SEC FILES SETTLED ACTION BASED ON TWO IMPROPER STOCK SCHEMES
The SEC filed a settled enforcement action against William Jacobson alleging that the former CEO of Atlas Mining Company employed two illegal stock schemes to try to prop up the struggling mining company. SEC v. Jacobson, Case No. 2:09-cv-00669 (D. Idaho Filed Dec. 22, 2009). A separate, settled, administrative proceeding was brought as to the company. In the Matter of Applied Minerals, Inc. (formerly known as Atlas Mining Company), Adm. Proc. File No. 3-13728 (Filed Dec. 22, 2009).
The complaint against Mr. Jacobson details two schemes which apparently were intended to raise money for the company. One involved shares sold under an S-8 registration statement. A second involved shares issued under Form SB-2.
From 2002 through late 2005, Mr. Jacobson caused Atlas Mining to improperly issue about 14.6 million S-8 shares to ineligible recipients, according to the complaint. Form S-8 is an abbreviated registration form. Using this form, a company can issue shares as part of a benefit plan to employees and certain types of consultants who furnish bona fide services to the registrant. Here however, the recipients included the defendant’s wife and son, neither of whom performed any services for the company. Millions of shares were also sold to entities, including an affiliated mining company Mr. Jacobson controlled which had no employees or operations. Those shares were later sold to investors and portions of the proceeds were returned to Atlas. Shares were also in capital raising efforts for the company.
The second scheme began in early 2003, when Atlas filed a Form SB-2 followed by a prospectus. The documents were for an offering of 10 million over a 180-day period. When the shares could not be sold within the allotted time, Mr. Jacobson, according to the complaint, illegally parked them. Those claimed investors never paid for the shares or received them. They did however execute blank irrevocable powers of attorney giving Mr. Jacobson discretion to sell the shares. Ultimately, the shares were sold to the public, raising over $800,000. To conceal this scheme, as well as the first, the Mr. Jacobson had the company file false documents with the Commission.
To resolve the case, Mr. Jacobson consented to the entry of a permanent injunction prohibiting future violations of the antifraud, reporting, internal control, certification and registration provisions of the federal securities laws. He also agreed to pay a penalty of $50,000 and to the entry of an order barring him from serving as an officer or director of any issuer or from participating in any offering of a penny stock for five years. The company, now known as Applied Minerals, Inc., consented to the entry of a cease and desist order barring violations of the registration and reporting provisions. See also Litig. Rel. 21345 (Dec. 21, 2009).