Plaintiff United States Securities and Exchange Commission (“Commission”) alleges the following against Defendants Alliance Transcription Services,...Plaintiff United States Securities and Exchange Commission (“Commission”) alleges the following against Defendants Alliance Transcription Services, Inc. (“Alliance” or “Company”), Clifford A. Lewis (“Lewis”), Richard A. Dabney, Raymond C. Dabney, Philip M. Young (“Young”), Charles J. Smith (“Smith”), and William D. O’Neal (“O’Neal”):
SUMMARY
1. This matter concerns a scheme to manipulate the price and trading volume of Alliance stock through false and misleading public disclosures and to issue and sell Alliance stock in an unregistered distribution from at least April
vs.
Alliance Transcription Services, Inc.; Clifford A. Lewis; Richard A. Dabney; ) Raymond C. Dabney; ) Philip M. Young; Charles J. Smith; and ) William D. O’Neal, )
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2005 through at least September 2006. Alliance, a Nevada corporation, purported to provide unique expertise in the field of homeland security, and its common stock was quoted at all relevant times on the Pink OTC Markets quotation system formerly known as the Pink Sheets.
2. Defendants Alliance, Richard Dabney, and Lewis manipulated the market for Alliance’s stock by making false and misleading public disclosures in press releases issued by Alliance and published through business newswire services and on Alliance’s website.
3. Defendants Alliance, Richard Dabney, Raymond Dabney, Young, Smith, and O’Neal participated in the unregistered distribution of Alliance securities from July 2005 to September 2006 through a series of purported offerings by Alliance to a Texas company controlled by Smith. Raymond Dabney, Young, and Smith arranged for Alliance to issue stock to the Texas company in offerings that purportedly were exempt from registration and through which stock certificates purportedly could be issued without printed legends restricting the stock’s resale. In fact, the transactions between Alliance and Smith’s company were not exempt from registration and were merely a device to evade the registration provisions of the federal securities laws. Once issued to Smith’s company, the stock was immediately distributed to third parties without being paid for by Smith. Richard Dabney and O’Neal enabled Alliance to engage in those transactions by providing the necessary corporate resolutions and legal opinions, respectively.
4. Defendants Young, Smith, and O’Neal received Alliance stock through the unregistered distribution and sold it into the market without registration or a valid exemption from registration. Defendants Lewis, Richard Dabney, and Raymond Dabney received a portion of the proceeds that Young obtained by selling the Alliance stock.
5. By their conduct, Alliance, Lewis, and Richard Dabney violated
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Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and Alliance, Richard Dabney, Raymond Dabney, Young, Smith, and O’Neal violated Section 5 of the Securities Act of 1933 (“Securities Act”).
6. The Commission seeks relief including: permanent injunctions against all the Defendants; disgorgement of ill-gotten gains plus prejudgment interest thereon and civil monetary penalties against Lewis, Richard Dabney, Raymond Dabney, Young, Smith, and O’Neal; penny stock bars against Lewis, Richard Dabney, Raymond Dabney, Young, and Smith; officer-and-director bars against Lewis and Richard Dabney; and any other appropriate relief.
JURISDICTION
7. The Commission brings this action pursuant to Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].
8. This Court has jurisdiction over this action pursuant to Sections 20(b) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
9. In connection with the acts, transactions, practices, and courses of business alleged in this Complaint, the defendants, directly or indirectly, made use of the means or instruments of transportation or communication in interstate commerce, the means or instrumentalities of interstate commerce, the mails, or the facilities of any national securities exchange.
THE DEFENDANTS
10. Alliance is a Nevada corporation that is based in Rancho Palos
Verdes, California, and was based in Harrison, Maine, at all relevant times. From December 2004 to August 2007, the Company, which was then known as Strategy X, Inc., purported to provide unique expertise in the field of homeland security.
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Alliance’s common stock was quoted on the Pink Sheets at all relevant times, but it has not traded actively since October 4, 2007, when the Commission ordered a 10-day trading suspension pursuant to Section 12(k) of the Exchange Act [15 U.S.C. § 78l(k)]. At all times relevant to this Complaint, Alliance’s common stock has been a penny stock because the Company’s net tangible assets and average revenues have been below the thresholds established under Section 3(a)(51) of the Exchange Act [15 U.S.C. § 78c(a)(51)] and Rule 3a51-1 thereunder [17 C.F.R. § 240.3a51-1], and the securities have traded at a price below $5 per share at all times since the stock began trading.
11. Lewis, age 44, resides in Huntsville, Alabama, and resided in Harrison, Maine, at all relevant times. He was the president, chief executive officer, and a director of Alliance at all relevant times and was responsible for business development and the day-to-day operations of the Company. Lewis caused Alliance to make false and misleading public disclosures in press releases and on its website.
12. Richard Dabney, age 40, resides in Rancho Palos Verdes, California, and resided in Torrance, California, at all relevant times. He was the managing director and treasurer of Alliance beginning in December 2004 and was responsible for Alliance’s financial matters. Richard Dabney caused Alliance to make false and misleading public disclosures and to engage in the unregistered distribution of its securities.
13. Raymond Dabney, age 43, resides in Vancouver, British Columbia, Canada. He is the brother of Richard Dabney and, from December 2004 to approximately November 2005, was a member of Alliance’s board of directors. Although Raymond Dabney ceased to be publicly identified as an officer or director of Alliance following a November 2005 disciplinary proceeding brought by the British Columbia Securities Commission that barred him from serving as an officer or director of any issuer, he continued to exercise great influence over the
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