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GGraessle

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GGraessle

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Re: None

Monday, 02/24/2003 3:37:10 PM

Monday, February 24, 2003 3:37:10 PM

Post# of 110
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION



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SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

vs.

International Biochemical
Industries, Inc.
and Timothy C. Moses,

Defendants.


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Civil Action No.


COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

The plaintiff, Securities and Exchange Commission ("Commission" or the "Plaintiff"), files this complaint and alleges the following:

SUMMARY

1. Beginning on January 29, 2003, International BioChemical Industries, Inc. ("IBCL") issued a series of press releases that falsely indicated that the federal government contacted the company to discuss the effectiveness of the company's products in the war on bio-terrorism and created the false impression that federal government was interested in purchasing IBCL's products. These press releases dramatically inflated both the price and trading volume for IBCL's shares.

2. Contrary to IBCL's press releases, the Federal Bureau of Investigation ("FBI") contacted IBCL simply as part of its on-going investigation of the post-September 11, 2001 anthrax attacks. The FBI agent who contacted IBCL never indicated that the federal government was considering procurement of any product or service provided by IBCL.

3. Timothy C. Moses ("Moses"), the president, chief executive officer ("CEO") and chairman of the board for IBCL knew that the press releases were false and misleading, but did nothing to correct those statements.

4. By virtue of its conduct, IBCL and Moses have engaged in and, unless enjoined, will continue to engage, in violations of 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 promulgated thereunder,[17 C.F.R. § 240.10b-5]

THE DEFENDANTS

5. IBCL is a Georgia corporation with its principal place of business in Norcross, Georgia. IBCL purports to be a biotech company that develops, markets and sells antimicrobial products that, inter alia, counteract agents, such as anthrax, commonly associated with bio-terrorism.

6. IBCL's stock is traded over the counter and is quoted on the Over-the-Counter Bulletin Board. The company's ticker symbol is IBCL.

7. Timothy C. Moses, age 46, is the chairman of the board, president, and chief executive officer of IBCL. According to IBCL's most recent Form 10-K, Moses has served as a director of securities and investment and has been instrumental in seeking and raising investment capital for prior employers.

JURISDICTION AND VENUE

8. This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1337 and Sections 20(b) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b) and 77v] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].

9. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(1) and (2); Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)]; and Section 27 of the Exchange Act [15 U.S.C. § 78aa]. IBCL is a Georgia corporation with its principal place of business in Norcross, Georgia. Moses resides in Atlanta, Georgia.

BIOCHEMICAL'S FALSE AND MISLEADING PRESS RELEASES SIGNIFICANTLY INCREASE ITS SHARE PRICE AND TRADING VOLUME

10. At or around 1:51 P.M., EST on January 29, 2003, IBCL issued a press release stating:

[A] Federal Government Agency has requested today an urgent meeting with the firm to discuss the [company's] line of products in the war on bio-terrorism. According to the government official who contacted IBCL, the request is being made after a review by his agency of the technical data publicly available from the EPA.

11. This press release directed readers to contact Moses for additional information on IBCL.

12. IBCL posted this press release on its Internet web site and has not removed it.

13. This press release, which strongly suggested that the federal government had a business interest in IBCL's products, dramatically impacted the trading volume of IBCL common stock. In the three hours before the press release, between 10:30 a.m. and 1:30 p.m. on January 29th, only 181,200 shares of IBCL were traded. Between 1:30 p.m. and 2:30 p.m., the hour in which IBCL issued its press release, the trading volume soared to 3.4 million shares.

14. This press release also artificially inflated IBCL's share price. At 1:30 p.m. IBCL stock traded at $0.024 per share. By 2:30 p.m., just 39 minutes after IBCL issued its press release, IBCL's share price had almost tripled to $0.07 per share.

15. On January 30, 2003, IBCL issued another press release in which it again indicated that the federal government was interested in its products. The press release stated:

[A] Federal government agency, requesting urgency, has scheduled its meeting with [IBCL] to discuss test data and [IBCL] products that will be effective in the war on bio-terrorism. The discussion will include manufacturing capabilities, good laboratory practices and protocols, security of the facility and security of internal data files including test locations and employee confidentiality.

16. This press release again directed readers to contact Moses for additional information on IBCL.

17. The trading volume on January 30th rose to nearly 22.6 million shares and the stock closed at a price of $0.067. On January 31st, trading volume was nearly 15.3 million shares and the closing price was $0.145.

18. The trading volume and price for IBCL shares between January 29th and January 31st, 2003, contrast sharply with the fairly stable trading that existed earlier in the month. From January 2nd through January 28th, IBCL's common stock traded between a low of $0.02 to a high of $0.034. During this period the average trading volume was 483,272 shares.

19. IBCL knew that the January 29th and January 30th press releases contained materially false information and contributed to the false impression that the federal government was interested in procuring products or services from IBCL.

20. On Friday, January 31, 2003, the Commission staff interviewed Moses and inquired about the press releases. Moses told the Commission staff that an FBI agent had contacted the company and requested the meeting.

21. Contrary to what the company stated in its January 29th and January 30th press releases, the FBI agent did not request an "urgent" meeting to discuss the company's product line.

22. In his initial call with IBCL, the FBI agent spoke with a woman who identified herself as IBCL's manager. The FBI agent explained that the meeting he requested would be a routine investigative meeting at which he would ask a series of standard questions concerning the company.

23. Contrary to what the company stated in its January 29th and January 30th press releases, the FBI agent did not mention the Environmental Protection Agency ("EPA") in his conversations with IBCL. Nor did he indicate that the meeting pertained to a review by the FBI or any other federal agency regarding technical data publicly available from the EPA.

24. In addition, contrary to IBCL's January 30, 2003 press release, the FBI agent did not indicate that the purpose of the meeting was to discuss test data or IBCL products that would be effective in the war on bio-terrorism. The FBI agent did not tell IBCL that the discussion would include good laboratory practices and protocols, test locations, internal data files or employee confidentiality.

25. Most importantly, the FBI agent did not say or indicate to IBCL that the purpose of the meeting was to explore, in any way, the possibility of the government procuring products or services from ICBL.

26. During their initial telephone conversation, IBCL's Manager told the FBI Agent that she needed to contact Moses before a meeting could be arranged, and that she would get back in touch with the FBI agent.

27. On the evening of Friday, January 31st, after interviewing the FBI agent, the Commission staff again called Moses and told him that the staff believed that the January 29th and 30th press releases contained untrue and misleading statements.

28. The Commission staff told Moses that the staff was informed that the FBI did not request an urgent meeting, that the purpose of the meeting was not to discuss the effectiveness of the company's products in the war on bio-terrorism, and that the request for the meeting was not made after reviewing test data available from the EPA.

29. The Commission staff told Moses that the press releases clearly had a material impact on both the price and volume of IBCL stock and warned that, if accurate information was not disseminated by the company to the investing public, the Commission staff would consider appropriate action.

30. As a result of the telephone call from the Commission's staff, Moses knew that IBCL's January 29th and January 30th press releases contained false and misleading information. Moses, however, did nothing to correct the company's misstatements.

31. On Monday, February 3, 2003 at 9:01 a.m., IBCL issued another press release. IBCL knew that this press release continued the false impression created in the previous press releases that the federal government was interested in using IBCL products in the war on bio-terrorism.

32. Specifically, this press release revealed that the previously disclosed meeting with a federal agency was a meeting requested by an FBI agent to discuss the company's business operations and the company's "efforts over the last 14 months relating to products, and the stability and security of the business."

33. The press release acknowledged that the company "does not have a contract with the Federal Government, nor has one been presented." However, the press release added, "[t]he company is anxious to find out today, but does not know at this time, the exact level of interest in the company's products."

34. The press release again referred readers to Moses for additional information about IBCL.

35. Later that morning, after the issuance of the press release, the FBI agent met with Moses and, on two separate occasions, explained that the meeting had nothing to do with the purchase of the company's products by the United States government. Moses responded that he understood that such was the case.

36. The FBI agent explained to Moses that the meeting was pursuant to the FBI's investigation of the post-September 11, 2001 anthrax attacks.

37. Despite these clear an unequivocal statements by the FBI agent, IBCL and Moses failed to correct the misstatements within, and false impressions created by, its prior press releases.

38. Instead, at or around 3:34 p.m. on February 3, 2003, IBCL issued another press release in which it again emphasized the purported business purpose of the meeting. The press release announced that the "business meeting" with "the Federal Government took place today" and claimed that the meeting had been "requested by Washington, D.C. and that the information and data gathered in the meeting is to be submitted back to Washington, D.C. for further technical review."

39. This press release again directed readers to contact Moses for additional information on IBCL.

40. IBCL and Moses knew that this press release failed to correct the materially false information previously disclosed and instead contributed to the false impression that the federal government was interested in procuring products or services from IBCL.

41. The investing public continued to react to the misinformation disseminated by IBCL. During February 3, 2003, the price reached $0.164 per share before closing at $0.112. The trading volume totaled 42.3 million shares, almost 100 times greater than the average daily trading volume between January 3 and January 28, 2003.

COUNT I - FRAUD

Violations of Section 17(a)(1)
of the Securities Act [15 U.S.C. § 77q(a)(1)]

42. Paragraphs 1 through 41 are hereby realleged and are incorporated herein by reference.

43. Defendants IBCL and Moses, in the offer or sale of securities, directly or indirectly, employed devices, schemes, or artifices to defraud purchasers of such securities, all as more particularly described above.

44. Defendants IBCL and Moses knowingly, intentionally and/or recklessly engaged in the aforementioned devices, schemes and artifices to defraud.

45. While engaging in the courses of conduct described above, Defendants IBCL and Moses, directly or indirectly, made use of the mails, or means or instruments of transportation or communication in interstate commerce, or means or instrumentalities of interstate commerce.

46. By reason of the foregoing, Defendants IBCL and Moses violated, and, unless restrained and enjoined, will continue to violate Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1)].

COUNT II - FRAUD

Violations of Sections 17(a)(2) and 17(a)(3)
of the Securities Act [15 U.S.C. § 77q(a)(2) and (a)(3)]

47. Paragraphs 1 through 41 are hereby realleged and are incorporated herein by reference.

48. Defendants IBCL and Moses, in the offer or sale of securities, directly or indirectly, obtained money or property by means of untrue statements of material facts or omissions of material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading and/or engaged in transactions, practices, or courses of business which operated as a fraud or deceit upon the purchasers of securities, all as more particularly described above.

49. While engaging in the courses of conduct described above, Defendants IBCL and Moses, directly or indirectly, made use of the mails, or means or instruments of transportation or communication in interstate commerce, or means or instrumentalities of interstate commerce.

50. By reason of the foregoing, Defendants IBCL and Moses violated or are about to violate, and, unless restrained and enjoined, will continue to violate Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §§ 77q(a)(2) and (3)].

COUNT III - FRAUD

Violations of Section 10(b) of the Securities Act [15 U.S.C.
§ 78 j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]

51. Paragraphs 1 through 41 are hereby realleged and are incorporated herein by reference.

52. As described above, Defendants IBCL and Moses, in connection with the purchase or sale of securities, directly or indirectly employed devices, schemes, or artifices to defraud; made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or engaged in acts, practices, or courses of business which operated as a fraud or deceit.

53. Defendants IBCL and Moses knowingly, intentionally and/or recklessly engaged in the conduct described above.

54. While engaging in the above courses of conduct, Defendants IBCL or Moses, directly or indirectly, made use of the mails, or means or instruments of transportation or communication in interstate commerce, or means or instrumentalities of interstate commerce.

55. By reason of the foregoing, Defendants IBCL or Moses violated or is about to violate, and unless restrained and enjoined, will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Securities and Exchange Commission respectfully prays for:

I.

Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure, finding that Defendants IBCL and Moses committed the violations alleged herein.

II.

A temporary restraining order, preliminary and permanent injunctions enjoining Defendants, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise, and each of them, from violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

III.

An order requiring disgorgement of all ill-gotten gains from Defendants' illegal conduct with prejudgment interest.

IV.

An order pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] imposing civil penalties against the defendants.

V.

Such other and further relief as this Court may deem just, equitable, and appropriate in connection with the enforcement of the federal securities laws and for the protection of investors. Further, the Securities and Exchange Commission respectfully prays that the Court retain jurisdiction over this action in order to implement and carry out the terms of all orders and decrees that are entered or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.

DATED: February 6, 2003

Respectfully submitted,

_________________________
M. Graham Loomis
Senior Trial Counsel
Ga. Bar No. 457868

_________________________
Edward H. Saunders
Staff Attorney
Ga. Bar No. 627076

COUNSEL FOR PLAINTIFF
Securities and Exchange Commission
3475 Lenox Road, N.E., Suite 1000
Atlanta, Georgia 30326-1232
(404) 842-7600


http://www.sec.gov/litigation/complaints/comp17971.htm




The best weapon against "fear" is "facts"!!

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