SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 16632 / July 20, 2000
SECURITIES AND EXCHANGE COMMISSION v. CHARLES O. HUTTOE, ET AL., Civil
Action No. 96-02543 (GK) (D.D.C.)
FINAL THREE DEFENDANTS IN SYSTEMS OF EXCELLENCE LITIGATION SETTLE AND
ORDERED TO PAY MORE THAN $2 MILLION FOR TOUTING AND DISSEMINATING
MISLEADING INFORMATION IN INTERNET STOCK NEWSLETTER
The Securities and Exchange Commission ("Commission") announced that
on July 7, 2000, Judge Gladys Kessler issued an order implementing a
settlement with Theodore R. Melcher, Jr., SGA Goldstar Research, Inc.,
and Alpha Securities, Ltd. (collectively the "Melcher Defendants"),
the remaining three defendants in The Melcher Defendants agreed,
without admitting or denying the Commission's allegations, to consent
to permanent injunctions against future violations of the securities
laws and to disgorge millions of dollars of unlawful proceeds. Melcher
previously pled guilty to criminal charges arising from the same
conduct. The settlement with the Melcher Defendants concludes the
original civil litigation filed by the Commission in 1996 in response
to the massive market manipulation perpetrated by Systems of
Excellence, Inc. and others.
It its complaint and amended complaint, the Commission alleged the
following as to the Melcher Defendants
* From August 1993 until November 1996, Melcher owned and ran SGA
Goldstar Research, Inc., publisher of the SGA Goldstar Whisper
Stocks newsletter. That newsletter profiled and made
recommendations promoting largely unknown and untested penny stock
or small capitalization companies, and was distributed over the
internet and otherwise.
* Companies paid Melcher and SGA Goldstar in stock in exchange for
articles promoting their securities in the Whisper Stocks
newsletter.
* Charles O. Huttoe, the CEO of Systems of Excellence, Inc. ("SOE"),
hired SGA Goldstar to promote SOE in the Whisper Stocks
newsletter.
* In exchange for recommending SOE securities in the Whisper Stocks
newsletter, Huttoe caused SOE to issue unregistered, purportedly
free-trading stock to Melcher and Alpha Securities. SGA Goldstar
and Melcher failed to disclose that they had been compensated by
SOE in exchange for promoting SOE in the Whisper Stocks
newsletter.
* At the same time that Melcher was recommending the purchase of SOE
stock through the Whisper Stocks newsletter, Melcher was selling
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
FINAL THREE DEFENDANTS IN SYSTEMS OF EXCELLENCE LITIGATION SETTLE AND ORDERED TO PAY MORE
The Securities and Exchange Commission announced that on July 7, 2000, Judge Gladys Kessler
The settlement with the Melcher Defendants concludes the original civil litigation filed by
It its complaint and amended complaint, the Commission alleged the following as to the
That newsletter profiled and made recommendations promoting largely unknown and untested
* Charles O. Huttoe, the CEO of Systems of Excellence, Inc., hired SGA Goldstar to promote
* In exchange for recommending SOE securities in the Whisper Stocks newsletter, Huttoe caused
Including assets to be disgorged by the Melcher Defendants, the Commission will have
The Commission and the Receiver hope to file a plan of distribution for the Court's approval
To date, six individuals have pleaded guilty to felony charges stemming from these matters
* Merle Finkel, the auditor for SOE, pleaded guilty to a criminal information charging him
Davis is currently awaiting sentencing.
In a related matter, on May 30, 2000, the Commission revoked the registration of the common
This enforcement action is part of the Commission's four-pronged approach to minimizing
See Securities Exchange Act Rel. 42616; Lit.
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