==========================================START OF PAGE 1====== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. LITIGATION RELEASE NO. 15185 / December 12, 1996 SECURITIES AND EXCHANGE COMMISSION v. CHARLES O. HUTTOE, ET AL., Civil Action No. 96-02543 (GK)(D.D.C.) The Securities and Exchange Commission ("Commission") announced today that it is seeking to amend the Complaint previously filed against Charles Huttoe and other defendants alleging the fraudulent manipulation of the market for the securities of Systems of Excellence, Inc. ("SOE"). The proposed amended Complaint names twenty-one individuals and entities as Relief Defendants for the purpose of securing the disgorgement of more than $12 million in illegal profits that the Commission alleges was obtained from the sale of SOE securities by Huttoe, members of his family and entities he controls (collectively the "Huttoe defendants"). The Commission is also seeking an emergency Order freezing assets of the proposed Relief Defendants. The proposed amended Complaint also adds additional claims against defendants SGA Goldstar Research, Inc., Theodore Melcher, Shannon B. Terry, Alpha Securities Ltd. and Dunbar Holdings, Ltd. (collectively the "Goldstar defendants"). The Commission has previously alleged that the Goldstar defendants were bribed with stock to recommend SOE to subscribers to the SGA Goldstar Whisper Stock report, a tout sheet that they disseminated over the internet and otherwise. The Commission also alleged that they took advantage of the inflated market for SOE stock that they had created by dumping their own stock on unwitting investors. In the proposed amended Complaint, the Commission alleges that from in or around 1991 and continuing through the present, the Goldstar defendants engaged in a systematic practice of publishing promotional coverage for other issuers in exchange for compensation. The proposed amended Complaint alleges that the Goldstar defendants failed to disclose either their compensation or whether they were selling their own shares while they were recommending that subscribers to their newsletter invest. The proposed amended Complaint seeks an order requiring the Goldstar defendants to disgorge their illegal gains from all of that activity together with prejudgment interest, as well as an injunction against violations of Sections 5, 17(a) and 17(b) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. According to the Commission, the proposed Relief Defendants are the beneficiaries of a massive effort by Huttoe to dissipate and secrete his illegal profits that proceeded at an accelerating pace in the last several weeks before the Commission's Complaint was filed. According to the Commission, more than $8 million of the illegal profits obtained by Huttoe and his nominees can be ==========================================START OF PAGE 2====== traced to the proposed Relief Defendants, who the Commission alleges were not bona fide recipients of the funds or otherwise entitled to retain them. The Commission has also applied to the Court for an emergency Order that would freeze the assets that were transferred to the proposed Relief Defendants and require an accounting. The proposed amended Complaint seeks an order requiring all of the Relief Defendants to disgorge all proceeds traceable to Huttoe's fraudulent sales of unregistered SOE stock, together with prejudgment interest. The proposed Relief Defendants are Nancy Ellis, also known as Nancy Ellis Davis and also known as Nancy Davis, Jack Weinstein, Nancy Weinstein, Adobe Galleries Inc. d/b/a Tower of Jewels, Loretta Davis, Barclay Davis, William Daw, Sonya Daw, Mary Jane Hubbard, David Goldstein, Starlog Franchise Corp., Hope Associates, L.L.C., Michael Michaelson, Raymond J. Markman, Herman Rush, Mark Savel, George Holsten, J.S. Holdings, Inc., Jeffrey Szur, Lynda Lou Kane, also known as Lynda Lou Kraft and Investors Associates, Inc. According to the Commission, proposed Relief Defendants J.S. Holdings, Szur, Kane and Investors Associates are related directly or indirectly to the brokers through which the Huttoe defendants executed their sales of SOE stock. The Commission originally filed a Complaint and an application for a temporary restraining order freezing assets, requiring and accounting, permitting expedited discovery and other emergency relief on November 7, 1996. The Honorable Judge Kessler granted the Commission's motion for a Temporary Restraining Order and other emergency relief that day, and scheduled a Preliminary Injunction hearing that has now been set for January 21, 1997. See SEC v. Huttoe, et al., Lit. Rel. 15153 (November 7, 1996). On October 7, 1996, the Commission issued an Order suspending trading in SOE securities for ten days. See Securities Exchange Act Rel. No. 37791 (October 7, 1996). The Commission's investigation in this matter is continuing.