UNITED STATES SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
RELEASE NO. 7748 / September 30, 1999
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 41950 / September 30, 1999
ADMINISTRATIVE PROCEEDING FILE NO. 3-10055
The Commission has instituted a public administrative and cease-and-desist
proceeding, pursuant to pursuant to Section 8A of the Securities Act of 1933
(Securities Act) and Sections 15(b) and 21C of the Securities Exchange Act of
1934 (Exchange Act) against Madlyn L. Ferro (Ferro) and Dwight H. Stephens
(Stephens). The proceeding is based upon allegations that Ferro, who was
associated with Rich Management Corp. (Rich Management), an unregistered
broker-dealer, and Stephens, who was associated with Cyber-Tech Marketing &
Consulting Group, Inc. (Cyber-Tech), another unregistered broker-dealer, each
engaged in the unlawful sale of unregistered securities of Friendly Power
Company (Friendly Power). The unregistered securities took the form of
partnership units in various franchises in Friendly Power.
The administrative and cease-and-desist proceeding against Ferro is based
upon allegations that Ferro offered and sold the Friendly Power partnership
units on behalf of Rich Management through unsolicited telephone solicitations
to investors located nationwide, that Rich Management raised more than $5
million of the total amount raised in the Friendly Power offering, and that Rich
Management received over $2 million in commission payments. The proceedings are
also based on allegations that Ferro was one of Rich Management's unregistered
representatives, had worked with the principals of Friendly Power and Rich
Management for several years, previously sold partnership units in at least one
other venture started by the principals of Friendly Power and Rich Management,
and that between November 1997 and July 1998, Ferro sold approximately 20 of the
Friendly Power partnership units in return for commissions from Rich Management
of $52,252.70.
The administrative proceeding against Stephens is based upon allegations that
Stephens was associated as an officer and director of Cyber-Tech, and that
between November 1997 and July 1998, Cyber-Tech offered and sold the Friendly
Power securities to the general public. The proceedings are also based on
allegations that on June 28, 1999, in the case of SEC v. Friendly Power
Company, LLC, et al., 98-2902-CIV-KING (S.D. Fla.), the United States
District Court for the Southern District of Florida entered a final judgment of
permanent injunction and other relief, by default, enjoining Stephens from
violating the antifraud and securities and broker-dealer registration provisions
of the federal securities laws. The Court found that Stephens had failed to
appear, answer or otherwise plead to the Complaint filed by the Commission
against him. The Commission's Complaint alleged, among other things, that
between November 1997 and July 1998, Respondent made, or directed his employees
to make, material misrepresentations and omissions in connection with the offer
and sale of unregistered securities in Friendly Power Company concerning: the
potential profitability of an investment in a Friendly Power partnership unit;
the availability of the securities (in a manner designed to create a false sense
of urgency in the investor); Friendly Power's unilateral right to revoke a
franchise's right of exclusivity to the franchise area; and the risk of an
investment in a Friendly Power partnership unit.
A hearing will be held before an administrative law judge to determine
whether the staff's allegations are true, and if so, what sanctions, if any, are
appropriate against Ferro and Stephens.
http://www.sec.gov/litigation/admin/34-41950.htm
