SEC responds to Robinson's motion to dismiss 2009-10-23 14:15 ET - Street Wire Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell The U.S. Securities and Exchange Commission has responded to Vancouver resident Dallas Robinson's motion to dismiss civil charges for the Prime Time Group Inc. fraud. Mr. Robinson argued that the Florida courts have no jurisdiction over him, because he has no connection to that state. The SEC says that the courts do have jurisdiction, because Mr. Robinson was an officer of Boca Raton-based Prime Time, and he drafted many misleading news releases for the company. SEC's complaint The SEC filed a civil fraud suit against Mr. Robinson and others in the Southern District of Florida on June 25, 2009. It claimed that Mr. Robinson was the chief executive officer of Prime Time Group when it misled shareholders by claiming to own two businesses. They were a chain of 7-Eleven stores in Puerto Rico and a Canadian cellphone accessory company. In addition to Mr. Robinson, the suit named as defendants Saskatchewan resident Troy Metz, who served as Prime Time's president, and Florida residents Johnny Ray Arnold and John Mattera. The scheme began in August, 2005, when Prime Time acquired 14 7-Eleven stores in Puerto Rico. To pay for the acquisition, Prime Time had to pledge 92 per cent of its interest in the stores as collateral for a promissory note. The SEC said that the company defaulted on the note in April, 2006, and the noteholder collected his collateral, leaving Prime Time with just an 8-per-cent interest in the stores. After losing the stores, the company continued to issue news about them, without disclosing its reduced interest, the complaint alleged. One news release, dated Feb. 28, 2006, stated that revenue from the stores was $18-million in 2005. (All figures are in U.S. dollars.) Others, issued in December, 2006, and November, 2007, stated that the company maintained an interest in the stores, but did not specify what that interest was. The next business that Prime Time claimed to have was a wireless division. In October, 2006, the company acquired Robinson Wireless Inc., a private company which purportedly had marketing agreements with Virgin Mobile, Fido and T-Mobile. Several news releases touted rising sales from the agreements. The SEC claimed that the company's news was misleading, because Robinson actually had no marketing agreements with Fido or T-Mobile, and it only had an agreement in principle with Virgin. The company touted two other misleading agreements as well, according to the SEC. On May 2, 2007, it announced that it had acquired Southern Wheel Workz Inc., a private company that purportedly sold cars on a rent-to-own basis. Prime Time touted the deal as a $100-million venture, but it never actually completed the purchase agreement, the complaint stated. The other agreement was with Xpress Your Cell USA LLC. Prime Time said it had an agreement to acquire Xpress Your Cell, but it actually only had an agreement that provided for further negotiations, the complaint stated. The remainder of the SEC's complaint was about a note backdating scheme, in which Mr. Mattera improperly received 44 million shares of the company. According to the SEC, the company issued three promissory notes to Mr. Mattera, dated May, August and September, 2005. The notes were supposedly for convertible loans totalling $560,000. One of the problems with the notes, according to the SEC, is that they could not have been signed in 2005. The two men who supposedly executed them, Mr. Mattera and Mr. Arnold, did not meet until 2006. In addition, Mr. Mattera did not actually lend the company any money, the SEC claimed. According to the complaint, Mr. Mattera sold 41 million of the improperly issued shares in November, 2007. (The stock, which closed at 0.7 cent on Nov. 1, 2007, ended the month at 0.08 cent.) The SEC sought appropriate civil penalties and penny stock bans against all four man, and disgorgement of ill-gotten gains against Mr. Mattera. In filing the case, the SEC acknowledged the assistance of the B.C. Securities Commission. Robinson's motion to dismiss Mr. Robinson filed a motion to have the charges dismissed on Sept. 10, 2009. In his motion, he claimed that he had no personal connection to Florida and the courts there had no jurisdiction over him. He acknowledged that he was CEO of Prime Time from September, 2006, to March, 2007, but said he was in B.C. for most of that time. He further argued that the complaint mostly accused his co-defendants of wrongdoing, and attributed little of the conduct to him. He also said that most of the misleading news releases predated his time as CEO, and that the SEC does not allege that he sold stock or otherwise profited from the scheme. SEC's reply The SEC filed its response to Mr. Robinson's motion to dismiss on Oct. 13, 2009. In it, the regulator argues that Mr. Robinson's connection to the United States is sufficient enough to give any U.S. court jurisdiction over him. During his time as CEO of Prime Time, he flew to Florida six times. He also participated extensively in drafting, reviewing and disseminating numerous false and misleading news releases for Prime Time. These news releases had the dateline set to Fort Lauderdale. In addition, the regulator says that the complaint contains many details of Mr. Robinson's wrongdoing, and not just that of his co-accused. He drafted news releases stating that the company maintained its interest in the 7-Eleven stores when it did not, the reply states. He also drafted news releases that stated the company's wireless division's sales were rising, but failed to disclose its losses. The SEC asks that the court deny the motion to dismiss. |
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