SEC Cracking Down on 'Shell' Trading

Some of the companies on the SEC's hit list include such little-known concerns as Redneck Foods, Nevada Manhattan Group, CathayOne, Cyber Tennis, Oasis Resorts and Rollerball International. Many of the companies the SEC is targeting have been previously cited for failing to file periodic financial reports and other regulatory filings.

The SEC alleges that at least 15 of the stocks are part of a group that has been associated with Salt Lake City stock promoter Richard Surber, who specializes in taking "private companies public via reverse mergers with public shell companies."

In an administrative order, the SEC alleges that Surber, a 31-year-old attorney, purchases a controlling interest in shell companies that trade on the pink sheets and then finds private companies interested in doing a reverse merger. Regulators contend that Surber "obtains cash fees in the range of $100,000 to $350,000" and up to a 3% equity interest in every reverse merger deal he completes.

Surber, who wasn't charged with any wrongdoing by the SEC, did not return a telephone call to his Salt Lake City office.

Surber is president of Nexia Holdings, a company that trades on the OTC Bulletin Board and is itself the product of a reverse merger, according to regulatory filings. One of Nexia's subsidiaries is Hudson Consulting Group, a company that offers financial consulting services to start-up businesses. In a regulatory filing, Hudson is said to specialize in "uncovering private placement funding sources; strategic business planning; SEC registration documentation; "edgarization" of SEC forms and filings ... and identifying merger and acquisition opportunities."

Surber is the nephew of Allen Wolfson, a Salt Lake City penny-stock promoter who was convicted last year on a variety of federal securities fraud charges. Federal prosecutors in New York had alleged that Wolfson was the mastermind of a major pump-and-dump operation that involved 120 stockbrokers, stock promoters and organized crime members.

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