Opinion
Civil No. 2:03-CV-0914K
December 19, 2003
Thomas M. Melton, Karen L. Martinez, Salt Lake City, Utah, for Plaintiff
FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING PRELIMINARY INJUNCTION AGAINST JON R. MARPLE AND GRATEFUL INTERNET ASSOCIATES, LLC
Plaintiff Securities and Exchange Commission (the "Commission"), by and through its counsel of record, hereby submits Proposed Findings of Facts and Conclusions of Law.
INTRODUCTION
On October 16, 2003, the Commission filed a civil action against Jon R. Marple and Grateful Internet Associates, LLC, ("Grateful Internet") and others for a Preliminary Injunction for violations of federal securities laws. The Commission has submitted evidence supporting the allegations that Jon R. Marple and Grateful Internet violated Section 17(a) of the Securities Act of 1933 ("Securities Act") [ 15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [ 15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17C.RF.R. § 240.10b-5].
FINDINGS OF FACT
1. F10 Oil Gas Properties, Inc. is a Nevada corporation with offices in Willis, Texas and Newport Beach, California. F10 offered its stock to foreign investors through Sukumo.
2. Jon R. Marple of Willis, Texas, and Newport Beach, California, was President of G10 until July 23, 2003, when he resigned and was replaced by Charles Blake, his brother-in-law. John H. Marple is now a consultant to F10.
3. Mary E. Blake also of Willis, Texas, and Newport Beach, California, in Jon H. Marple's wife and Chief Financial Officer of F10.
4. Jon R. Marple, of Colorado Springs, Colorado, is the president of Grateful Internet Associates, LLC, a Colorado limited liability company, and son of Jon H. Marple. He is a consultant for F10.
5. On December 18, 2002, F10 entered into an Offshore Agreement to sell Sukumo Limited, ("Sukumo") up to 10 million shares of F10 stock at a price of 30% of the bid price of F10 stock,
6. Jon H. Marple signed the agreement on behalf of F10, as its President, and M. Wiseman signed as the President and CEO of Sukumo.
7. F10 entered into a Finder's Fee Agreement dated December 4, 2002, with NuWay. Under the terms of a Finder's Fee Agreement an aggregate of 17.5% of the bid price of the stock was to be paid to two entities controlled by David Wolfson.
8. Sukumo never bought stock from F10. Frost Dec., ¶ 68, 73. Instead, Sukumo acted as an agent of F10, receiving a 70% commission when funds were wired by investors to an escrow account. NuWay received its 17.5% consulting fee at the same time. Id., ¶ 68.
9. From the time Sukumo started offering F10's stock to overseas investors through June 30, 2003, more than $5.8 million flowed through the F10 escrow accounts in Salt Lake City and Laguna Beach, California. Frost Dec., ¶ 73.
10. In all likelihood, the amount of money raised through offshore sales of F10 stock is much higher because investors have stated Sukumo continued to aggressively market FIO stock through August and well into September 2003. Campbell Dec., ¶ 9; Thaxter Dec, ¶ 8; Swift Dec., ¶ 3.
11. On February 14, 2003, F10 filed a Form 10-QSB with the Commission for the quarter ended December 31, 2002.
12. The February 2003 Form 10-QSB stated that F10 had issued 10 million shares of stock to Sukumo, F10 would receive approximately 12.5% of its bid price per share, that the agreement had been signed on December 10, 2002, and that no shares had been sold as of December 31, 2002. The company stated that it started receiving funds in January 2003.
13. The Offshore Agreement between F10 and Sukumo and the agreement between F10 and NuWay were attached as exhibits to the filing.
14. On August 14, 2003, F10 filed its Form 10-QSB for the quarter ended June 30, 2003. The filing stated that by June 30, 2003, F10 had received $420,668 in proceeds from stock purchased by Sukumo. Jon R. Marple prepared that filing.
15. F10 received 12.5% of the bid price for its stock. All payments for stock by foreign investors passed through F10's escrow agent who distributed the funds according to the agreements with Sukumo and NuWay. Thus, by the end of June 2003, the escrow agent had received approximately $3.3 million and distributed 70% of that amount to Sukumo. In addition, by the time the Form 10-QSB had been filed, F10's transfer agent had reissued significant amounts of the Sukumo stock to foreign purchasers.
16. On September 5, 2003, F10 filed an 8-K to announce that it had provided notice to Sukumo of its intent to terminate the agreement. F10 established 30 days to complete any on-going transactions.
17. From January 2003, when Sukumo began selling F10 stock, through September 2003, a total of 23,400 shares of F10 stock were traded at prices ranging from $1.30 to $2.25 a share. Most of the retail trading involved sales of stock by Jon R. Marple, and matching purchases of the shares by David Wolfson through Momentous. Frost Dec., ¶¶ 71, 72.
18. From March 1, 2003, through July 9, 2003, only 1,892 shares were purchased in retail transactions; all of those purchases were by Wolfson trading for the account of Momentous. During that same period, Jon R. Marple sold 1,750 shares, or virtually all the retail selling. Most of Marple's sales were on the same day as Wolfson's purchases. Id.
19. This trading pattern occurred at a time when Sukumo was aggressively marketing F10 shares to overseas investors at prices tied to the quoted prices on the OTC Bulletin Board. Thaxter Dec., ¶ 2; Dymond Dec., ¶¶ 9, 10, 11; Feather Dec., 14.
This agreement was filed as an exhibit to F10's Form 10-KSB for the year ended March 31, 2003; this annual report was filed on July 11, 2003.
M. Wiseman appears to be Michael Sydney Newman. E-mail addressed to Michael Sydney Newman has been sent to an email address for Marcus Wiseman.
Like the Offshore Agreement, the Finder's Fee Agreement was filed as an exhibit to F10's Form 10-KSB.
Total trading volume (including wholesale trades between brokerage firms trading with each other rather than with retail customers) aggregated 9,100 shares during this time period. Frost Dec., ¶ 70.
CONCLUSIONS OF LAW
1. The Commission has made a prima facie case that Jon R. Marple and Grateful Internet violated Section 17(a) of the Securities Act of 1933.
2. The Commission has made a prima facie that Jon R. Marple and Grateful Internet violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and
3. The Commission has made a prima facie that there is a reasonable likelihood that Jon R. Marple and Grateful Internet will violate Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.