Securities and Exchange Commission v. Thomas D. Coldicutt, Jr., et al., Case No. 4:12-CV-00505 (E.D.Tex.) (filed August 13, 2012)
SEC Charges Six Individuals in $6 Million “Shell-Factory” Scheme
Recently, the SEC filed suit in the United States District Court for the Eastern District of Texas against Thomas D. Coldicutt, Jr., Elizabeth L. Coldicutt, Robert C. Weaver, Jr., Christopher C. Greenwood, Linda S. Farrell, and Susana Gomez. According to the complaint, between 2006 and 2011, Defendants engaged in an elaborate scheme to create and sell at least 15 public shell companies, from which they derived nearly $6 million in ill-gotten gains. The SEC alleges that the husband and wife team of Thomas and Elizabeth Coldicutt installed nominee officers and directors in corporations that they secretly funded and controlled, and that they directed and helped the corporate nominees, including Farrell, Weaver, Greenwood, and Gomez, submit materially false and misleading registration statements and reports to the SEC. These false documents gave the companies the appearance of legitimacy and permitted their securities to be quoted on the OTC Bulletin Board.
In the present case, the SEC alleges that the shell companies filed registration statements and reports with the SEC that misrepresented that the companies were formed to pursue mining activities, when in fact they neither conducted nor were intended to conduct any real mining activities. The SEC further contends that these companies’ SEC filings failed to disclose that the Coldicutts controlled and funded the companies. In addition, the SEC alleges that the Coldicutts obtained nominees to purchase stock in the companies, and then provided these nominees with all or most of the funds to purchase the stock. Farrell, Weaver, Greenwood, and Gomez each substantially assisted the scheme by, among other things, acting as corporate nominees, recruiting other nominees to hold stock in the shells, and signing materially false and misleading SEC filings. In addition, Weaver, Greenwood, and Farrell each formed, registered, marketed, and ultimately sold at least one shell, together with the Coldicutts.
The complaint alleges that the Coldicutts, Farrell, Weaver, Greenwood, and Gomez violated, or aided and abetted violations of, the anti-fraud provisions of the federal securities laws including Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further alleges that the Coldicutts are liable as control persons under Section 20(a) of the Exchange Act for the other Defendants’ violations of Section 10(b) and Rule 10b-5. The complaint further charges the Coldicutts, Farrell, Weaver, and Gomez with aiding and abetting violations of Exchange Act 15(d) and Rules 12b-20, 15d-1, and 15d-13 thereunder, and charges Greenwood with aiding and abetting violations of Section 15(d) and Rules 12b-20 and 15d-13 thereunder. Finally, the complaint alleges that Farrell, Weaver, Greenwood, and Gomez each aided and abetted violations of Exchange Act Rule 15d-14. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, the assessment of civil penalties, permanent officer and director bars, and permanent penny stock bars as to each of the Defendants.