24 February 2005 – LAWFUEL – The Law News Network – The United States Securities and Exchange Commission announced today that it
has filed a securities fraud lawsuit in the United States District Court for
the District of Columbia against Earthboard Sports USA, Inc., Hubert A.
Jeffreys, Timothy F. Bell and Tracy A. Edwards. The Commission’s complaint
alleges that Jeffreys, the founder and then-president, CEO, and CFO of
Earthboard, a privately held, Costa Mesa, California-based manufacturer of
all-terrain skateboards and Bell and Edwards, two former registered
representatives, fraudulently offered and sold stock of Earthboard Sports
USA, Inc. From April 1998 to March 2003, Earthboard, in an unregistered
offering, raised approximately $5.1 million from at least 66 individuals and
entities. Jeffreys, Bell and Edwards enticed investors to purchase
Earthboard shares using a number of materially false statements including
the claim that Vans Inc., a Nasdaq-traded footwear company, planned to
acquire Earthboard in a one-for-one share exchange that would generate a
windfall of as much as $24 for each dollar invested in Earthboard stock. In
reality, Vans never had any intention to acquire Earthboard and had never
expressed any interest in acquiring Earthboard.
The complaint alleges that, in one instance, Jeffreys, Bell and Edwards
defrauded an elderly couple of at least $455,000. Bell and Edwards went as
far as arranging for the couple to mortgage their paid-off home to buy
Earthboard stock; the couple ultimately lost their home when the promised
profits from their Earthboard investment failed to materialize and they
could not afford to make the mortgage payments.
The complaint further alleges that Jeffreys misappropriated at least $1.9
million of investor funds, using stock sale proceeds to buy a waterfront
home in Newport Beach, three undeveloped plots in a residential community in
Lake Havasu, Arizona, a house in his girlfriend’s name, and a thirty-foot
fishing boat and accompanying mooring on Santa Catalina Island.
Jeffreys’s criminal history includes convictions of drug possession and
writing bad checks, and he has served time in jail for a telemarketing sales
scheme. Bell and Edwards are both former registered representatives whose
registrations were suspended by the NASD in November 2001 for their failure
to comply with a joint arbitration award stemming from claims of unsuitable
and excessive trading, misrepresentation, and negligence.
The Commission’s action seeks permanent injunctions, orders of disgorgement
and civil penalties against Earthboard and Jeffreys for violating Sections
5(a), 5(c) and 17(a) of the Securities Act of 1933 (“Securities Act”) and
Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and
Rule 10b-5 thereunder, as well as an officer and director bar against
Jeffreys. The Commission also seeks permanent injunctions, orders of
disgorgement, and civil penalties against Bell and Edwards for violating
Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder.