[ by Howard Haykin ] Six Individuals Charged in $6Mn "Shell-Factory" Scheme The SEC filed suit in U.S. District Court for the Eastern District of Texas against a husband and wife team, who were assisted by four others in the scheme.  Named in the complaint were:  Thomas Coldicutt Jr., Elizabeth Coldicutt, Robert Weaver Jr., Christopher Greenwood, Linda Farrell, and Susana Gomez. Backgrounds of Individuals. The Coldicutts have prior experience in the securities industry and were previously permanently enjoined from violating the federal securities laws.

• Both Tom and Elizabeth Coldicutt worked in the securities industry years before they concocted the scheme at issue in this action.
• In December 1985, while Tom Coldicutt was working as the branch manager of Osler Wills Bickle Limited’s Vancouver office, the Vancouver Stock Exchange suspended his license for 5 years based on, among other things, his unauthorized acceptance of 3rd-party orders for trades in client accounts and for permitting unregistered representatives to deal directly with clients.
• Tom Coldicutt was later employed, between 1991 and 1994, as a principal of Grey & Co.,m a registered broker-dealer.  During that time, he held Series 7, 24, 27, and 63 licenses.
• Between 1987 and 1993, Elizabeth Coldicutt worked as a registered rep associated with FCN Financial Services, Inc. and Burnett Grey & Co., the latter of which she also was President and majority owner;  she held Series 7, 24, 27 and 63 licenses.
• While associated with Burnett Grey & Co. and FCN, the Coldicutts became involved in marketing and trading unregistered stock of a sham corporation. Consequently, in 1992 the Southern District of California permanently enjoined both Coldicutts, by default, from further violations Sections 5(a) and 5(c) of the Securities Act based on their roles in the market manipulation scheme. In 2001, the Ninth Circuit upheld the Southern District of California’s refusal to dissolve the injunction against Elizabeth Coldicutt, who claimed that she was no longer a licensed securities broker and that there existed “simply no danger” that she would violate the rules.

SEC Findings and Allegations. It's alleged that the Defendants, from 2006 until 2011, engaged in an elaborate scheme to create and sell at least 15 public shell companies, from which they derived nearly $6 million in ill-gotten gains.  The husband and wife team of Thomas and Elizabeth Coldicutt allegedly installed nominee officers and directors in corporations that they secretly funded and controlled, and then directed and helped those corporate nominees - including Farrell, Weaver, Greenwood, and Gomez - in submitting materially false and misleading registration statements and reports to the SEC.  These false documents gave the companies the appearance of legitimacy and permitted their securities to be quoted on the OTC Bulletin Board. After the Coldicutt Companies were incorporated by, among others, Linda Farrell, Christopher Greenwood, and Robert Weaver, the Coldicutts often provided funding to capitalize and take the companies public, provided funding for investors to purchase shares in registered offerings, and also directed the nominees in obtaining OTC Bulletin Board listing, filing periodic and annual reports with the Commission, and ultimately selling the Coldicutt Companies.  The Coldicutts realized nearly $5,000,000 in profits from these transactions. In the present legal proceeding, the SEC alleges that the shell companies filed registration statements and reports with the SEC that contained misrepresentations that the companies had been formed to pursue mining activities, when in fact they neither conducted nor ever intended to conduct any real mining activities.

Although Farrell, Gomez, Greenwood, and Weaver, among others, were to run the public Coldicutt Companies, none of them had any experience in the mining industry, and only Weaver had prior experience in the securities industry. Without their participation in the Coldicutts’ fraudulent scheme, however, the scheme would have failed.

The SEC further contends that these companies submitted SEC filings that omitted the fact that the Coldicutts controlled and funded the companies.  In addition, the SEC alleges that the Coldicutts obtained nominees to purchase stock in the companies, and then provided these nominees with all or most of the funds to purchase the stock. Farrell, Weaver, Greenwood, and Gomez each substantially assisted the scheme by, among other things, acting as corporate nominees, recruiting other nominees to hold stock in the shells, and signing materially false and misleading SEC filings. In addition, Weaver, Greenwood, and Farrell each formed, registered, marketed, and ultimately sold at least one shell, together with the Coldicutts. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, the assessment of civil penalties, permanent officer and director bars, and permanent penny stock bars as to each of the Defendants. For further details, go to:  [SEC Litigation Rel. 22445, 8/14/12]   and  [SEC Complaint].