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DOCKET NO. CV-
SECURITIES ADMINISTRATOR, )
v. ) COMPLAINT
KRISTOPHER T. SAUNDERS, )
1. The State of Maine and Securities Administrator (hereinafter collectively referred to as “the State”) bring this action against Kristopher T. Saunders (“Saunders”) for violations of the Revised Maine Securities Act, 32 M.R.S.A. §§ 10101-10713 (1999 and Supp. 2002) (“the Act”), in that Saunders: (a) offered and sold securities in Maine without a license; (b) offered and sold securities in Maine that were not registered; and, (c) in selling the unregistered securities, Saunders made untrue statements and omitted material facts that would have been necessary to include in order to make statements made by him not misleading.
2. This Court has jurisdiction pursuant to 4 M.R.S.A. § 105 (Supp. 2002) and 32 M.R.S.A. §§ 10602-10603 (1999 and Supp. 2002).
4. Saunders is an adult individual
Act prohibits the offer or sale of securities that are not registered in
Act further prohibits any person from transacting business in
8. Under the Act, a person shall not, in connection with the offer, sale, or purchase of any security, directly or indirectly: (a) employ any device, scheme, or artifice to defraud; (b) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; or (c) engage in any act, practice, or course of business that operates as a fraud or deceit upon any person. 32 M.R.S.A. § 10201 (1999).
9. The Securities Administrator may refer violations of the Act to the Attorney General for enforcement, and the Attorney General may initiate a civil action in the Superior Court. 32 M.R.S.A. § 10602(1)(D) (1999).
10. In an enforcement action under the Act, the Court may grant a variety of legal and equitable remedies, including injunctions, civil penalties, restitution to investors and disgorgement. 32 M.R.S.A. § 10603(1) (1999).
GENERAL ALLEGATIONS APPLICABLE
TO ALL COUNTS OF THE COMPLAINT
12. In the weeks following the meeting with Securities, Saunders made several postings to the Raging Bull site under his screen name “ThePURPLE.” In the postings, Saunders solicited investors to participate in a scheme under which Saunders would receive funds from the investors and then use the pooled funds to purchase Edulink stock.
13. Saunders retained the services of Peter Sang, Esquire, to provide advice concerning the proposed investment in Edulink and the group structure, and Sang subsequently drafted a joint venture agreement. Sang informed Saunders in June of 2000 that Sang is a tax attorney and was not providing any advice regarding compliance with securities laws.
14. The transactions between Saunders and the
investors, as described in the postings and as ultimately executed, legally
constitute the sale of investment contracts by Saunders to each investor under
the well-established Howey test. See
SEC v. W.J. Howey Co., 328
15. Saunders’ postings included the following untrue statements:
a. Saunders would distribute shares to investors one year after the date of purchase;
b. An investment in Edulink through Saunders would allow investors to avoid paying taxes on the investment;
c. The investment would return a 300% profit;
d. Saunders had consulted with Securities and private attorneys, including securities attorneys, and confirmed that the investment would be made in compliance with the law;
e. Saunders would refund the purchase price to all investors if the scheme violated any regulatory requirements; and
f. Saunders would not receive compensation for effecting the transaction.
16. Saunders omitted the following material information, disclosure of which would have been necessary to make other representations by Saunders not misleading:
a. Securities had informed Saunders that he could not lawfully raise money for purposes of his Edulink investment scheme from individuals he solicited on the Raging Bull site; and
b. The attorney who drafted the agreement that set forth the structure of the scheme had advised Saunders that the attorney is not a securities attorney and could not offer any advice to Saunders or his group on whether the scheme complied with securities laws.
19. After paying attorneys fees, Saunders retained the remaining money received from investors for his personal use.
no time was Saunders licensed by the State of
no time were the investment contracts sold by Saunders registered with the
(Transaction of Business Without a License)
22. The State repeats and realleges paragraphs 1 through 21 as if set forth fully herein.
effecting the Edulink transactions, Saunders violated the prohibition in 32
M.R.S.A. § 10301 against transacting business in
24. The State repeats and realleges paragraphs 1 through 23 as if set forth fully herein.
offering for sale and selling the Edulink investment contracts, Saunders
violated the prohibition in 32 M.R.S.A. § 10401 against offering or selling
unregistered securities in
(Fraudulent and Deceptive Practices)
REQUEST FOR RELIEF
WHEREFORE, the State requests that this Honorable Court grant the following relief:
1. An injunction prohibiting Saunders from offering or selling unregistered securities in the State of Maine or transacting business as a broker-dealer or sales representative in the State of Maine unless licensed;
2. An order requiring Saunders to make full restitution by returning all monies to the investors together with any commissions, fees, penalties, and interest;
3. An order requiring Saunders to account for all monies received by him from or on behalf of the investors;
4. An order, as necessary, appointing a receiver or conservator for Saunders’ assets so that appropriate restitution may be made;
5. An order requiring Saunders to disgorge all profits from the unlawful transactions described in this Complaint; and
6. Such other and further relief as this Court deems appropriate.
/s/ Michael J. Colleran
MICHAEL J. COLLERAN
Assistant Attorney General
6 State House Station
Tel. (207) 626-8800
Bar. No. 9247
Attorney for Plaintiffs