U.S. Securities and Exchange Commission

Litigation Release No. 18921 / October 6, 2004

Accounting and Auditing Enforcement Release No. 2121 / October 6, 2004

SEC SUES ELECTRONIC PRESCRIPTION TECHNOLOGY COMPANY AND ITS FORMER OFFICERS AND DIRECTORS FOR FRAUD

SECURITIES AND EXCHANGE COMMISSION v. SAFESCRIPT PHARMACIES, INC., f/k/a RTIN HOLDINGS, INC., CURTIS A. SWANSON, STANLEY L. SWANSON, R. STEPHEN CAVENDER, AND CURTIS A. BORMAN
Civil Action No. 6:04-CV-455 (USDC/EDTX/Tyler Division)

On October 5, 2004 the Securities and Exchange Commission ("SEC" or "the Commission") filed a civil action in the United States District Court for the Eastern District of Texas against the following entity and individuals: Safescript Pharmacies, Inc., f/k/a RTIN Holdings, Inc. ("RTIN" or "the company"), a Longview, Texas based, electronic prescription technology company; Stanley L. Swanson, RTIN's former CEO; his son, Curtis A. Swanson, also former RTIN CEO; R. Stephen Cavender, the company's former CFO; and Curtis A. Borman, a former RTIN director.

The SEC simultaneously settled its action against RTIN in consideration for RTIN's consenting to a permanent injunction against violations of the antifraud, registration, reporting, books and records and internal controls provisions of the federal securities laws, and RTIN's consenting to the entry of an order by the SEC revoking the SEC registration of RTIN's securities. The SEC also simultaneously settled its action against Borman in consideration for Borman's agreeing to disgorge 106,000 options on RTIN common stock, a $25,000 civil penalty, and a permanent injunction against violations of the "deception of auditors" provisions, and against aiding and abetting violations of the antifraud and reporting provisions of the federal securities laws.

In the civil action filed against Stanley Swanson, Curtis Swanson and Cavender, the SEC is seeking, against each of them, a permanent injunction, an officer and director bar, disgorgement plus prejudgment interest, an accounting, and a civil money penalty, based on violations by each of them of the registration, antifraud, falsification of records, deception of auditors, circumvention of controls and certification provisions, and on their each aiding and abetting RTIN's violations of the antifraud, reporting, books and records and internal controls provisions.

According to the SEC's complaint, in 2002 and 2003, RTIN materially inflated its reported revenue by selling franchise agreements to start-up franchisees in exchange for worthless stock and promissory notes, and then immediately recognizing revenue from the transactions, despite the franchisees' known inability to pay. The SEC further alleges that the Swansons, together with Cavender, fraudulently supported the company's inflated revenue figures by recording fictitious payments by franchisees and by using funds from undisclosed, unregistered distributions of RTIN stock to pay RTIN's debts and management bonuses. The SEC further alleges that Borman, while he was a director of RTIN, assisted the company in misleading the company's auditors about the authenticity of a sham certificate of deposit, allegedly issued to pay for the purchase of an RTIN franchise license. The revenue-inflation scheme caused RTIN to overstate by material amounts its net income in periodic reports the company filed with the Commission throughout 2002 and 2003.

In its complaint, the SEC alleges that RTIN, Stanley Swanson, Curtis Swanson, and Cavender violated Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and that Stanley Swanson, Curtis Swanson and Cavender violated Section 13(b)(5) of the Exchange Act and Rules 13b2-1, 13b2-2 and 13a-14 thereunder. The SEC further alleges that RTIN violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder, and that Stanley Swanson, Curtis Swanson and Cavender aided and abetted those violations. Finally, the Commission alleges that Borman violated Exchange Act Rule 13b2-2, and aided and abetted RTIN's violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20 and 13a-1 thereunder.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/lr18921.htm