9 in Penny Stock Fraud Case Settle Charges With SEC

The Securities and Exchange Commission said Friday that it has settled stock fraud charges against nine associates of former Orange County penny stock king David D. Sterns, accused of looting about $10 million from thousands of investors nationwide.

The SEC sued Sterns and 13 others in March for their alleged involvement in a massive penny stock fraud through a network of Laguna Hills companies, known collectively as the Ultimate Business Network.

Without admitting or denying any wrongdoing, nine UBN associates--including Sterns’ brother and two nephews--agreed not to violate securities laws in the future. Friday’s settlement did not cover five remaining defendants, including Sterns.

The SEC waived $1.1 million in restitution against the nine defendants and seven related companies after they said they had no money.

“My guess is they may be cooperating in the investigation,” said Jim Sanders, who was the SEC’s regional manager in Los Angeles until last April. “The SEC would not have entered into this kind of settlement unless they were satisfied these people didn’t have the money . . . and they would have had to provide the commission with good evidence as to what happened there.”

Sterns’ nephews--Mark A. Sterns of Irving, Tex., and Jonathan D. Sterns of Tampa, Fla.--each pleaded guilty late last year to securities registration violations and mail fraud in connection with UBN. Federal investigators have said the men are cooperating in a criminal investigation of Sterns by a grand jury.

Those settling Friday were Verl V. Sterns II, Mark A. Sterns, Jonathan D. Sterns, J. Marcus Ryan, Joseph P. Cillo, Barry L. Gilliam, David R. High, David N. Gliksman, Norman L. Dixon, Primeritexx Inc., Acrotech Inc., Advanced Technical Systems Inc., Ameritex Inc., Ayin Corp., Gentre Laboratories Inc. and OmniSource Inc.