Source: https://www.sec.gov/litigation/complaints/comp17835.htm
Timestamp: 2019-04-19 13:02:08+00:00

Document:
800America is committing an egregious financial fraud by falsifying virtually all of its reported revenues and millions in expenses and assets.
Rabi and Steeples - both criminal recidivists - are conducting an unregistered offering of 800America stock, engaging in insider trading by selling the stock into the market while knowing about their fraud, and misappropriating 800America assets.
800America is making misrepresentations in its public filings and a press release about Rabi's and Steeple's criminal pasts and about 800America's purported corporate officers.
2. Specifically, 800America is falsely reporting millions of dollars in fictitious sales, expenses, and assets. 800America accomplished the fraud by submitting fictitious bank statements and a falsified general ledger to its auditor. Some of the falsified bank statements also include bogus checks and deposit slips. The actual bank statements, however, do not support any of the fictitious sales or expenses. The scope of the fraud is massive relative to the size of the company. For example, the Commission has determined that 800America's general ledger contained at least $22,219,920 in fictitious sales in the 2001 calendar year -- more than 100% of the $21,401,169 in revenues 800America reported generating in its audited financial statements contained in its 2001 Form 10-KSB.
3. Second, Rabi and Steeples obtained large blocks of 800America stock through a purported S-8 registration and through a reverse-merger, placed the shares into their nominee accounts, and sold -- and continue to sell -- the stock to the investing public in unregistered offerings. Rabi and Steeples have accumulated at least 1,369,750 shares of 800America stock, and, through their nominee accounts, have sold at least 1,188,150 shares for $2,731,760.27, increasing 800America's float by 19.02 %. Some of the money raised in these unregistered offerings has gone back to 800America or its subsidiaries, and at least $330,105.00 has gone to Rabi and Steeples. 800America has not disclosed the unregistered stock sales or the misappropriation of 800America assets.
4. Third, on January 17, 2002, 800America issued a press release falsely denying that Rabi had a criminal past. In fact, on January 3, 1997, Rabi, using the alias Edward Rabie, pleaded guilty in Kentucky state court to charges of securities fraud, acting as an unregistered broker-dealer, and selling unregistered securities. To date, 800America has not disclosed Rabi's felony conviction. Beyond that, 800America's public filings contain other misrepresentations or omit material facts: (a) the Company's most recent 10-KSB identifies as officers or directors several individuals who either have left the Company or cannot be located by the Company; (b) the filings fail to disclose that Steeples is a de facto control person of the Company and has signatory authority over 800America's bank accounts; and (c) the Company's filings fail to disclose that on November 14, 1996, Steeples pleaded guilty to charges of delivering cocaine into a detention facility where prisoners are quartered.
5. The fraud is continuing. The Defendants are still opening nominee accounts, sending unregistered 800America securities into those accounts, and selling the unregistered securities to the investing public. The Defendants are still preparing and filing false financial statements. As recently as August 2002, Rabi certified false financial statements.
6. The Commission brings this action pursuant to the authority conferred upon it by Section 20 of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77t(b), and Section 21(d) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78u(d), to temporarily, preliminarily, and permanently enjoin the Defendants as follows: (a) 800America, enjoining it from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, 15 U.S.C. §§ 77e(a), 77e(c), 77q(a), and Sections 10(b), 13(a), and 13(b)(2) of the Exchange Act, 15 U.S.C. §78j(b) 15 U.S.C. §78m(a) and §78m(b)(2), and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder, 17 C.F.R. §§ 240.10b-5, 240.12b-20, 230.13a-1, and 240.13a-13; and (b) Rabi and Steeples, enjoining them from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, 15 U.S.C. §§ 77e(a), 77e(c), 77q(a), Sections 10(b), and 13(b)(5) of the Exchange Act, 15 U.S.C., §78m(b)(5), and Rules 10b-5, 13b2-1 and 13b2-2 thereunder, 17 C.F.R §§ 240.10b-5, 240.13b2-1 and 240.13b2-2, and, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 77t(a), from violating as control persons Sections 17(a) of the Securities Act, 15 U.S.C. §77q(a), and Sections 10(b), 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. § 78j(b) §§78m(a) and 78m(b)(2), and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder, 17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-1, and 240.13a-13, and from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §78m(a) and §78m(b)(2), and Rules 12b-20, 13a-1, and 13a-13 thereunder, 17 C.F.R. §§ 240.12b-20, 230.13a-1, and 240.13a-13.
7. In addition, the Commission is seeking an order appointing a receiver for 800America; expedited discovery; an accounting of each of the Defendants' assets; asset freezes against each of the Defendants; repatriation orders; disgorgement of all ill-gotten gains plus prejudgment interest; civil penalties; an order preventing the destruction of documents and evidence; and, against Rabi and Steeples interim and final penny stock and officer and director bars and a forfeiture of stock under their control.
8. The Defendants have engaged, and unless enjoined will continue to engage, directly or indirectly, in acts, practices, or courses of business, that constitute violations of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
9. The Defendants have engaged, and unless enjoined will continue to engage, directly or indirectly, in conduct that constitutes violations of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c).
10. Rabi and Steeples have engaged, and unless enjoined will continue to engage, directly or indirectly, in conduct that constitutes violations of Section 13(b)(5) of the Exchange Act, 15 U.S.C. §78m(b)(5), and Rules 13(b)(2)(A), 13(b)(2)(B), and 13(b)2-2 thereunder, 17 C.F.R §§ 240.13(b)(2)(A), 240.13(b)(2)(B), and 240.13(b)2-2.
11. 800America has engaged, and unless enjoined will continue to engage, directly or indirectly, in conduct that constitutes violations of Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§78m(a) and 78m(b)(2), and Rules 12b-20, 13a-1, and 13a-13 thereunder, 17 C.F.R. §§240.12b-20, 240.13a-1, and 240.13a-13. Rabi and Steeples are liable for 800America's reporting violations as control persons. In the alternative, Rabi and Steeples have aided and abetted violations, and unless enjoined will continue to aid and abet violations, of Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§78m(a) and 78m(b)(2), and Rules 12b-20, 13a-1, and 13a-13 thereunder, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.
12. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d) and 77v(a), and Sections 21(d), 21(e) and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e) and 78aa.
13. Venue lies in this Court pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and Section 27 of the Exchange Act, 15 U.S.C. § 78aa. Certain of the transactions, acts, practices and courses of business alleged herein occurred within the Southern District of New York. In particular, 800America maintains its executive office at 420 Lexington Avenue, New York, New York.
14. Defendants, directly or indirectly, have made use of the means or instrumentalities of interstate commerce, the means or instruments of transportation or communication in interstate commerce, and/or the mails, in connection with the acts, practices and courses of business alleged herein.
15. 800America is a Nevada corporation, has an executive office in New York, and has operations at 1301 North Mount Juliet Road, Mount Juliet, Tennessee. 800America became a public company in July 1999, when World House Entertainment, a public shell company, issued 10,000,000 shares of restricted common stock to acquire all of the issued and outstanding common stock of 800America, Inc. and renamed itself 800America.com, Inc. 800America's common stock is registered with the Commission pursuant to Section 12(g) of Exchange Act, 15 U.S.C. §78l(g), and is traded on the OTC Bulletin Board.
16. 800America purports to own and operate several Internet websites that retail various products, particularly clothing, or that provide links to websites of other retailers. 800America's public filings claim that 800America operates "one of the world's busiest and most popular Web-based trading communities, and has several operating divisions representing both e-commerce companies and technology businesses." 800America reports having the following subsidiaries: InShop.com, Internet Web Guide Magazine, Inc., Rothman Closeouts, Fileshooter.com, Inc., Ebiz 4Biz.com, IRSpayment.com, cs-live, Igain, Inc., YouTopia.com, and One Two Click.
17. Rabi, age approximately 62, is the Chief Executive Officer, the Chief Financial Officer, a Director, and the majority shareholder of 800America. Rabi also served as 800America's President for most of the period from July 9, 1999 through January 2002. Rabi controls 50.6 % of 800America's outstanding common stock, mostly through the 9,308,000 shares he controls in a purported trust named American Deductible, Inc. ("American Deductible"). On January 3, 1997, Rabi pleaded guilty in McCracken County, Kentucky, to state felony charges of securities fraud, acting as an unregistered broker-dealer, and selling unregistered securities. Rabi was sentenced to four years imprisonment, which was commuted, based on the four years Rabi had already served in Tennessee state prison fighting extradition to Kentucky on these charges. Although not part of his plea, the grand jury that indicted Rabi charged him as a Persistent Felony Offender because Rabi had allegedly been convicted of financial fraud in Israel, Italy, Monaco and New York, using various aliases.
18. Steeples, age 55, is not disclosed as having any affiliation with 800America in 800America's public filings, but is acting as an undisclosed control person of the Company. Among other things, she controls some of 800America's bank accounts, and represents that she is 800America's secretary, both in her own name and under the alias "Ruth Walley." On November 14, 1996, in Nashville, Tennessee, Steeples pleaded guilty to delivering cocaine into a detention facility where prisoners are quartered. Steeples was sentenced to six years imprisonment for this conduct, and was incarcerated from January 1, 1997 to November 24, 1999.
19. To create the image of a vibrant enterprise, the Defendants have fraudulently reported millions in fictitious earnings, revenues, expenses, and assets. To conceal the true results, 800America, through Rabi and Steeples, created fictitious periodic statements purportedly from Wilson Bank and Trust in Mount Juliet, Tennessee ("Wilson Bank"), a falsified general ledger, and phony advertising invoices, and submitted them to the Company's auditor, Jack F. Burke Jr. of Hattiesburg, Mississippi. These falsified documents show large credits and debits that appear nowhere in the actual bank statements.
22. The falsified Wilson Bank statements support the debits by identifying purported checks that do not appear on the actual statements.
23. 800America, Rabi and Steeples, using the alias Ruth Walley, provided 800America's auditors with the false financial information, including the phony bank statements, phony checks, phony advertising invoices, and the fake general ledger.
(a) 800America intentionally and materially misstated its earnings, revenues, and expenses in its Form 10-QSB, filed with the Commission on August 15, 2001, for the quarter ending on June 30, 2002 ("2002 Q2 10-QSB"). A comparison of the general ledger, the false bank statements and the real bank statements shows that 800America reported at least $8,428,345 in fictitious sales during the second quarter of 2002 - more than all of the $7,641,048 in revenues 800America reported generating in its 2002 Q2 10-QSB.
(b) 800America's general ledger also contains $2,225,000 in bogus advertising expenses during the second quarter of 2002. The fabricated advertising expenses amount to 99% of the $2,226,000 in advertising expenses reported in 800America's 2002 Q2 10-QSB, and 56% of the $3,938,905 in total expenses reported in 800America's 2002 Q2 10-QSB. The general ledger also contained $1,214,528 in fake payments to the IRS during the second quarter of 2002.
(a) 800America intentionally and materially misstated its earnings, revenues, and expenses in its Form 10-QSB, filed with the Commission on May 20, 2002, for the quarter ending on March 31, 2002 ("2002 Q1 10-QSB"). A comparison of the general ledger, the phony bank statements, and the real bank statements shows that 800America reported at least $7,737,268.13 in fictitious sales during the second quarter of 2002 - 99% of the $7,768,164 in revenues 800America reported generating in its 2002 Q1 10-QSB.
(b) 800America's general ledger also contains $2,300,000 in bogus advertising expenses during the first quarter of 2002. The fabricated advertising expenses amount to 100% of the $2,300,000 in advertising expenses and 50% of the $4,563,607 total expenses reported in its 2002 Q1 10-QSB. 800America's general ledger contained at least $22,219,920 in fictitious sales in the 2001 calendar year -- more than 100% of the $21,401,169 in revenues 800America reported generating in audited financial statements contained in its 2001 10-KSB.
(a) 800America intentionally and materially misstated its earnings, revenues, and expenses in its Form 10-KSB, filed with the Commission on April 12, 2002, for the fiscal year ending December 31, 2001 ("2001 10-KSB"). A comparison of the actual bank statements, the fake bank statements, and the general ledger shows that 800America reported at least $22,219,920 in fictitious sales in the 2001 calendar year -- more than 100% of the $21,401,169 in revenues 800America reported generating in audited financial statements contained in its 2001 10-KSB. Similarly, 800America's general ledger contains $4,159,003.81 in bogus advertising expenses in 2001. The fabricated advertising expenses amount to 94% of the $4,443,249 in advertising expenses and 44% of the $9,446,174 in total expenses reported by 800America in its 2001 10-KSB.
(a) 800America also intentionally and materially misstated its earnings, revenues, and expenses in its Form 10-KSB, filed with the Commission on March 29, 2001, for the fiscal year ending December 31, 2000 ("2000 10-KSB"). A comparison of the actual bank statements, the fake bank statements, and 800America's general ledger shows that 800America reported at least $5,828,642 in fictitious sales in the 2000 calendar year - 36% of the $15,980,529 in revenues 800America reported generating in audited financial statements contained in its 2000 10-KSB.
(b) 800America's 2000 general ledger also contained $1,777,250 in bogus advertising expenses. The fabricated advertising expenses amount to 100% of the $1,777,250 in advertising expenses and 14% of the $12,866,629 total expenses reported by 800America in its 2001 10-KSB. 800America's 2000 general ledger contains other false expense entries, including hundreds of thousands of dollars in fictitious payments to the IRS.
25. In sum, since at least the first quarter of 2000, much of 800America's reported revenues and reported advertising expenses were fictitious. Since at least January 1, 2001, virtually all of 800America's reported revenues were fictitious. As the CEO and a Director of the Company, Rabi signed each of the Company's filings, including the filings listed in paragraph 24 hereof.
26. Rabi and Steeples knew, or were reckless in not knowing, of the misrepresentations made to 800America's auditors and in 800America's public filings described in paragraph 24 above, and thus to the investing public. On August 15, 2002, 800America filed a certification of 800America's 2002 Q2 10 QSB signed by Rabi. Rabi knowingly and willfully certified the 2002 Q2 10-QSB knowing that the periodic report accompanying the 2002 Q2 10-QSB was materially false.
27. The Defendants also intentionally materially misstated 800America's assets. To convince its auditor of the fictitious assets, the Defendants provided the auditor with fictitious bank statements showing large cash balances.
28. For example, 800America reported having $13,201,125 in cash and $13,573,598 in total assets in its 2001 10-KSB. 800America provided its auditor with a fake Citibank account statement for the period December 11, 2001 through January 9, 2002 that stated that as of December 31, 2001, 800America's Citibank account number 619508 contained $12,669,962.70 in cash. However, the actual statement for Citibank account number 619508 shows that during that period, the account never had more that $640.66. Accordingly, at least 96% of the cash assets and 93% of the total assets reports in 800America's 2001 10-KSB were false.
B. Unregistered Fraudulent Offerings Through Nominee Accounts.
29. Rabi and Steeples are accumulating blocks of 800America stock through a purported S-8 registration and through shares obtained in 800America's reverse merger with World House Entertainment, a shell company. After issuing the stock, Rabi and Steeples place it in nominee Internet brokerage accounts. Rabi and Steeples then sell the stock to the public and send the proceeds to accounts controlled by 800America, Rabi, or Steeples. To date, Rabi and Steeples have sold at least 1,188,150 shares of 800America stock for $2,731,760.27.
Each of the accounts identified in this paragraph 30 are nominee accounts controlled by Rabi or Steeples.
31. With the exception of the Steeples account, the majority of the proceeds of the bogus S-8 stock sales are transmitted to 800America or one of its subsidiaries. Steeples sends most of the proceeds to Accurate Business Forms, a company controlled by Steeples and Rabi, and some proceeds to her own checking account and to Rothman Closeouts, a subsidiary of 800America.
32. Rabi also obtained control of at least 389,750 shares of 800America stock as a result of 800America's reverse-merger with World House Entertainment. The shares were deposited in an account at E-Trade in the name of Clyta Debenham ("Debenham"), which, in fact, was a nominee account for Rabi. At least 374,750 shares of 800America stock were sold from the Debenham account for a total of $752,672.89. Between April 2001 and September 2002, at least $621,900.00 was transferred from the Debenham account to accounts under Rabi's and Steeple's control: $371,200.00 was sent to Rothman Closeouts, $242,200.00 was sent to 800America, and $8,500.00 was sent to InShop.com, a subsidiary of 800America.
33. Rabi, as 800America's Chief Executive Officer, Chief Financial Officer, and as a director of 800America, was an insider of 800America, and he owed a duty to keep confidential, and not use for personal gain, material, nonpublic information concerning 800America.
34. Steeples was an undisclosed control person of 800America. Steeples held herself out as the Secretary for 800America. Steeples, consequently, was an insider of 800America, and owed a duty to keep confidential, and not use for personal gain, material, nonpublic information concerning 800America.
35. Rabi and Steeples sold their undisclosed stock holdings while in possession of material nonpublic information, namely, that 800America's reported earnings, revenues, expenses, and assets were fictitious, as alleged in paragraphs 19 through 28. Through these sales, Rabi and Steeples breached their fiduciary duties to 800America or similar duties arising out of relationships of trust and confidence with 800America.
36. Rabi knew, or was reckless in not knowing, that he was breaching a fiduciary duty, or other similar duty arising out of a relationship of trust and confidence with 800America, by selling 800America common stock while using material, nonpublic information concerning 800America.
37. Steeples knew, or was reckless in not knowing, that she was breaching a fiduciary duty, or other similar duty arising out of a relationship of trust and confidence with 800America, by selling 800America common stock while using material, nonpublic information concerning 800America.
38. Rabi and Steeples also are misappropriating assets from 800America. For example, after Rabi sent the proceeds of the "Debenham" stock sales to Rothman Closeouts, Rabi transferred $261,800 from a Rothman Closeouts account to an account he controls under the name American Deductible. Although 800America's public filings state that American Deductible is a trust for Rabi's children, it is actually a standard checking account where Rabi deposits his 800America paychecks. Rabi uses the American Deductible account as a personal bank account to pay his expenses, and the expenses of Steeples and Steeple's children. Rabi and Steeples have paid themselves and are continuing to pay themselves hundreds of thousands of dollars in salary while they are orchestrating the fraudulent scheme.
39. The evidence indicates that Rabi and Steeples are looting large sums of 800America assets. For example, on September 7, 2001 Rabi caused a transfer of approximately $4 million from 800America's bank account to three funds managed by Renaissance Capital Growth & Income Fund III, Inc. This withdrawal does not appear on 800America's 2001general ledger provided to the Commission staff by 800America's current auditor.
D. Rabi and 800America Made False Statements and Omissions About Rabi's Criminal Past and Have Failed To Disclose Rabi's Felony Securities Fraud Conviction.
40. On January 3, 1997, Rabi, using the name Edward Rabie, pleaded guilty to state felony charges of securities fraud, acting as an unregistered broker-dealer, and selling unregistered securities in McCracken County, Kentucky. The charges against Rabi stemmed from misrepresentations he made while selling securities of Onecard Health Systems Corporation ("Onecard"), a business he owned and controlled. Among other misstatements, Rabi misrepresented that Onecard had contracts with Blue Cross/Blue Shield, that Onecard was building a facility in Kentucky, that Onecard stock would be registered on the American Stock Exchange by July 1992, and that Onecard's liabilities totaled $148,535.00, when in fact Onecard's liabilities exceeded $600,000.00. Rabi was sentenced to four years imprisonment, which was commuted, based on the four years he had already served in Tennessee state prison fighting extradition to Kentucky on these charges. Although not part of his plea, the grand jury that indicted Rabi charged him as a Persistent Felony Offender because he had allegedly been convicted of financial fraud in Israel, Italy, Monaco and New York, using various aliases.
It has come to the attention of the Company through published reports and other information that one or possibly more persons who have names similar to our Chief Executive Officer may have been or were involved in or associated with activities of a criminal nature. The Company emphatically states that its Chief Executive Officer, Mr. David E. "Elie" Rabi, has never been convicted of any crime nor does he have any knowledge of the activities associated with the persons named in the published reports and other information. Mr. Rabi continues to serve in a full time capacity as the Company Chief Executive Officer.
E. 800 America Has Failed To Disclose The Departure Or Unavailability Of Most Of Its Purported Corporate Officers and That Steeples, Herself A Felon, Controls 800America's Bank Accounts.
Our success depends largely on the skills of David E. Rabi, our Chief Executive Officer, and certain other key management and technical personnel . . .. Our performance is also substantially dependant on the services and performance of our management team at the parent and subsidiary levels. The loss of Mr. Rabi or one or more of our other board members, key management and technical personnel may materially and adversely affect our business, results of operations and financial condition.
44. However, most of 800America's officers, directors and significant employees, are either no longer with 800America or are otherwise unavailable. By letter dated September 12, 2002, 800America represented to the Commission staff that Bobby Walley left 800America to become a missionary in the Ukraine. Darvin Pierce resigned as director of 800America on March 6, 2002 by sending an e-mail to Rabi. Counsel for 800America represents that it has been unable to locate Richard Sullivan, Jerry Kavoun, and Vincent Ren. In addition, Rabi claims to suffer from a debilitating illness that has forced him to forego appearing for testimony at the Commission three times. 800 America has not disclosed that most of its officers and directors are either not with the Company or otherwise unavailable.
[Steeples] illegally sent cocaine to her husband is prison, apparently with the intentions of allowing her husband to overdose on the drug so he would not have to stand trial. Also, since her husband's insurance policy apparently did not have a "suicide clause," [Steeples] was able to collect more than a half-million dollars as a result of her husband's death.
State v. Steeples, No. 01c01-9706-CR-00211, 1998 WL307963, at *8 (Tenn. Crim. App. June 12, 1998) (upholding decision to deny Steeples bail).
46. In addition, Steeples has assumed the identity of Ruth Walley, claiming to be Secretary of 800America under that name. The actual Ruth Walley died on July 23, 1997.
F. The Fraud Is Ongoing And 800America Is Obstructing the Commission's Investigation.
47. The fraud is ongoing. Rabi has switched transfer agents, opened new nominee accounts, and is liquidating his 800America holdings as soon as he puts stock into nominee accounts. In September 2002, brokerage accounts were opened in the names of Tillie Ruth Steeples and John Steeples, one of Steeples' children, at HMS Securities in Mount Vale, NJ, and Rabi opened another brokerage account in the name of 800America at HMS Securities. In the account opening documents, Rabi provided the same P.O. Box that was provided in brokerage account opening documents provided for the Steeples and Nissani brokerage accounts identified in paragraph 30 hereof.
48. In addition, Rabi and 800America have obstructed the Commission's investigation. For example, after being read privacy act disclosures, including the disclosure concerning criminal penalties for knowingly providing false information to the Commission, Rabi represented to the Commission staff (a) that he had no criminal background, and (b) that he had retained a private investigator to research the allegations, which he claimed was an attempt by market-makers to depress the price of 800America stock. Later, Rabi, through counsel, provided the name, address and phone number of the purported investigator. The Commission staff has determined that the investigator does not exist, that the address provided does not exist and that the phone number was a line at 800America.
49. In an initial response to the subpoena served upon him, Rabi indicated that he had not sold 800America stock for the past three years. As indicated above, Rabi in fact sold over 1 million shares of 800America stock through nominee accounts during this period.
51. The Commission repeats and realleges the allegations contained in paragraphs 1 through 50 by reference as if fully set forth herein.
52. Defendants, directly and indirectly, singly and in concert, knowingly or recklessly, by the use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or by the use of the mails, in the offer or sale, and in connection with the purchase or sale, of securities, have: (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of, or otherwise made untrue statements of material fact, or omitted to state material facts necessary to make the statements, in light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, acts, practices and courses of business which operated or would operate as a fraud or deceit upon purchasers of securities or other persons.
53. As part of and in furtherance of this violative conduct, the Defendants, directly or indirectly, made misstatements or omissions of material facts, including, but not limited to: misstatements of earnings, revenue, expenses and assets in 800America's 2002 Q2 10-QSB, 2002 Q1 10-QSB, 2001 10-KSB, and 2000 10-KSB; issuing a false press release about Rabi's criminal history; and omitting to disclose of material facts to the investing public through several public filings about Rabi's and Steeple's prior criminal records, and about the resignations or unavailability of most of its officers and directors. In addition, as part of and in furtherance of this violative conduct, Rabi and Steeples, directly or indirectly, made misstatements or omissions of material fact, including, but not limited to: failing to disclose that the proceeds of the S-8 issuances were going to 800America, Rabi, and Steeples; Rabi and Steeples selling 800America stock while in possession of material nonpublic information - namely, the falsity of the company's public filings and press releases; selling 800America stock at prices and in a market artificially maintained by the Defendant's misrepresentations; and failing to disclose their misappropriation of 800America assets.
54. The false statements and omissions made by Defendants, more fully described above, were material.
55. The Defendants knew, or were reckless in not knowing, that these material misrepresentations, more fully described above, were false or misleading.
56. By reason of the foregoing, the Defendants, directly or indirectly, singly or in concert, have violated, are violating, and, unless permanently enjoined, will continue to violate Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10-b-5.
57. The Commission repeats and realleges the allegations contained in paragraphs 1 through 56 by reference as if fully set forth herein.
58. Defendants, directly or indirectly: (a) made use of the means or instruments of transportation or communication in interstate commerce or of the mails to sell securities through the use or medium of a prospectus or otherwise; or carried securities or caused such securities to be carried through the mails or in interstate commerce, by means or instruments of transportation, for the purpose of sale or for delivery after sale; and (b) made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy, through the use or medium of any prospectus or otherwise, securities without a registration statement having been filed or being in effect with the Commission as to such securities.
59. The stock that Rabi and Steeples sold through nominee accounts was not properly registered with the Commission or subject to an exemption to the registration requirements of the Federal securities laws. Similarly, Rabi's resales of the stock he obtained and sold through the "Debenham" nominee account were not properly registered.
60. By reason of the foregoing, the Defendants violated, and unless enjoined, will again violate Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c).
61. The Commission repeats and realleges the allegations contained in paragraphs 1 through 60 by reference as if fully set forth herein.
62. 800America failed to file with the Commission, in accordance with the rules and regulations prescribed by the Commission, such annual reports as the Commission has prescribed and 800America failed to include, in addition to the information expressly required to be stated in such reports, such further material information as was necessary to make the statements made therein, in light of the circumstances in which they are made, not misleading, in violation of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20 and 13a-1, 17 C.F.R. §§ 240.12b-20 and 240.13a-1. As described above, 800America's annual and quarterly reports were false and misleading, among other reasons, because most of the revenues and expenses charged were fictitious, and because the reports failed to disclose Rabi's and Steeple's prior felony convictions.
63. At all relevant times hereto, Rabi and Steeples each was a controlling person of 800America for the purposes of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). Rabi and Steeples each, knowingly or recklessly, directly or indirectly, singly or in concert, engaged in fraudulent practices resulting in material overstatements of 800America's net income on its books and records and in financial statements included in its public filings.
64. By their conduct, previously alleged, Rabi and Steeples each, knowingly or recklessly, directly or indirectly, singly or in concert, engaged in fraudulent practices resulting in falsification of 800America's 2002 Q2 10-QSB, 2002 Q1 10-QSB, 2001 10-KSB, and 2000 10-KS .
65. By reason of the foregoing, 800America violated Section 13(a) of the Exchange Act, 15 U.S.C, §78m(a), and Rules 12b-20 and 13a-1, 17 C.F.R. 240.12b-20 and 240.13a-1; and unless it is enjoined, 800America will again violate Section 13(a) of the Exchange Act, 15 U.S.C., §78m(a), and Rules 12b-20 and 13a-1, 17 C.F.R. 240.12b-20 and 240.13a-1.
66. By reason of the foregoing, Rabi and Steeples are each liable as a controlling person, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), for 800America's violations of Section 13(a) of the Exchange Act, 15 U.S.C. §78m(a), and Rules 12b-20 and 13a-1, Rules 12b-20 and 13a-1, 17 C.F.R. 240.12b-20 and 240.13a-1; and unless they are enjoined, Rabi and Steeples will again engage in conduct that would render them liable, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. §78t(a), for violations of Section 13(a) of the Exchange Act, 15 U.S.C. §78m(a), and Rules 12b-20 and 13a-1 thereunder, 17 C.F.R. 240.12b-20 and 240.13a-1.
67. Alternatively, by reason of the foregoing, Rabi and Steeples are each liable, pursuant to Section 20(f) of the Exchange Act, 15 U.S.C. §78t(f), as an aider and abettor of 800America's violations of Section 13(a) of the Exchange Act, 15 U.S.C. §78m(a), and Rules 12b-20 and 13a-13, 17 C.F.R. § 240.12b-20, 240.13a-13; and unless they are enjoined, Rabi and Steeples will again engage in conduct that would render them liable, pursuant to Section 20(f) of the Exchange Act, 15 U.S.C. §78t(f), for violations of Section 13(a) of the Exchange Act, 15 U.S.C. §78m(a), and Rules 12b-20 and 13a-13, 17 C.F.R. § 240.12b-20, 240.13a-13.
68. The Commission repeats and realleges the allegations contained in paragraphs 1 through 67 by reference as if fully set forth herein.
c. in violation of Section 13(b)(2) of the Exchange Act, 15 U.S.C § 78m(b)(2). As described above, the Defendants falsified the Company's books and records, and, in particular, 800America general ledgers and bank statements, resulting in the misstatements of earnings, revenue, expenses and assets in 800America's 2002 Q2 10-QSB, 2002 Q1 10-QSB, 2001 10-KSB, and 2000 10-KSB.
70. At all times relevant hereto, Rabi and Steeples each was a controlling person of 800America for the purposes of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). Rabi and Steeples each, knowingly or recklessly, directly or indirectly, singly or in concert, engaged in fraudulent practices resulting in material overstatements of 800America's net income on its books and records and in financial statements included in 800America's public filings.
71. By their conduct, previously alleged, Rabi and Steeples each, knowingly or recklessly, directly or indirectly, singly or in concert, engaged in fraudulent practices resulting in falsification of 800America's 2002 Q2 10-QSB, 2002 Q1 10-QSB, 2001 10-KSB, and 2000 10-KSB; and (ii) other material misstatements in 800America's 2000, 2001, and 2002 public filings.
72. By reason of the foregoing, 800America is liable for its violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C. § 78m(b)(2); and unless it is enjoined, it will again engage in conduct that would render it liable for violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C.§ 78m(b)(2).
73. By reason of the foregoing, Rabi and Steeples are each liable as a controlling person, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), for 800America's violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C. §78m(b)(2); and unless they are enjoined, Rabi and Steeples will again engage in conduct that would render them liable, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. §78t(a), for violations of Section 13(b)(2) of the Exchange Act 15 U.S.C. §78m(b)(2).
74. Alternatively, by reason of the foregoing, Rabi and Steeples are each liable, pursuant to Section 20(f) of the Exchange Act, 15 U.S.C. §78t(f), as aiders and abettors of 800America's violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C. §78m(b)(2), and Rules 12b-20 and 13a-13, 17C.F.R. §§240.12b-20 and 240.13a-13; and unless they are enjoined, Rabi and Steeples will again engage in conduct that would render them liable, pursuant to Section 20(f) of the Exchange Act, 15 U.S.C. §78(f), for violations of Section 13(b)(2) of the Exchange Act, 15 U.S.C. §78m(b)(2).
75. The Commission repeats and realleges the allegations contained in paragraphs 1 through 74 by reference as if fully set forth herein.
76. Rabi and Steeples each knowingly circumvented or knowingly failed to implement a system of internal accounting controls and knowingly falsified, directly or indirectly, or caused to be falsified 800America's public filings by falsification of its books, records and accounts that were subject to Section 13(b)(2)(A) of the Exchange Act, 15 U.S.C. § 78m(b)(2)(A). As described above, Rabi and Steeples each participated in the scheme to falsify 800America's bank statements, general ledger, and other corporate business records that were used in the preparation of the Company's public filings.
77. By reason of the foregoing, Rabi and Steeples have violated, and unless enjoined will again violate, Section 13(b)(5) of the Exchange Act, 15 U.S.C. § 78m(b)(5), and Rule 13b2-1, 17 C.F.R. § 240.13b2-1.
78. The Commission repeats and realleges the allegations contained in paragraphs 1 through 77 by reference as if fully set forth herein.
79. Rabi and Steeples, directly or indirectly, made or caused to be made materially false or misleading statements, or omitted to state or caused another person to omit to state material facts necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading to an accountant, in connection with 800America's 2002 Q2 10-QSB, 2002 Q1 10-QSB, 2001 10-KSB, and 2000 10-KSB.
80. By reason of the foregoing, Rabi and Steeples have each violated, and unless enjoined will again violate, Exchange Act Rule 13b2-2, 17 C.F.R. § 240.13b2-2.
Orders temporarily and preliminarily, and Final Judgments permanently, restraining and enjoining each of the Defendants, their agents, servants, employees, attorneys in-fact, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b), 13(a) and 13(b)(2) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder.
Orders temporarily and preliminarily, and Final Judgments permanently, restraining and enjoining defendants Rabi and Steeples, their agents, servants, employees, attorneys in-fact, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating Section 13(b)(5) and the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder.
An Order directing that each of the Defendants' assets be frozen, including: (1) assets in the names of aliases referenced in this Complaint; (2) assets over which the Defendants have control, including assets in the names of corporate entities over which they have signatory control.
An Order freezing the nominee accounts identified in paragraph 30 of this Complaint.
An Order directing 800America, Rabi, and Steeples, to repatriate assets held outside of the United States.
Orders temporarily and preliminarily, and Final Judgments permanently, restraining and enjoining Rabi and Steeples from participating in any future penny stock offering, pursuant to Section 20(g) of the Securities Act, 15 U.S.C. § 77t(g), and Section 21(d)(6) of the Exchange Act, 15 U.S.C. § 78u(d)(6).
Orders temporarily and preliminarily, and Final Judgments permanently, restraining and enjoining Rabi and Steeples from serving as an officer or director of any issuer that has a class of securities registered or that is required to file reports pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. §78o(d), pursuant to Section 21(d)(2) of the Exchange Act, 15 U.S.C. §78u(d)(2).
An Order appointing a receiver for 800America.
An Order directing Rabi and Steeples to forfeit all stock under their direct or indirect control and ordering them to tender all such stock to the Court appointed receiver.
An Order directing each of the Defendants to file with this Court and serve upon the Commission, within five business days, or within such extension of time as the Commission agrees in writing or as otherwise ordered by the Court, verified written accountings, signed by each of them under penalty of perjury.
An Order enjoining and restraining each of the Defendants, and any person or entity acting at their direction or on their behalf, from destroying, altering, concealing, or otherwise interfering with the access of the Commission to relevant documents, books and records.
An Order enjoining and restraining each of the Defendants, and any person or entity acting at their direction or on their behalf, from witness tampering, suborning perjury or otherwise impeding discovery or the prosecution of this case.
A Final Judgment requiring each of the Defendants to disgorge their ill-gotten gains from the violative conduct alleged in this Complaint, and to pay prejudgment interest thereon.
A Final Judgment imposing civil monetary penalties against each Defendant pursuant to Section 20(d) of the Securities Act, 15 U.S.C. §77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. §78u(d)(3), and, in addition, against Rabi and Steeples, pursuant to Section 21A of the Exchange Act, 15 U.S.C. §78u-1(A).

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