Initial Decision of an SEC Administrative Law Judge

In the Matter of
Stansbury Holdings Corporation

INITIAL DECISION RELEASE NO. 232
ADMINISTRATIVE PROCEEDING
FILE NO. 3-11108

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

In the Matter of STANSBURY HOLDINGS CORPORATION

: : : : :

INITIAL DECISION July 14, 2003

APPEARANCES:	Robert M. Fusfeld for the Division of Enforcement, Securities and Exchange Commission. Scott R. Jenkins for Respondent.
BEFORE:	James T. Kelly, Administrative Law Judge.

The Securities and Exchange Commission (SEC or Commission) issued its Order Instituting Proceedings (OIP) on May 7, 2003, pursuant to Section 12(j) of the Securities Exchange Act of 1934 (Exchange Act). The Respondent is Stansbury Holdings Corporation (Stansbury), a mining company formerly headquartered in Denver, Colorado, which has registered its common stock with the Commission pursuant to Section 12(g) of the Exchange Act. The OIP alleges that Stansbury has failed to file its annual report with the Commission for the fiscal year ending June 30, 2002, as well as its quarterly reports for the periods ending September 30, 2002, and December 31, 2002. The OIP also charges that Stansbury was late in filing its annual report for the fiscal year ending June 30, 2001.

The OIP further asserts that Stansbury's quarterly report for the period ending March 31, 2002, failed to disclose the material fact that a Montana state court had entered a judgment ordering that one of Stansbury's most significant mining properties be sold at a sheriff's sale. The OIP alleges that the report's discussion of this property without also mentioning the judgment rendered the report materially misleading. According to the OIP, the financial statements in that quarterly report were also materially misleading because they failed to disclose the possible loss of the mining property, which accounted for more than half the total asset value shown on Stansbury's balance sheet.

Finally, the OIP alleges that Stansbury's corporate charter was involuntarily dissolved by the State of Utah in July 2001. The OIP asserts that the dissolution was a material fact that Stansbury should have disclosed to the investing public. The OIP charges that Stansbury made several periodic filings with the Commission after the dissolution, falsely representing that it was a Utah corporation, without disclosing the dissolution.

As a result of these acts and omissions, the OIP charges that Stansbury has failed to comply with Section 13(a) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13. The Commission instituted this proceeding to determine whether the allegations are true, to afford Stansbury an opportunity to establish any defenses to such allegations, and to decide whether the registration of Stansbury's common stock should be suspended or revoked.

Stansbury filed its answer on May 27, 2003. It admitted that it had failed to file three periodic reports and that it was late in filing a fourth periodic report. Stansbury denied that it had made any misstatements or omissions of material fact in its periodic reports. It acknowledged that the State of Utah had involuntary dissolved its corporate charter, but it maintained that the dissolution was immaterial. Stansbury also argued that it has been reinstated and is once again a corporation in good standing. Finally, Stansbury requested an opportunity to come into compliance with the Commission's periodic filing requirements during a period of time to be determined.

I held a telephonic prehearing conference on June 2, 2003. Because Stansbury's failure to file its periodic reports was uncontested, the parties agreed that the only issues to be addressed at a hearing would be Stansbury's plan for bringing itself into compliance and the appropriate sanction under Section 12(j) of the Exchange Act.

The parties agreed to a telephonic hearing, rather than an in-person hearing.¹ I held the hearing on June 18, 2003, and received testimony from one witness. The Division filed fifteen exhibits and Stansbury filed six exhibits.² I conducted the hearing from the public hearing room at the Commission's headquarters in Washington, D.C, by speakerphone. Division counsel participated by telephone from Denver. Stansbury's counsel participated by telephone from Salt Lake City, Utah. The witness testified by telephone from North Kingston, Rhode Island (Tr. 20-61). The parties waived the opportunity to submit proposed findings of fact, conclusions of law, and briefs (Tr. 61-62). They offered closing arguments at the hearing (Tr. 62-77). The matter is now ready for decision. I have applied preponderance of the evidence as the standard of proof. See Steadman v. SEC, 450 U.S. 91, 97-104 (1981).

FINDINGS OF FACT

Stansbury is a mining company incorporated in the State of Utah in 1969 under the name Stansbury Mining Corporation (DX 3). The company changed its name to Stansbury Holdings Corporation in 1990 (DX 3). Stansbury describes its business as the acquisition, exploration, development, and operation of industrial mineral properties, particularly vermiculite and garnet mineral projects (DX 9). Stansbury has been inactive and non-operating for most of its history, and its outside auditors have questioned its ability to remain a going concern (DX 8). Its primary activity in the past few years has been to preserve and maintain its mineral leases and claims (DX 10, DX 11).

Stansbury's common stock has been registered with the Commission under Section 12(g) of the Exchange Act since at least 1985 (OIP ¶ II.A; Answer, ¶ II.A; Tr. 54). The stock, which is quoted in the Pink Sheets, trades sporadically, in low volume, and at prices well below $0.01 per share (Tr. 56; RX 6).

Unfiled And Untimely Periodic Reports

Stansbury has failed to file its annual report with the Commission on Form 10-KSB for the fiscal year ending June 30, 2002, and its quarterly reports on Form 10-QSB for the quarters ending September 30, 2002, and December 31, 2002 (OIP ¶ II.B; Answer, ¶ II.B).

Stansbury's annual report on Form 10-KSB for the year ending June 30, 2001, was filed late (OIP ¶ II.C; Answer, ¶ II.C). The report was due on September 30, 2001, but the Commission did not receive it until November 16, 2001 (DX 7, DX 8).

Alleged Misrepresentation Or
Omission # 1: Adverse Litigation Results
And Misleading Financial Statements

Nevada Vermiculite, LLC (Nevada Vermiculite), arranged a $130,000 loan to Stansbury in 1998 to help Stansbury settle a dispute involving over $2,000,000 dating from 1989 (DX 8 at 20). The loan was secured by vermiculite claims near Hamilton, Montana, Stansbury's most significant asset.³

Stansbury failed to repay the loan when it became due on October 28, 1999, and Nevada Vermiculite filed a mortgage foreclosure action against Stansbury in the Montana court system. Stansbury disclosed the existence of the litigation in its 2001 annual report, and in its September 30, 2001, and December 31, 2001, quarterly reports (Tr. 28; DX 8 at 10, DX 9 at 16, DX 10 at 12). It also carried the amount in controversy ($130,000) as a current liability on its balance sheet (DX 8, DX 9, DX 10).

On March 1, 2002, a Montana district court entered final judgment against Stansbury for $191,875 (including principal, interest, attorney's fees, and costs) (DX 2). The district court also ordered the sheriff to sell the Hamilton vermiculite property to satisfy the judgment (DX 2).

On May 14, 2002, Stansbury filed its quarterly report on Form 10-QSB for the period ending March 31, 2002 (DX 11). With respect to the Hamilton vermiculite property in general and the Montana litigation in particular, Stansbury again disclosed the fact of the litigation, but not the entry of judgment. The only new information Stansbury offered was the following (DX 11 at 7-8):

At this time, the company has no plans for the immediate resumption of operations at its . . . Hamilton Vermiculite Project near Hamilton, Montana. With severe working capital constraints as noted above, the Company has viewed it to be necessary to postpone any expenditures on [this project] until positive cash flow becomes available from [other] projects. . . .

In January 2002, the court in Montana ruled that the plaintiffs may proceed to foreclosure, and that the counterclaims of the company are properly to be arbitrated. Since that ruling, other claimants to the property have petitioned to intervene in the case.

Stansbury's unaudited balance sheet as of March 31, 2002, continued to carry Nevada Vermiculite's claim as a current liability valued at $130,000 (DX 11).

The sheriff's sale of the Hamilton vermiculite property took place on January 23, 2003 (Tr. 29; RX 4). Stansbury issued a press release on February 7, 2003, announcing the sheriff's sale (Tr. 30; RX 5). Under Montana law, Stansbury has twelve months following the date of the sheriff's sale to redeem the Hamilton vermiculite property (Tr. 29; RX 5). However, Stansbury has already advised the public that the most likely outcome is the termination of its vermiculite business in order to focus on its garnet mining operations (RX 5).

Alleged Misrepresentation Or
Omission # 2: Corporate Good Standing

The Utah Revised Business Corporation Act (URBCA) governs Utah corporations from creation to dissolution. See Utah Code Ann. §§ 16-10a-101 - 16-10a-1705. The URBCA requires Utah corporations to file an annual report with the Division of Corporations of the Utah Department of Commerce. Id. § 16-10a-1607. Failure to pay the annual franchise fee or failure to file an annual report are among the grounds for administrative dissolution. Id. § 16-10a-1420(1)-(2). In general, an administratively dissolved Utah corporation continues its corporate existence, but may not carry on any business except the business necessary to wind up and liquidate its business and affairs. Id. § 16-10a-1421(3)(a)(i). However, if a dissolved Utah corporation is reinstated within two years of the effective date of the administrative dissolution, business conducted during a period of administrative dissolution is unaffected by the dissolution. Id. §§ 16-10a-1421(3)(b), 16-10a-1422. Upon reinstatement, an act of a corporation during the period of dissolution is effective and enforceable as if the administrative dissolution had never occurred. Id. § 16-10a-1422(4)(a).

The State of Utah involuntarily dissolved Stansbury's corporate charter on July 11, 2001 (OIP ¶ III.C; Answer, ¶ III.C). After the dissolution, Stansbury filed several periodic reports with the Commission (DX 8, DX 9, DX 10, DX 11). Among other things, these reports discussed how Stansbury was then conducting its operations and how it planned to conduct them in the future. None of these periodic reports mentioned the involuntary dissolution.

In late April 2003, Stansbury filed its delinquent tax returns with the State of Utah for the years 2000 and 2001 and it paid the necessary late-filing penalties (Tr. 23). Stansbury then applied to the Utah Department of Commerce for reinstatement of its corporate charter (Tr. 24). Reinstatement was granted effective May 2, 2003, and Stansbury is again a corporation in good standing with the State of Utah (RX 1).

New Management's Plan For Coming Into Compliance
With The Exchange Act's Periodic Reporting Requirements

Michael J. Healey (Healey), age 45 and a resident of Rhode Island, has been president and a director of Stansbury since October 31, 2002 (Tr. 20-21). Healey earned a B.A. degree in political science from the University of Rhode Island (Tr. 21). He was a stockbroker from 1985 to 2002, but he had no experience in the mining industry before he became affiliated with Stansbury (Tr. 31, 60-61).⁴ Healey described his work for Stansbury as full-time employment (Tr. 32). From October 31, 2002, through the date of the hearing, Stansbury has paid Healey approximately $30,000 in compensation (Tr. 32). Healey does not own any Stansbury stock or stock options (Tr. 57-58).⁵ Since April 2003, Healey has been working a second job as a mortgage loan officer (Tr. 32).

Most of the violations alleged in the OIP took place under Stansbury's prior management (Tr. 25). However, Stansbury's failure to file Forms 10-QSB for the periods ending September 30, 2002, and December 31, 2002, occurred during Healey's presidency.

Healey readily acknowledges the importance of the Exchange Act's periodic reporting requirements, but he explains that he cannot bring Stansbury into full compliance immediately (Tr. 24-25). To become current in its reporting obligations, Stansbury must undergo outside audits of its financial statements for fiscal year 2002 and (very soon) for fiscal year 2003 (Tr. 25). It must then file its delinquent annual and quarterly reports with the Commission (Tr. 25). Stansbury has not yet retained an outside accounting firm to audit its financial statements, although it has conducted preliminary discussions with two such firms (Tr. 36).

Healey anticipates that Stansbury will have all the necessary filings completed by September 30, 2003 (Tr. 25, 49). In the interim, Stansbury is willing to consent to a temporary suspension in the trading of its common stock (Tr. 26). Under Healey's proposal, the temporary suspension would last until September 30, 2003, or until all delinquent reports have been filed, whichever occurs first (Tr. 26). If Stansbury does not bring itself into full compliance with the Exchange Act's reporting requirements by September 30, 2003, the company will consent to the automatic revocation of the registration of its common stock without another hearing (Tr. 26). The September 30, 2003, deadline would be eleven months after Healey took over from prior management.

Healey acknowledged that Stansbury has not earned any revenues since he became president, and that Stansbury has a balance of about $1,000 in its bank account (Tr. 43-44). Stansbury still owes approximately $40,000 to the accounting firm that conducted its fiscal year 2001 audit (Tr. 39, 44-45). Funds to pay the auditors would have to be raised from private placements (Tr. 50). Oral estimates of the auditing fees needed to bring Stansbury into full compliance are $20,000 to $40,000, in addition to the $40,000 still owing for the 2001 audit (Tr. 44, 52-53).

As for future mining operations, Stansbury has one other employee in addition to Healey (Tr. 45). John Hill (Hill) is operational manager of Stansbury's Sweetwater Garnet Mine and Mill near Dillon, Montana (Tr. 45). Hill has twenty-five years of experience in industrial mining and milling, and he has been involved with the Sweetwater property since July 2000 (Tr. 60). In Healey's judgment, Hill and unnamed others provide the technical mining skills needed to move the company forward (Tr. 60). Stansbury will require about $400,000 in capital investment to get its Sweetwater garnet mine and mill operational (Tr. 45).

DISCUSSION AND CONCLUSIONS

Under Section 12(j) of the Exchange Act, the Commission is authorized, "as it deems necessary or appropriate for the protection of investors," to revoke the registration of a security or to suspend the registration of a security for a period not exceeding twelve months if it finds that the issuer of such security has failed to comply with any provision of the Exchange Act or the rules and regulations thereunder.

The determination of an appropriate sanction under Section 12(j) of the Exchange Act should be guided by the public interest factors identified in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). See WSF Corp., 77 SEC Docket 1831 (May 8, 2002), final, 77 SEC Docket 2336 (May 24, 2002).

Under Steadman, several issues should be considered, including: (1) the egregiousness of the respondent's actions; (2) the isolated or recurrent nature of the infraction; (3) the degree of scienter involved; (4) the sincerity of the respondent's assurances against future violations; (5) the respondent's recognition of the wrongful nature of its conduct; and (6) the likelihood of future violations. No one factor is controlling.

Periodic Reporting Requirements

Section 13(a) of the Exchange Act and the regulations thereunder require issuers of securities registered pursuant to Section 12 of the Exchange Act to file periodic and other reports with the Commission. Implicit in these rules is the requirement that the reports accurately reflect the financial condition and operating results of the issuer. See SEC v. Kalvex, Inc., 425 F. Supp. 310, 316 (S.D.N.Y. 1975). No showing of scienter is necessary to establish a violation of Section 13(a) or the regulations thereunder. See SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998); SEC v. Wills, 472 F. Supp. 1250, 1268 (D.D.C. 1978).

The purpose of periodic filings is to supply the investing public with current, accurate financial information about an issuer so that the investing public may make informed decisions. As stated in SEC v. Beisinger Indus. Corp., 552 F.2d 15, 18 (1st Cir. 1977) (quoting legislative history):

The reporting requirements of the [Exchange Act] is the primary tool which Congress has fashioned for the protection of investors from negligent, careless, and deliberate misrepresentations in the sale of stock and securities. Congress has extended the reporting requirements even to companies which are "relatively unknown and insubstantial."

Stansbury's undisputed failure to file three periodic reports violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder. These violations are not isolated. In addition to failing to file the annual report and the two quarterly reports identified in the OIP, Stansbury has not filed its quarterly report for the period ending March 31, 2003 (DX 15). Its annual report for 2001 was filed well after the due date. Violations of Section 13(a) of the Exchange Act do not require a finding of scienter. Through the testimony of Mr. Healey, Stansbury has recognized the wrongful nature of its failure to file the periodic reports at issue. Stansbury has represented that it intends to bring itself into full compliance with the periodic reporting requirements of Exchange Act Section 13(a) no later than September 30, 2003. However, based on cost estimates involved, the absence of operating revenues, the lack of cash on hand, and the absence of a clear plan for obtaining the necessary funds, I conclude that Stansbury's ongoing failure to comply with the periodic reporting requirements is likely to continue beyond September 30, 2003.

Stansbury's request for a grace period while coming into compliance is in reality a settlement offer, which only the Commission may accept or reject. If I were to suspend the registration of Stansbury's common stock for a fixed period of time, and if Stansbury were to fail to bring itself into compliance during that fixed period, the suspension order would expire automatically. It could not be extended, and it could not be converted into a revocation. To revoke the registration of Stansbury's common stock at that juncture, the Commission would have to initiate a fresh administrative proceeding. I cannot realistically issue a ruling that Stansbury has already waived a hearing in an administrative proceeding that has not yet commenced, and which may very well not be assigned to my docket if it is commenced. The weight of the evidence persuades me that Stansbury cannot remedy its violations of the periodic reporting requirements in the near future. Based on my determination that Stansbury's violations of the periodic reporting requirements have not been isolated and are likely to continue in the future, I do not believe that suspension of registration for a fixed term will adequately protect the investing public.

As a result of Stansbury's failure to make the required periodic reports, there is no current, reliable, audited information regarding Stansbury's operations or financial condition. The investing public has no way of knowing if the missing periodic reports really mask significant financial problems and/or inaccuracies in Stansbury's most recent financial statements. Viewing the Steadman factors in their entirety, it is necessary and appropriate for the protection of investors to revoke the registration of Stansbury's common stock.

Material Misrepresentations And Omissions

The allegations concerning Stansbury's material misrepresentations and omissions add nothing to the Division's case. Revocation is warranted by reason of the admitted reporting violations and the need to protect the investing public. Accord Nano World Projects Corp., __ SEC Docket ___ (Initial Decision Release No. 228) (May 20, 2003), final, __ SEC Docket ___, Exchange Act Release No. 48057 (June 18, 2003); Freedom Golf Corp., __ SEC Docket ___ (Initial Decision Release No. 227) (May 15, 2003), final, __ SEC Docket ___, Exchange Act Release No. 48009 (June 10, 2003). I discuss these charges only in the interest of completeness.

A fact is material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision and if the reasonable investor would view disclosure of the omitted fact as having significantly altered the total mix of information made available. See Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988); TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). Information regarding the financial condition of a company is presumptively material. See SEC v. Blavin, 760 F.2d 706, 711 (6th Cir. 1985).

The Montana court judgment. Stansbury defends on the ground that the entry of judgment was immaterial because the sheriff's foreclosure sale had not yet occurred and that, when and if it did occur, Stansbury would still have another year to redeem its vermiculite assets (Answer ¶ III.B; Tr. 72-73). In evaluating the materiality of a corporate event that has not yet occurred, Basic provides that materiality "will depend at any given time upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity." Basic, 485 U.S. at 238 (citations omitted). Applying that standard to Stansbury's Form 10-QSB for the quarter ending March 31, 2002, I conclude that the information about the Montana district court judgment was material. Narrative disclosure was thus required in the quarterly report in order to comply with Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.⁶ Although the loss of the Hamilton vermiculite claims was not inevitable at the time the quarterly report was filed, the judgment represented a potentially huge financial setback for Stansbury (the loss of a $15 million asset on a balance sheet with total assets of $24 million). If Stansbury wanted to emphasize the uncertainty of the loss, it could have placed the necessary disclosure in context by pointing out that the sheriff's sale had not yet occurred and that, when it did occur, Stansbury would still have another twelve months to redeem the asset. Investors and prospective investors could then have decided for themselves just how meaningful a right of redemption was to an issuer without revenues or cash to fund the redemption.

The involuntary corporate dissolution. OIP ¶¶ III.C-III.D explore the uncharted wilderness that divides "interesting facts" from "material facts." Fewell v. Kozak, 1999 U.S. Dist. LEXIS 16532 at *19-20, Fed. Sec. L. Rep. (CCH) ¶ 90,690 at 93,272 (N.D. Ill. Oct. 18, 1999) is instructive. The complaint in Fewell alleged that defendant sold securities to plaintiff, while neglecting to inform plaintiff that the issuing corporation had been dissolved for failing to file an annual report and pay annual franchise taxes. The omission was alleged to violate Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5. The court denied defendant's motion to dismiss the federal securities law claim, holding that plaintiff "has stated a fraud claim, albeit barely." Id. at *18. The court explained (id. at *19-20):

Plaintiff contends that [defendant] failed to inform him that [the issuer] allegedly had been dissolved by the Illinois Secretary of State. Neither party has provided case law on the issue of whether failure to disclose the defunct status of an issuing corporation constitutes fraud. Viewing the allegations in the light most favorable to Plaintiff, the court concludes that [defendant's] failure to mention [the issuer's] defunct status when providing [] information [about the issuer] may well meet the level of materiality required in a securities fraud action. Defendant argues that the fact that [the issuer] was dissolved was immaterial in that it could "be cured easily, and had no effect on the value of plaintiff's stock." The court finds this reasoning unpersuasive. Under the "materiality" test set forth in TSC Indus., Inc., the fact that the issuing company is defunct, for even arguably ministerial reasons, is information which would have a substantial likelihood of significantly altering the total mix of information made available. Thus, the court holds that . . . Defendant's failure to inform Plaintiff that [the issuer] corporation had been dissolved is a material omission which can support the Plaintiff's fraud claim.

In reliance on Fewell, I conclude that Stansbury's involuntary dissolution was material (albeit barely) and that Stansbury should have disclosed the matter in its periodic reports (DX 8, DX 9, DX 10, DX 11).⁷ Its failure to do so violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder.

RECORD CERTIFICATION

Pursuant to Rule 351(b) of the Commission's Rules of Practice, I certify that the record includes the items set forth in the record index issued by the Secretary of the Commission on July 2, 2003.

ORDER

Based on the findings and conclusions set forth above, IT IS ORDERED THAT the registration of the common stock of Stansbury Holdings Corporation is revoked pursuant to Section 12(j) of the Securities Exchange Act of 1934.

This Order shall become effective in accordance with and subject to the provisions of Rule 360 of the Commission's Rules of Practice. Pursuant to that Rule, a petition for review of this Initial Decision may be filed within fourteen days after service of the Initial Decision.⁸ It shall become the final decision of the Commission as to each party who has not filed a petition for review pursuant to Rule 360(d)(1) within fourteen days after service of the Initial Decision on that party, unless the Commission, pursuant to Rule 360(b)(1), determines on its own initiative to review this Initial Decision as to that party. If a party timely files a petition for review, or the Commission acts to review on its own motion, the Initial Decision shall not become final as to that party.

_______________________________
James T. Kelly
Administrative Law Judge

_________________________

1	Paragraph V of the OIP requires that the hearing be held "before" an Administrative Law Judge (ALJ). Hearings "before" an ALJ need not be "in the physical presence" of the ALJ. Cf. Bigby v. INS, 21 F.3d 1059, 1063-64 (11th Cir. 1994) (holding that when credibility determinations are not in issue, an immigration judge may hold a hearing by telephonic means). Witness credibility is not an issue here.
2	The hearing transcript, as amended by my Order of July 7, 2003, will be cited as "Tr. ___." The Division's exhibits will be cited as "DX ___." Respondent's exhibits will be cited as "RX ___."
3	Stansbury has represented that the Hamilton vermiculite property is worth $15,021,593 (Tr. 29; DX 8, Independent Accountant's Report at 13).
4	Merit Capital Associates, Inc. (Merit Capital), of Westport, Connecticut, was Healey's employer from 1995 to 2002 (Tr. 31). Merit Capital has arranged private placements for Stansbury (DX 8 at 17).
5	Article X of Stansbury's Articles of Incorporation requires that all directors must be stockholders of record (DX 3).
6	OIP ¶ III.B raises two distinct allegations: first, that the narrative disclosure in Stansbury's quarterly report was misleading, and second, that the financial statements in Stansbury's quarterly report were also misleading. My conclusions about violations are limited to the first of these allegations. Accounting for Contingencies, Statement of Financial Accounting Standards No. 5 (Financial Accounting Standards Bd. 1975) (FASB No. 5), sets forth the standards of financial accounting and reporting for loss contingencies. The Division did not present any evidence that Stansbury's financial statements for the quarter ending March 31, 2002, failed to conform with FASB No. 5. Indeed, the Division first mentioned FASB No. 5 during its closing argument, and then only to support its position about the need for narrative disclosure of the judgment (Tr. 68). Stansbury's prior management felt that the Hamilton vermiculite asset was impeded, but that the amount of the loss could not be estimated (Tr. 30). See SEC v. Steadman, 967 F.2d 636, 645 (D.C. Cir. 1992) (holding that there is no obligation under FASB No. 5 to attempt to quantify a contingent obligation through rough guesses or speculation). The second allegation in OIP ¶ III.B is dismissed for failure of proof.
7	The Division also argues that Stansbury misrepresented a material fact when it identified Utah as its state of incorporation in three current reports filed after the involuntary dissolution. According to the Division, Stansbury made a material misrepresentation when it typed in the word "Utah" on a line in Form 8-K that asked the reporting company to name its jurisdiction of incorporation. In the Division's view, Stansbury made the implicit representation that it was a company in good standing, when it was not (Tr. 12-13; DX 12, DX 13, DX 14). Stansbury argued that DX 12, DX 13, and DX 14 (current reports on Form 8-K) involved matters beyond the scope of the OIP, which was confined to "periodic reports," and said nothing about "current reports" (OIP ¶ III.D; Tr. 6, 8, 12-13). Cf. Certification of Disclosure in Companies' Quarterly and Annual Reports, 78 SEC Docket 1104, 1106-07 (Aug. 28, 2002) (drawing a distinction between periodic reports and current reports). I conclude that the OIP's invocation of Exchange Act Rule 13a-11 was a sufficient (although cryptic) way to inform Stansbury that current reports on Form 8-K would be at issue in the proceeding. Stansbury also argued that there was no misrepresentation because even a dissolved Utah corporation still has a jurisdiction of incorporation, at least for two years following dissolution. See URBCA §§ 16-10a-1421, 16-10a-1422. I agree with Respondent on this latter point, and conclude that the charges under Exchange Act Rule 13a-11 have not been sustained as to DX 12, DX 13, and DX 14. Unlike the quarterly reports in question (DX 8, DX 9, DX 10, DX 11), the Forms 8-K did not discuss Stansbury's ongoing operations or expected future operations in the narrative text. Rather, the current reports were confined to changes in Stansbury's board of directors, changes in Stansbury's outside auditor, and the distribution of stock in a Stansbury subsidiary.
8	Rule 360(b) permits an ALJ to grant the parties up to twenty-one days after service of an Initial Decision to petition for Commission review. Most Initial Decisions routinely grant the maximum twenty-one days. A shorter period of fourteen days is established here because the issues are straightforward and the public interest considerations in timely resolution of this controversy are strong. See WSF Corp., 77 SEC Docket at 1838 n.2.