Source: https://www.sec.gov/litigation/complaints/comp18055.htm
Timestamp: 2019-04-22 16:35:13+00:00

Document:
1. Defendant Global Airlines Corporation and Defendant Emil Bernard deceived the public by making false and misleading statements regarding Global's ability to purchase and operate two major airline companies.
2. Beginning in June 2000, Global by and through Bernard, its sole shareholder, employee and officer, made several written offers to purchase Trans World Airlines, Inc. and later publicly announced it would soon commence a tender offer for the company.
3. Beginning in July 2001, Global, by and through Bernard, made several offers to purchase US Airways Group Inc. and, in August 2001, publicly announced that it would commence a tender offer for US Airways by the following month.
4. The Defendants made various statements to the public about Global's offers to purchase and proposed tender offers for the airline companies through press releases and through statements by Bernard, using his name and the name, "John Scott."
5. Following these statements, price and volume increases occurred on two different days in the common shares of both TWA and US Airways.
6. The statements were materially false and misleading because they created the impression that Global's offers to purchase and tender offer announcements were legitimate and that the deals would likely be consummated. In fact, consummation of either deal was remote, if not impossible. As Bernard knew, Global did not have the means to purchase either airline by tender offer or otherwise as it had no assets or resources.
7. The Defendants' conduct violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b) and 78n] and Exchange Act Rules 10b-5 and 14e-8 [17 C.F.R. §§240.10b-5 and 240.14e-8].
8. Unless the Court enjoins the Defendants, they will continue to engage in conduct similar to that described in this Complaint. The Commission, therefore, requests that this Court issue an order permanently restraining and enjoining the Defendants from directly or indirectly violating the aforementioned provisions of the federal securities laws. The Commission also is seeking an order that Bernard pay a civil penalty for his unlawful acts pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].
9. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e) and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78aa].
10. The Commission brings this action pursuant to Section 21(d) and 21(e) of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e)], to restrain and enjoin the Defendants permanently from engaging in the acts, practices and transactions herein alleged.
11. Venue lies in the Court pursuant to Section 27 of the Exchange Act [15 U.S.C. § 78aa]. The Defendants, directly or indirectly, made use of the means or instrumentality of interstate commerce, or of the mails, or of a facility of a national securities exchange, in connection with the acts, transactions, and practices alleged herein, many of which took place in the Southern District of New York.
12. Global Airlines Corporation is a private Delaware corporation. Global is a shell company, with no tangible assets, established by Bernard with the purported purpose of acquiring airline assets. Bernard is the company's sole owner, officer, director and employee. During the relevant period, Global's address was P.O. Box 8031, New York, New York 10150.
13. Emil Bernard, age 50, is chief executive officer ("CEO") of Global. Bernard has used the name, "John Scott."
14. Prior to its bankruptcy in January 2001 and the acquisition by American Airlines of its assets in April 2001, Trans World Airlines, Inc. was a Delaware corporation headquartered in St. Louis, Missouri. TWA was an air carrier engaged primarily in the business of transporting passengers, cargo and mail. During the relevant period, TWA's common stock was registered pursuant to Section 12(b) of the Exchange Act and traded on the American Stock Exchange.
15. US Airways Group Inc. is a Delaware corporation headquartered in Arlington, Virginia. US Airways is the parent company of US Airways, Inc., an air carrier engaged primarily in the business of transporting passengers, property and mail. On August 11, 2002, US Airways filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. During the relevant period, US Airways' common stock was registered pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock Exchange ("NYSE").
16. On June 16, 2000, Global, by and through Bernard, sent the board of directors of TWA a written offer to purchase all outstanding TWA shares for five dollars ($5.00) per share. On June 19, 2000, Global issued a press release publicly announcing the terms of that offer. The press release stated that Global would have the right to proceed with a tender offer for TWA if TWA's board of directors ignored or declined Global's offer.
17. The offer letter and the press release also described Global's operating plans for TWA. For example, the release stated that Global planned to expand TWA's fleet by leasing and purchasing airplanes. Global also asserted that it had held talks with seven major airports about "building new gates" and expanding operations. In addition, Global announced plans to expand the TWA terminal in New York and to create hubs in Amsterdam, the Netherlands and Seoul, South Korea.
18. Various press articles during June through November 2000 reported on Global's offer for TWA and contained quotes from Bernard or "John Scott." For example, a July 6, 2000 article in Air Transport Intelligence, titled "Global Claims TWA Interested in Proposed Buy-out," reported, "a privately held company with no airline experience called Global Airlines says [TWA] is giving serious thought to Global's proposal . . .." "John Scott" is quoted in the article as having said, "[w]e expect the deal to close."
19. The article also reported that Global released a statement claiming that Global expected to speak to TWA in the next few days along with TWA's financial advisers and to set up a meeting with TWA CEO Bill Compton and his board. The article went on to quote "John Scott" as having said, "Global is `very close to acquiring Singapore [Airlines'] fleet . . .,'" for TWA, and that "John Scott" did not "see how the deal won't go through right now."
20. Global, by and through Bernard, made revised and repeated offers to TWA, including on August 18 and November 6. In conjunction with the November 6, 2000 offer, Global issued a press release that day describing the revised offer and stating that, under any circumstances, Global would proceed with a tender offer directly to TWA shareholders to commence by November 30, 2000 or "any time there after [sic] that the proper documents are filed with the SEC and the Exchange."
21. A rapid increase in the price and volume of TWA shares followed Global's November 6 press release. TWA share price moved on the American Stock Exchange from one dollar and sixty-five cents ($1.65) at closing on November 6 to a high of two dollars and seventy-five cents ($2.75) on November 7 (a sixty-seven percent (67%) increase), and volume moved from four hundred ninety-six thousand one hundred (496,100) shares on November 6 to three million seven hundred eighty-nine thousand nine hundred (3,789,900) shares on November 7. The exchange halted trading in TWA shares in response to this activity.
22. Global, and Bernard personally, did not have sufficient assets or resources to complete the deal and neither he nor Global had access to outside financing.
23. Global never commenced a tender offer for TWA shares.
24. TWA did not give Global's offer "serious thought" or even consider the offer.
25. Global could not have had a reasonable expectation that the deal would close. Bernard knew that Global had not provided to TWA requested financial and operating information that was a prerequisite for TWA to consider Global's offer.
26. On July 18, 2001, Global, by and through Bernard, made a letter offer to the board of directors of US Airways to purchase the company. The offer letter described Global's various operating and financing plans for US Airways, and stated that Global would proceed with a tender offer directly to the shareholders commencing no later than August 20, 2001.
27. In a letter dated Saturday, August 4, 2001, which was sent to US Airways, Global, by and through Bernard, extended the time period of its offer to the US Airways board, and stated that Global's tender offer to US Airways shareholders would commence no later than September 4.
28. An Associated Press article of Sunday, August 5, reported that "John Scott" said that Bernard met with US Airways executives in July, and quoted "John Scott" saying, "[t]his is a real deal."
29. In a press release issued on Monday, August 6, Global announced to the public its offer for US Airways stock at twenty-seven dollars ($27) per share and its intention to commence a tender offer by September 4. Among other things, the press release stated that Global would "meet this week with its advisors that include its investment bankers, lawyers and accountants . . .," and that the "transaction will close within 90 days but no later than the fourth quarter of this year," when Global claimed that its stock would trade on the NYSE.
30. In a televised interview with Bloomberg financial news service on August 6, Bernard indicated, among other things, that Global had the seven hundred fifty million dollars ($750 million) "lined up already for the cash portion. The source of the money is other private investors and other companies who might be suppliers in this transaction."
31. Bernard also stated in the Bloomberg interview, that he would be able to "tell the public who the bankers are by the end of the week. A lot of the bankers were involved in the United deal." He also told the interviewer "[t]he tender offer will begin on September 4th."
32. In an interview on August 6, 2001, with the cable television channel CNNfn, Bernard stated that the bankers financing Global's offer would be "substantial bankers," some of whom were involved in United Airlines' proposed acquisition of US Airways.
33. On August 6, there was an increase in US Airways stock price and trading volume. On Friday, August 3, US Airways stock had closed on the NYSE at sixteen dollars eighty-eight cents ($16.88) on volume of one hundred eighty-three thousand five hundred (183,500) shares. On Monday, August 6, the stock reached a high of eighteen dollars sixty-nine cents ($18.69) (an eleven percent (11%) increase). Trading volume increased to one million five hundred twenty-three thousand (1,523,000).
34. Contrary to the August 5 Associated Press Article, Bernard never met with US Airways executives. Global had no assets or resources or staff other than Bernard. Bernard could not personally finance an acquisition of a major airline company.
35. Contrary to his statement in the August 6 Bloomberg interview, Bernard had not yet "lined up" the cash portion of Global's offer in August 2001 and had no investors committed.
36. Contrary to his statement in the August 6 Bloomberg interview and the CNNfn interview, Global had no bankers committed to the deal. Global was not prepared to commence a tender offer for US Airways on September 4. In fact, Global never commenced a tender offer for US Airways.
38. The Defendants, in June through November 2000, made materially false or misleading statements in offer letters, in press releases, and in press interviews, with respect to TWA. The Defendants knew, or were reckless in not knowing, that the statements they made were false and/or misleading.
39. The Defendants, in July through September 2001, made materially false and/or misleading statements in offer letters, in press releases, and in press interviews, with respect to US Airways. The Defendants knew, or were reckless in not knowing, that the statements they made were false and/or misleading.
40. The Defendants, directly or indirectly, in connection with the purchase or sale of securities, and by use of the means or instrumentalities of interstate commerce or by use of the mails, or by use of any facility of any national securities exchange: (a) employed devices, schemes or artifices to defraud; (b) 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; and/or (c) engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon any person in violation of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5 [17 C.F.R. § 240.10b-5].
42. The Defendants, in June through November 2000, made materially false and/or or misleading statements in offer letters, in press releases, and in press interviews, in connection with a tender offer for TWA. The Defendants knew, or were reckless in not knowing, that the statements they made were false and/or misleading.
43. The Defendants, in July through September 2001, made materially false and/or misleading statements in offer letters, in press releases, and in press interviews, in connection with a tender offer for US Airways. The Defendants knew, or were reckless in not knowing, that the statements they made were false and/or misleading.
44. The Defendants, in June through November 2000, publicly announced in press releases and in press interviews that they planned to make a tender offer for TWA that had not yet been commenced, without having any reasonable belief that they would have the means to purchase securities to complete the offer. Neither of the Defendants had the assets or resources required to purchase the securities of TWA necessary to complete a tender offer. They had no reasonable belief that they would obtain financing to purchase the securities to complete the offer.
45. The Defendants, in July through September 2001, publicly announced in press releases and in press interviews that they planned to make a tender offer for US Airways that had not yet been commenced, without having any reasonable belief that they would have the means to purchase securities to complete the offer. The Defendants neither had the assets nor the resources required to purchase the securities of US Airways necessary to complete a tender offer. They had no reasonable belief that they would obtain financing to purchase the securities to complete the offer.
46. The Defendants made untrue statements of material facts and/or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or engaged in fraudulent, deceptive, or manipulative acts or practices, in connection with tender offers, in violation of Section 14(e) of the Exchange Act [15 U.S.C. § 78n].
47. The Defendants publicly announced that the Defendants planned to make a tender offer that had not yet been commenced and the Defendants did not have any reasonable belief that the Defendants would have the means to purchase securities to complete the offer, in violation of Exchange Act Rule 14e-8 [17 C.F.R. § 240.14e-8].
Permanently restrain and enjoin the Defendants from violating, directly or indirectly, Sections 10(b) and 14(e) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78n] and Exchange Act Rules 10b-5 and 14e-8 [17 C.F.R. §§ 240.10b-5 and 240.14e-8].
Order Bernard to pay a civil penalty pursuant to Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].

References: § 78
 § 78
 § 78
 § 240
 § 78
 § 240
 § 78