U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19947 / December 18, 2006
SEC v. James E. Franklin, et al., Civil Action No. 02CV0084 DMS (RBB) (S.D. Cal.)
Court Orders Defendant Dieter Raabe to Pay a Total of $831,310 in Disgorgement, Interest and a Civil Penalty
On December 13, 2006, The Honorable Dana M. Sabraw, U.S. District Court Judge for the Southern District of California, entered a Final Judgment against Defendant Dieter Raabe ("Raabe") ordering Raabe to pay $489,900 in disgorgement, plus prejudgment interest of $215,110 and post judgment interest of $16,300, and a civil penalty of $110,000, for a total of $831,310. Previously, on November 13, 2002, the Court entered a Final Judgment permanently enjoining Raabe from violating the antifraud and registration provisions of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Raabe consented to the entry of these Final Judgments, without admitting or denying the allegations in the Commission's Complaint.
On January 14, 2002, the Commission filed this action against Defendants James E. Franklin ("Franklin"), Samuel Wolanyk ("Wolanyk") and Raabe, and four entity defendants under their control, Vector Keel, Net Income, Avalon Trust and Initial Public Offering Consultants, for operating a "pump and dump" scheme beginning in 1997. The Complaint alleges that Franklin set up an internet website, "Red Hot Stocks," to tout stocks that he would acquire cheaply (through private offerings, open market purchases and consulting fees). According to the Complaint, Franklin then sold those shares after their price increased following overly optimistic and misleading "profiles" on the companies which appeared on the Red Hot Stocks website. The Complaint alleges that Wolanyk operated Red Hot Stocks, authored and distributed the "profiles" and also owned and sold some of the stocks that were touted. The Complaint alleges that Raabe participated in the fraudulent scheme by issuing trading instructions for stocks profiled on Red Hot Stocks that were held in a Canadian brokerage account of Defendant Vector Keel. The Complaint further alleges that Raabe and Franklin engaged in an illegal unregistered offering of securities.
On December 15, 2005, following a jury trial, the Court permanently enjoined Franklin and Wolanyk from violating certain provisions of the federal securities laws and ordered Franklin to pay a civil penalty of $770,000 and Wolanyk to pay a civil penalty of $50,000. Previously, final default judgments were entered against the four entity defendants. Additionally, on November 15, 2006, Franklin was barred from participating in an offering of penny stock.
For further information, please see Administrative Proceeding File No. 3-12228 (November 15, 2006)(Initial Decision), Litigation Release No. 19507 (December 21, 2005), Litigation Release No. 19466 (November 16, 2005), Litigation Release No. 17311 (January 15, 2002), Litigation Release No. 17312 (January 15, 2002) and Administrative Proceeding File No. 33-8054 (January 14, 2002).