How is it that the SEC can get away with misrepresentative press releases – essentially bullying, irresponsible journalism – but if your company does the same you will end up in jail or other serious trouble?
Let’s take a look at the actions of another corporate Bully – the SEC. The 1999-2000 events of the MAWI case of Stanley R. Medley shows us how the government can lie, cheat and steal it’s way to a judgment with no concern for the truth and fairness of its actions.
There have been a number of articles written about the MAWI case (SECURITIES AND EXCHANGE COMMISSION v. M & A WEST, INC. et al.) because it involved some landmark interpretations and decisions about Rule 144 and major dissent thereof. But let’s take a look at another side of the coin. What caught my eye was the 2008 Court Of Appeal’s decision brought about by the appeal filed by Stanley R Medley. Unlike most people who probably skim over a lot of things, I like to look at things in depth. And unlike a lot of people who believe every word they read in a government press release, I read all the court filings and documents behind the press releases, and when I did, several very odd things about the government’s civil suit against Medley were immediately apparent that didn’t make sense:
- 1) In the government civil suit against Medley he is characterized as a “key player” who was mainly in the business of “reverse mergers” who used corporations and others to “hide his involvement” and who “wanted to sell stock right away” – These all seem like fraudulent and perhaps criminal activities, yet the SEC does not sue Medley for anything fraudulent or criminal. They sue him for a technical violation of the law – selling unregistered shares. Medley, in fact is the only person involved in MAWI that was not sued for a criminal or even fraudulent violation. This immediately caught my attention. Why is this Key Player who was trying to hide his involvement the only person who was not sued for anything criminal or fraudulent? Being sued on a technicality means in essence you didn’t do anything wrong. Anyone can be sued on a technicality. If your attorney is an idiot and makes a mistake, you are “technically” liable for selling unregistered shares but it doesn’t mean you did anything wrong. So if Medley did nothing wrong as the “technical” charges would indicate, why are they saying all this nasty stuff about him?
- 2) On further investigation of discovery testimony and documents filed I discovered Medley worked as a paralegal under Tom Eck for approximately two weeks on each company that he is accused of being a “key player” in, and that all the shares he received were under a ten month lock-up agreement, unlike Eck and the others who were criminally charged. Now how is it a key player (who only worked for two weeks for each company – oxymoronic) was not able to structure a deal in which he received shares that were not locked up?
- 3) If you read all the court documents, the government got a summary judgment against Medley and Medley never got a chance to testify in court on his own behalf. Furthermore, the testimony that is quoted by the SEC was obtained from his testimony about others before he was sued by the SEC, so therefore Medley NEVER got a chance to put anything on record on his own behalf. How is it I wondered that a person can get a huge judgment against himself and tons of bad press stating things like Medley used shell companies and other individuals to hide his involvement, and never get a chance to testify on his own behalf. After all, isn’t this America?
- 4) Furthermore, when Medley appealed the first judgment decision and the appeal court ruled in his favor that the SEC could not assess penalties against Medley without his having a chance to testify in court, the SEC dropped the case and still did not give Medley his day in court to defend himself. Odd, why is that?
- 5) The SEC published a very misleading press release which was picked up by others in which the SEC gives the impression that Medley had criminal charges against him. Again, this was not true. Why is the SEC who is the agency that is given the task to prevent misleading information disseminating misleading information itself? Again, very odd.
- 6) I visited the SEC website and sure enough you can find the original September 6, 2001 press release about the MAWI suit, and you can find the December 9, 2005 Press release in which the SEC announces a judgment, and injunction against Medley and posts several irrelevant derogatory statements against Medley, yet I could not find any mention in the 2005 press release that Medley won the issue of “acting as a broker dealer” without a license, nor could I find any mention on the SEC website of the 2008 appeal court reversal of penalties, injunction, and order that the SEC had to go back to court against Medley. Nor could I find on the SEC website any mention or a press release announcing that the SEC, rather than go back to court and allow Medley his testimony, decided to dismiss the case in 2009. Doesn’t this give a false, misleading impression? If you visit the SEC site and search for Medley’s name, you will not get the whole story, much less the complete truth. Does the SEC only publish facts that are favorable to themselves and systematically omit data that makes them look bad or unfavorable? Something struck me as very odd with the Medley case and the facts, when researched in depth. After all, isn’t the SEC the government entity that is supposed to stop misleading dissemination of corporate information?
- 7) On further research I also found around a dozen other filings since the events of MAWI in which Medley’s name is disclosed. When I talked to people involved in the various filings and asked if they had any problems with their filings because of Medley’s involvement, I got a universal answer – “We didn’t have one question about Medley’s lawsuit. It wasn’t a problem.”
- 8) In what I describe as the coup de grace, I discovered that Medley was hired by the justice department in 2006 as an expert witness to explain to a trial court how reverse mergers work. The justice department hired him fully knowing his case with the SEC and it was fully disclosed in the court proceedings. Now why would the government hire this so called “horrible” person as an expert witness? None of this made sense.
I decided to contact Medley to see if there was more to this SEC suit than meets the eye. What would Medley have said if he were able to testify on his own behalf? I was not actually able to get hold of Medley, who was traveling when writing this article, but I did get in touch with his attorney who gave me the following information:
- 1) Medley would have exposed numerous out and out lies in the SEC filings if he had been able to testify in court. He showed me statements in the court filings and then showed me actual transcripts of Medley’s testimony during discovery interrogation and I could see that the SEC, on more than one occasion, literally chopped Medley’s sentences in half excluding clauses that resulted in the appearance that Medley was saying the opposite of what he actually said. These “chopped” sentences were used against Medley in the summary judgment to give the judge a false impression. Hmmm…no wonder the SEC did not want Medley to testify in court.
- 2) Medley was not using “shell corporations and others” to hide his involvement. His attorney showed me that each of the corporations that were supposedly “shells” were:
- -a) tax filing entities for years (he showed me the tax filings),
- -b) not set up for MAWI events but set up years before for estate planning purposes (Medley was a single Dad with two minor kids who owned most of the corporations named in the lawsuit and the companies were set up so in case something happened to Medley his kids would have financial support. Bryan who he supposedly used to hide his involvement was the children’s godfather and president of the corporations in case something happened to Medley), and
- -c) his involvement in all of the corporations named was fully disclosed in at least ten government (NASD/SEC) filings prior to the MAWI events of 1999-2000. I was shown the documents. Medley’s, Medley’s children and Bryan’s involvement were all clearly disclosed for years before the MAWI events. Hardly what I would call “hiding his involvement”. Why wasn’t Medley given the opportunity to present this information to the judge in his own defense? How could the judge have possibly made the same statements and decision if he had known this information?
- 3) I was shown seven attorney opinion letters by three different attorneys that supported Medley’s sale of the “so called” unregistered shares. Medley’s attorney also explained to me that if Medley had known or even suspected that these seven opinion letters were wrong, his work would have qualified at the time for registered S8 shares which could have been issued to Medley, in all four corporations, in a day. In other words all the government’s accusations of this huge effort by Medley to “hide his activities” were false. He didn’t need to hide his activities to subsequently be able to trade his shares. He could have had “registered” shares in all of the corporations in as little as a day each time, and avoided the SEC lawsuits if he had even suspected that the legal advice by any of the attorneys on the tradability of the shares was in error.
- 4) His attorney also pointed out that there was a major dissent with the courts findings regarding the unregistered shares in the appeal case. His attorney believes that if Medley had been able to point out the various government deceptions by personally testifying in the lower court case there may have been a different decision, and if Medley had taken the case to the Supreme Court the government case was so weak on technical grounds that they would have lost.
Is the SEC a Corporate Bully? Well in this case, in my opinion, they definitely are. A great injustice was done not only to Medley but to the American people that something like this can go on in America. We are all supposed to get our day in court if accused of some wrong-doing. My god, most of us can get our day in court even for such a minor infraction as a $50 parking ticket. How is it Medley didn’t get his day in court on a multi-million dollar lawsuit, and now 15 years after the events of Scott Kelly, Tom Eck, MAWI et al., the government is perpetuating the injustice by sentencing him to unfair and misrepresentative information on the Internet?
Fortunately for Medley, who I am told still has the same phone number and address he had 30 years ago, his current attorney says most of Medley’s clients are professionals – attorneys, accountants, brokers, market makers and others who know how the SEC works – exaggerating everything in their filings to get quick summary judgements – and that the actual accusations against Medley were “technical” not “substantive” and the government hype…well, that was “politically motivated” – (Medley’s attorney says the SEC attorneys told his original attorney “off the record” they wouldn’t usually even bother to sue someone like Medley but because the MAWI “bad guys” all hid their money off shore they had to recover some money from someone – just to look good).
Well this finally makes sense, this was all about making a couple of hotshot SEC attorneys look good because they couldn’t figure out how to get money back from the real bad guys. But even though the events have had minimal impact on Medley’s career (Yes, as stated above, even the government has hired him as an expert witness since the events of MAWI) who knows how many clients Medley may have lost among those who are not sophisticated enough to read government documents and sort through the lies – those who are only able to believe whatever they see on Google.
This journalist, however, is out to bust Corporate and Government Bullies, and unfair, unprofessional journalism. If you have been the victim of a Corporate Bully or unprofessional journalism, contact us.