UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7362 / November 6, 1996 SECURITIES EXCHANGE ACT OF 1934 Release No. 37925 / November 6, 1996 ADMINISTRATIVE PROCEEDING File No. 3-9180 --------------------------------: ORDER INSTITUTING PROCEEDINGS In the Matter of : PURSUANT TO SECTION 8A OF : THE SECURITIES ACT OF 1933 : AND SECTION 21C OF THE : SECURITIES EXCHANGE ACT OF : 1934, MAKING FINDINGS AND ROBERT GANN, : IMPOSING CEASE-AND-DESIST : ORDER Respondent. : : --------------------------------: I. The Commission deems it appropriate that public administrative proceedings be instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Robert Gann ("Gann"). In anticipation of the institution of these administrative proceedings, Gann has submitted an Offer of Settlement which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings herein, except for those set forth in Section III A below, which Gann admits, he consents to the entry of this Order Instituting Proceedings, Making Findings and Imposing Cease-and-Desist Order. II. Accordingly, it is ordered that proceedings pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act be, and hereby are, instituted. ==========================================START OF PAGE 2====== III. On the basis of this Order and the Respondent's Offer of Settlement, the Commission makes the following findings:-[1]- A. The Commission has jurisdiction over Gann and over matters set forth in this Order; B. From in and around 1989 until June 1991, the common stock of Angeion Corporation ("Angeion") was the subject of an elaborate fraudulent scheme. The purpose of the scheme was to create the appearance of activity in the stock of Angeion and thus create the impression on the investing public of a demand for the stock. This was done by engaging in manipulative devices including matched orders, wash trades and stock parking.-[2]- During the course of the fraud, the manipulators engaged in at least 23 matched orders involving approximately 675,000 shares valued at approximately $5.6 million. The manipulators also engaged in at least 9 wash trades involving approximately 500,000 shares of Angeion valued at approximately $4.2 million. Further, the manipulators arranged for at least 266,000 shares of Angeion valued at approximately $2 million to be parked in customer accounts to relieve excess inventory at a broker-dealer in order to avoid selling the Angeion stock in the open market. As the scheme began to unravel in May 1991, certain individuals engaged in free- riding,-[3]- purchasing 355,700 shares of Angeion at a cost of $2.54 million with no intention or ability of paying for the shares. The manipulative activities stopped when the ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Respondent Gann's Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. -[2]- A matched order is the entering of a sell (or buy) order knowing that a corresponding buy (or sell) order of substantially the same size, at substantially the same time and at substantially the same price either has been or will be entered. A wash trade is a securities transaction which involves no change in the beneficial ownership of the security. Parking is the sale of securities subject to an agreement or understanding that the securities will be repurchased by the seller at a later time and at a price which leaves the economic risk on the seller. -[3]- Free riding is the practice whereby a security is purchased without sufficient funds to pay for it, the stock is sold prior to settlement date, and the proceeds of the sale are used to pay for the original purchase. ==========================================START OF PAGE 3====== manipulators could no longer pay for their purchases of Angeion stock or satisfy their margin calls. After the manipulative activities ceased, the stock price of Angeion fell from a high of $10 3/8 in March 1991, to a low of $2 3/4 on July 3, 1991. C. Specifically, on or about January 16, 1991, Gann violated Section 17(a) of the Securities Act in that he, in the offer or sale of Angeion securities, by use of the means or instruments of transportation or communication in interstate commerce or of the mails, directly or indirectly, employed devices, schemes, or artifices to defraud; obtained money or property by means of untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in transactions, practices or courses of business which operated as a fraud or deceit upon purchasers or prospective purchasers. As part of his conduct, Gann entered a matched order involving 12,000 shares of Angeion valued at approximately $92,000. D. Specifically, on or about January 16, 1991, Gann violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that he, in connection with the purchase or sale of Angeion securities, by use of the means or instrumentalities of interstate commerce, or by use of the mails, directly or indirectly, employed devices, schemes or artifices to defraud; made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in acts, practices, or courses of business which would or did operate as a fraud or deceit. As part of his conduct, Gann entered a matched order involving 12,000 shares of Angeion valued at approximately $92,000. IV. In view of the foregoing, the sanction specified in the Offer of Settlement is imposed. Accordingly, IT IS HEREBY ORDERED, effective immediately, that pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Gann cease and desist from committing or causing any violation, and committing or causing any future violations of, Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. By the Commission. ==========================================START OF PAGE 4====== Jonathan G. Katz Secretary