UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 51106 / January 31, 2005
Admin. Proc. File No. 3-11630
In the Matter of
MICHAEL SYDNEY NEWMAN,
ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTION BY DEFAULT
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) on September 3, 2004, pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act). At a prehearing conference on October 12, 2004, the Division of Enforcement (Division) advised that Respondent Michael Sydney Newman (Newman) was incarcerated in Vientiane, Laos (Tr. 4). The Division also explained that it had contacted U.S. Department of State personnel in Laos regarding service of the OIP on Newman.
On January 18, 2005, the Division submitted a declaration signed by Gregory D. Chapman, a consular official with the United States Embassy in Laos. The declaration stated that the Lao Foreign Ministry delivered the OIP to Newman during the week of November 22, 2004. It further represented that the method of service used was not prohibited in Laos. Newman's Answer was due within twenty days of service. 17 C.F.R. § 201.220(b); OIP at 3. To date, Newman has not filed an Answer.
Newman is in default for failing to answer the OIP within the time provided. See 17 C.F.R. §§ 201.155(a), .220(f). Pursuant to Rule 155(a) of the Commission's Rules of Practice, 17 C.F.R. § 201.155(a), I find the following allegations in the OIP to be true.
Newman is a citizen of the United Kingdom and currently lives in Laos. Newman was the principal of Sukumo Ltd. (Sukumo), a British Virgin Islands corporation formerly based in Vientiane, Laos, and engaged in sales of the securities of Stem Genetics, Inc. (Stem Genetics), F10 Oil & Gas Properties, Inc. (F10), Diversified Financial Resources Corporation (Diversified), Valesc Holdings, Inc. (Valesc), and NCI Holdings, Inc. (NCIH), all of which are microcap issuers based in the United States. Those securities were sold to overseas investors in several countries, primarily in the United Kingdom.
On October 16, 2003, the Commission initiated a civil injunctive action, SEC v. Wolfson, Docket No. 2:03 CV 00914 DAK (D. Utah), against Newman, Sukumo, and others. The complaint charged Newman with violations of the antifraud and broker-dealer registration provisions of the federal securities laws. The complaint sought: (1) an injunction against Newman from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder; (2) an order barring Newman from participating in any offering of penny stock; (3) an order of disgorgement and prejudgment interest; and (4) the imposition of a civil penalty against Newman.
In its complaint, the Commission alleged that from or about October 2002 until the filing of the complaint, Newman, through Sukumo, conducted an unlawful scheme to mislead and defraud more than one thousand overseas investors, located primarily in the United Kingdom, through sales of stock in Stem Genetics, F10, Diversified, Valesc, and NCIH. From January 1, 2003, through September 30, 2003, the scheme raised more than $16.3 million through these overseas offerings. Newman directed the activities of Sukumo in making these sales of securities. In connection with the sale of the various securities, Newman and others made numerous material misrepresentations to investors, including: the sales commission Sukumo received was only two percent, rather than the seventy percent commission Sukumo actually received; the shares investors purchased were free-trading shares, rather than the restricted shares they actually received; and misrepresentations about the operations and prospects of the companies whose stock was being sold by Sukumo and Newman. Neither Newman nor Sukumo were registered with the Commission as a broker or dealer at the time they were selling the stock of Stem Genetics, F10, Diversified, Valesc, and NCIH.
On February 3, 2004, Judge Dale A. Kimball issued an order granting the Commission's motion for default judgment against Newman, permanently enjoining him from future violations of Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, barring Newman from participating in any offering of penny stock, and ordering Newman to pay disgorgement, prejudgment interest, and a civil penalty in amounts to be determined by further order.
Based on the foregoing, I find that it is appropriate in the public interest to bar Newman from association with any broker or dealer.
IT IS ORDERED that, pursuant to Section 15(b) of the Securities Exchange Act of 1934, Michael Sydney Newman is hereby barred from association with any broker or dealer.
James T. Kelly
Administrative Law Judge