heartsoft's website. The releases included a
myriad of false and misleading statements concerning the purported
"adoption" and "endorsement" of Heartsoft's Thinkology software by two
large school districts, foreign distribution agreements for the
software, "strategic business ventures and alliances" with various
Internet companies to market the software, and a licensing agreement
to develop a "child safe" Internet web browser. This action is part of
the fourth nationwide Internet fraud sweep conducted by the SEC since
October 1998.
The Complaint alleges that only certain schools within the two school
districts had purchased copies of Heartsoft's educational software and
there were no agreements to distribute Thinkology to foreign
countries. Moreover, the purported marketing alliances and business
ventures were nothing more than Heartsoft's purchase of advertisement
space in catalogs. Finally, Heartsoft never entered into a licensing
agreement to develop a "child safe" Internet web browser.
The Complaint further alleges that the misleading press releases were,
in fact, the only public information available to investors, because
the company had not filed any of its required quarterly or annual
reports with the SEC from May 1, 1997 until November 1999. As a result
of Heartsoft's misleading promotional campaign, Heartsoft's stock
price increased over 1500%. Shell and Butler "dumped" substantial
amounts of their Heartsoft stock into the market, thereby profiting
from their illegal conduct.
Simultaneous with the filing of the Complaint, Heartsoft, Shell and
Butler consented, without admitting or denying the allegations of the
Complaint, to the entry of an order of permanent injunction which (1)
enjoins Heartsoft from violating Sections 10(b) and 13(a) of the
Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5,
13a-1 and 13a-13 thereunder; and (2) enjoins Shell and Butler from
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