whose specialty was the sale of IPI stock to United States servicemen overseas. The Commission charged that the sales were made in violation of the registration provision of Section 5 and the antifraud provision of Section 17 of the Securities Act. IPI agents sold the stock to service men in Weisbaden, Germany, and at other large concentrations of United States Service personnel. The misrepresentations and misleading statements used to boost the sale of IPI stock caused Air Force officials in Germany to bar IPI solicitations on its installations. The Commission obtained service on several defendants in the District of Columbia, but failed to reach Robert C. Buffkin, its president, who has remained in Europe with the firm's books. The case is still pending. In S.E.C. v. Security Credit Corporation, et al.3 the defendants were charged with violations of the registration requirements and anti-fraud provisions of the Securities Act. The Commission's complaint alleged that the defendants-Security Credit Corporation, a Nevada corporation, Dow & Company, a Utah corporation, and Eldon C. Harris were making misleading representations with regard to: the declaration of dividends; the consummation of firm underwriting agreements; the maintenance of a primary market for the purchase and sale of securities; the advertising of fictitious bids; representation as a registered broker-dealer and implying registration as a brokerdealer with the Commission; and the maintenance of "mail drops" which are representated as legitimate principal or branch offices. In S.E.C. v. Fall River Exploration and Mining Company, et al.35 the Commission filed a complaint seeking to enjoin defendants from violating Sections 5 (b) and 10 (a) of the Securities Act in the delivery of the stock of Fall River. Section 10 requires that where a prospectus is used more than nine months after the effective date of the registration statement, the information therein must be as of a date not more than 16 months prior to the date of its use. The complaint alleged that a registration statement relating to the stock of Fall River which became effective on August 13, 1958, contained financial information no more recent than May 31, 1958, and that such a prospectus used after October 1, 1959 did not meet the requirements of Section 10(a) of the Act. The Court entered an order preliminarily enjoining defendants from using a prospectus which does not meet the requirements of Section 10, and from delivering stock of Fall River unless preceded or accompanied by a prospectus which meets the requirements of Section 10. 34 U.S.D.C. D. Utah, No. C-87-60. 35 U.S.D.C. W.D. Colo. No. 6717. 36 A number of actions involved fraud in the sale of securities of oil, gas and mining companies. In S.E.C. v. Mon-O-Co Corporation the Commission brought suit to enjoin the corporation, Ben Haugner and Frank LeCocq from further violations of the registration and antifraud provisions of the Securities Act. The Commission's complaint charges that the defendants have been selling certificates of interest and fractional undivided interests in oil, gas and other mineral rights in the development and operations of oil and gas wells located in the Fertile Prairie Oil Field situated in Montana, and that the defendants' selling activities included the making of false representations and omissions of material facts, namely: the background, experience and success of Mon-O-Co Oil Corporation, Ben Haugner and Frank LeCocq in the oil and gas business; previous administrative proceedings taken by the Commission in connection with proposed offering of Mon-O-Co's stock because of false and misleading statements and omissions concerning its properties in the Fertile Prairie Field; the rights and obligations of those who purchase interests in the development of a certain oil and gas well; and costs of development of said well; and production to be expected therefrom.37 In S.E.C. v. A. R. Rhine, et al.38 the Commission's complaint in seeking injunctive relief and the appointment of a receiver, alleged that the defendants were engaged in a fraudulent device in the sale of fractional undivided interests in oil wells to investors by which defendants obtained in excess of $5 million; that in selling these fractional interests they employed what is known as a Ponzi scheme whereby the defendants paid back to purchasers sums which they represented to be returns from the sale of oil from such wells when, in truth, the payments were actually made from the funds which the investors had advanced for the purchase of their interests in the oil wells. By order of the Court, filed November 30, 1959, the defendants were preliminarily enjoined by consent and a receiver was appointed. Following a report of the receiver, a final judgment was entered by consent enjoining the defendants, A. R. Rhine, doing business as Rhine Petroleum Industries, Majestic Petroleum Company, and James M. Paddock from further violations of the antifraud provisions of the Securities Act of 1933. Thereafter, the case was transferred to the Bankruptcy Division of the Court. Injunctions obtained in other cases involving violations of the registration or anti-fraud provisions or both include: S.E.C. v. Doman *U.S.D.C. W.D. Wash. No. 5070. A final decree was entered against respondents, with their consent, on August 1, 1960. U.S.D.C. D. Colo. No. 6615. 46 49 41 43 Helicopters, S.E.C. v. Vanco,40 S.E.C. v. Haley, S.E.C. v. Prudential Oil Corporation, S.E.C. v. Clinton Mining Co., S.E.C. v. Judson Commercial Corp., S.E.C. v. Camdale Corporation, S.E.C. v. American Television & Radio Co., S.E.C. v. Belmont Oil Corporation," S.E.C. v. Globe Securities Corp.,48 S.E.C. v. Herbert Rapp, doing business as Webster Securities Co., S.E.C. v. Trans-Southern Oil Development Corp.,50 S.E.C. v. Trans-Globe Lease and Land Exchange, Inc.,51 S.E. C. v. Tidelands Oil and Gas Corporation,52 S.E.C.v. Jacwin & Costa, Inc.,53 S.E.C. v. Poff, S.E.C. v. Southwestern Iron & Steel Industries Inc.,55 S.E.C. v. Spindletop Petroleum Corp. S.E.C. v. Television Industries, Inc.,57 S.E.C. v. Barnstable Bay, Inc.,5 and S.E.C.v. Platalloy Corp.50 54 56 61 Other cases alleging such violations which are pending include: S.E.C. v. Bost,60 S.E.C. v. American Barides and Reduction Co., Inc., S.E.C. v. Sterling Mining and Milling Co., Inc.,62 and S.E.C. v. Bald Eagle Mining Co.63 Subpoena Enforcement Action under Securities Act of 1933 64 In S.E.C. v. Dobie, the United States District Court for the Western District of Virginia entered an order enforcing a subpoena duces tecum issued by the Commission and served upon Arthur F. Dobie in connection with a Commission investigation. Dobie had previously refused to testify in the investigation being conducted by the Commission into possible violations of the registration and anti-fraud provisions of the Securities Act of 1933 by John Milton Addison and others. 39 U.S.D.C. S.D. N.Y. No. 150-189. 44 U.S.D.C. S.D. N.Y. No. 60-1713. 40 U.S.D.C. D. Minn. No. 3-60-75. 47 U.S.D.C. S.D. N.Y. Nos. 147-361 and 149-60. 48 U.S.D.C. S.D. N.Y. No. 132–343. 49 U.S.D.C. S.D. N.Y. No. 132-344. 66 U.S.D.C. D. Ore. No. 502-59. 57 U.S.D.C. S.D. N.Y. No. 60 Civ. 1023. 68 U.S.D.C. D. Mass. No. 60-197F. U.S.D.C. S.D. Calif. No. 196-60Y. 60 U.S.D.C. D. Md. No. 12145. 62 U.S.D.C. N.D. Ill. No. 60 C 739. 63 U.S.D.C. S.D. Cal. No. 2399. 64 U.S.D.C. W.D. Va. No. 1003. In S.E.C. v. Standard Securities Service Corporation and Albert T. Schrader, the Commission made application for an order to require the defendants to appear and produce certain records of the corporation in the Commission's investigation into the activities of Certified Credit Corporation, Houston Financial Corporation, Daniel E. Armel, Claude L. Alden, Jr., Joseph S. Maniscalco, Richard Lee, Standard Securities Service Corporation and Albert Schrader for possible violation of the registration and anti-fraud provisions of the Securities Act. The matter was dismissed on motion by the Commission after the defendants appeared before an officer of the Commission and produced the requested records. In S.E.C. v. John A. Noonan, the Commission applied for an order requiring defendant to appear, produce and identify certain books and records previously subpoenaed. The Court ordered defendant to obey the subpoena. SUITS AGAINST THE COMMISSION On January 9, 1960 William Leighton filed a petition for rehearing of a petition for review which had been dismissed by the Court in February 1955 in William Leighton v. S.E.C.67 The petition for review had sought review of a Commission determination that it was without jurisdiction to institute an action to compel the American Express Company to register its "travelers checks" under the Securities Act. The Court had held that the determination sought to be reviewed was a matter committed to the Commission's discretion by Section 20 of the Securities Act, and was not reviewable under Section 9(a) of the Act or Section 10 of the Administrative Procedure Act. Certiorari was denied by the Supreme Court. In the peti tion for rehearing petitioner alleged that J. Sinclair Armstrong, who had been a member of the Commission when the above determination was made in 1954, was biased at the time because he was employed about five years later by the United States Trust Company, a corporation which, petitioner alleged, has a director in common with the American Express Company and another director in a law firm representing the American Express Company. On March 14, 1960 the Court denied the petition. In 1958 a judgment had been entered by consent in S.E.C. v. Farm and Home Agency, Inc., et al.70 permanently enjoining the defend ants from violating the registration provisions of the Securities Act in the sale of the stock of Farm and Home. Defendants later filed a motion to vacate that decree and a motion seeking to enjoin the Commission from investigating, prosecuting, or presenting any evidence to a grand jury pertaining to the alleged violations of the Securities Act involved in the consent decree. The District Court denied both motions. The defendants appealed, arguing that the McCarranFerguson Act of 1945 exempted the securities of insurance companies from the registration requirements of the Securities Act and that, therefore, the prior judgment was void for lack of jurisdiction. The Court of Appeals for the Seventh Circuit affirmed the denial of defendant's motions," and the Supreme Court denied certiorari."2 In Callahan Consolidated Mines, Inc., et al. v. S.E.C." the plaintiffs filed a complaint seeking a judgment declaring Rule 136, an amendment to Rule 140 and Regulation F adopted by the Commission under the 1933 Act to be void and enjoining the Commission from enforcing the same. The action was dismissed by stipulation of the parties. Gearhart & Otis, Inc. v. S.E.C. involved an appeal from an order of the District Court denying the motion of Gearhart & Otis to reinstate and enforce certain subpoenas it was attempting to serve upon a member of the Commission and members of its staff in connection with an administrative proceeding under Section 15 of the Securities Exchange Act. On September 8, 1959 the Court of Appeals dismissed the appeal on the motion of the Commission for failure of the appellant to comply with the rules of the Court. 71 270 F. 2d 891. 72 362 U.S. 903. 73 U.S.D.C. D. Idaho No. 2215-N. 74 C.A.D.C. No. 15064. |