Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 1 of 27

RICHARD H. GREENER, ISB # 1191 MONICA R. MORRISON, ISB #7346 GREENER BURKE SHOEMAKER P.A. Counselors and Attorneys at Law 950 West Bannock Street, Suite 900 Boise, ID 83702 Telephone (208) 319-2600 Facsimile (208) 319-2601 Email: rgreener@greenerlaw.com mmorrison@greenerlaw.com RICHARD A. ROTH, NYSB #1961036 (Admitted Pro Hac Vice) THE ROTH LAW FIRM, P.L.L.C. 295 Madison Avenue, 22nd Floor New York, NY 10017 Telephone (212) 542-8882 Facsimile (212) 542-8883 Email: rich@rrothlaw.com Attorneys for Defendants Alternate Energy Holdings, Inc., Donald L. Gillispie, Jennifer Ransom, and Relief Defendants Bosco Financial, LLC, and Energy Executive Consulting, LLC UNITED STATES DISTRICT COURT DISTRICT OF IDAHO SOUTHERN DIVISION

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. ALTERNATE ENERGY HOLDINGS, INC., DONALD L. GILLISPIE, and JENNIFER RANSOM, Defendants, BOSCO FINANCIAL, LLC, and ENERGY EXECUTIVE CONSULTING, LLC, Relief Defendants.

Case No. 1:10-cv-00621-EJL MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PLAINTIFFS MOTION FOR TEMPORARY RESTRAINING ORDER AND OTHER ANCILLARY RELIEF AND PRELIMINARY INJUNCTION

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION P 1

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 2 of 27

TABLE OF CONTENTS Page No. PRELIMINARY STATEMENT STATEMENT OF FACTS IN REPLY TO SEC ALLEGATIONS A. B. The SECs Allegation that AEHI is a Sham Business is False The SECs General Allegation that the Quantity of AEHIs Press Releases Caused the Manipulation of AEHIs Stock Price is False The SECs Allegation that Two AEHI Press Releases in September 2010 Contained False and/or Misleading Statements of Fact is False The SECs Allegation that Ms. Ransom Acted Inappropriately in Not Filing Forms 3, 4 or 5 is False The SECs Allegation that Mr. Gillispie Used Nominees to Sell Stock and Failed to File Forms 3, 4 or 5 is False The SECs Allegation that AEHI Falsely Stated in a Private Placement Memorandum that it had Funding is False The SECs Allegation that AEHI Falsely Stated that Pinnacle Digest Was Not Compensated for Writing an Article Favorable to AEHI is False The SECs Allegation that Mr. Gillispie and AEHI Falsely Stated Mr. Gillispies Compensation in Form 10-K for Fiscal Year 2009 is False The SECs Allegation that AEHI Failed to Disclose a Material Change In Mr. Gillispies 2010 Compensation is False 1 5 5 6

C.

D.

E.

F.

G.

10

H.

11

I.

11

ARGUMENT A. Legal Standard for Preliminary Injunction

12 12

B.

The SEC Cannot Meet its Burden to Obtain Injunctive Relief 1. No Primary Violation of the Antifraud Provisions of the Federal Securities Laws has Occurred

13 13

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION P i

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 3 of 27

2.

No Aiding and Abetting of the Antifraud Provisions of the Federal Securities Laws Occurred No Violation of the Reporting Requirements of the Exchange Act Occurred

15

3.

16

C.

The Order Currently Restraining Defendants Assets Should be Lifted, Either in Whole or in Part An Order Preventing Alteration or Destruction of Documents is Unnecessary and Inappropriate Under the Circumstances Any New Factual or Legal Arguments Raised in the SECs Reply Should be Disregarded

17

D.

19

E.

19

CONCLUSION

20

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. ii

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 4 of 27

TABLE OF AUTHORITIES Case Law: Aaron v. SEC 446 U.S. 680, 64 L. Ed. 2d 611, 100 S. Ct. 1945 (1980) Basic Inc. v. Levinson 485 U.S. 224 (1988) Chevron Corporation v. Pennzoil Company 974 F. 2d 1156 (9th Cir. 1992) Ernst & Ernst v. Hochfelder 425 U.S. 185, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976) FTC v. H.N. Singer, Inc. 668 F. 2d 1107 (9th Cir. 1982) Garcoa, Inc. v. PH Beauty Labs, Inc. 2009 U.S. Dist. LEXIS 125205 at *6 Hernandez v. Tanninen 604 F. 3d 1095 (9th Cir. 2010) In re Von Bulow 828 F. 2d 94 (2d Cir. 1987) Johnson v. Couturier 572 F. 3d 1067 (9th Cir. 2009) Jones v. Baltimore Life Ins. Co. No. Civ. S-06-1501 LKK/KJM, 2007 U.S. Dist. LEXIS 44825, 2007 WL 1713250, at *9 (E.D. Cal. June 11, 2007) Lujan v. National Wildlife Federation 497 U.S. 871, 110 S. Ct. 3177 (1990) Munaf v. Geren 128 S. Ct. 2207 (2008) Navel Orange Admin. Comm. v. Exeter Orange Co. 722 F. 2d 449 (9th Cir. 1983) SEC v. Management Dynamics, Inc. 515 F. 2d 801 (2d Cir. 1975) MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. iii Page No. 14

14

14

16

12

16

20

20

12

13

13

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 5 of 27

Securities and Exchange Commission v. Thomas Edward Cavanagh et al 155 F. 3d 129 (2d Cir. 1998) SEC v. Chemical Trust 2000 U.S. Dist. LEXIS 19786, No. 00-CIV-8015, at * 17 and 35-36 (S.D. Fl. 2000) SEC v. Hickey 322 F. 3d 1123 (9th Cir. 2003) SEC v. Manor Nursing Centers, Inc. 458 F. 2d 1082 (2d Cir. 1972) Southwest Voter Reg. Educ. Project v. Shelley 344 F. 3d 914 (9th Cir. 2003) Springs Industries, Inc. v. American Motorists Ins. Co. 137 F.R.D. 238 (N.D. Tex. 1991) TSC Indus., Inc. v. Northway, Inc. 426 U.S. 438 (1976) United States v. Diapulse Corp. 457 F. 2d 25 (2d Cir. 1972) United States v. Mendelsohn 896 F. 2d 1183 (9th Cir. 1990) United States v. Nobles 422 U.S. 225 (1975) United States v. Odessa Union Warehouse Co-op 833 F. 2d 172 (9th Cir. 1987) United States v. Plache 913 F. 2d 1375 (9th Cir. 1990) Weil v. Investment/Indicators, Research & Management 647 F. 2d 18 (9th Cir. 1981) Willnerd v. Sybase, Inc. 2010 U.S. Dis. LEXIS 135781 (D. Idaho 2010) Donald C. Winter, et al. v. Natural Resources Defense Council, Inc., et al. 129 S. Ct. 365 (2008) Zamani v. Carnes 491 F.3d 990 (9th Cir. 2007) MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. iv

13

19

16

16

12

20

14

13

12

12

20
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 6 of 27

Authorities: Exchange Act, Section 10(b) Exchange Act, Section 13(a) Exchange Act, Section 16(a) Exchange Act, Rule 240.16a-1(f) Securities Act of 1933 17(a) Securities Act of 1933 20(b) 13, 14 16 8, 16 8 13, 14 13

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. v

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 7 of 27

Defendants Alternate Energy Holdings, Inc. (AEHI), Donald Gillispie, Jennifer Ransom (collectively, Defendants) and Relief Defendants Bosco Financial, LLC (Bosco) and Energy Executive Consulting, LLC (Energy Executive) (collectively, Relief Defendants), by and through their undersigned attorneys, respectfully submit this memorandum of points and authorities in opposition to Plaintiff Securities and Exchange Commissions (SEC) motion for temporary restraining order and other ancillary relief and preliminary injunction, as follows: PRELIMINARY STATEMENT This memorandum will demonstrate that the relief sought by the SEC must be denied under both the facts and the law. At its core, the SEC alleges that Defendants have engaged in a pump and dump scheme involving the manipulation of the market for AEHIs stock. The facts alleged to support such claims, however, are at best tenuous and misleading, and at worst, blatantly false. Underlying the SECs pumping allegations is the concept that AEHIs issuance of numerous press releases throughout the year 2010 caused AEHIs stock price to become artificially inflated. The SEC, however, only alleges that two (2) of these press releases (both in September 2010) actually contain false or misleading information -- and gives no facts whatsoever to support its allegation that any other press releases caused an artificial inflation in AEHIs stock price. Further, and notwithstanding the fact that the SECs allegations regarding those two September press releases are false (as stated below), the SEC incorrectly asserts that AEHIs press releases are the cause of AEHIs rise in stock price. The SEC ignores and omits significant events affecting AEHIs stock price that were out of AEHIs control. For example, throughout the SECs memorandum of points and authorities in support (the SECs Brief), it is asserted that, AEHIs average closing price in March 2010 was $0.11 MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION P 1
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 8 of 27

[a]nd, after AEHIs press release campaign, the price and volume soared. The September 2010 daily average closing price for the month rose to $0.77, representing a 700 percent increase1 The SEC, of course, selectively chose March and September to illustrate its argument since those two particular months represented the stock prices average low and high, respectively. What the SEC mistakenly fails to inform the Court, however, is that there was not a gradual increase in stock price over that time period. Rather, on May 12, 2010, the stock price skyrocketed -- which then created a new plateau upon which the price fluctuated for the remainder of the year. As detailed below, what happened on May 12, 2010 had nothing whatsoever to do with Defendants press releases,2 but rather other significant third party events. On May 12, 2010, the United States Senate unveiled its highly anticipated Climate Bill -which, among other things, called for the building of twelve (12) new nuclear power plants in the Unites States, and specifically earmarked $54 billion in government loan guarantees for that purpose. Not coincidentally, on May 13, 2010, Nick Hodge (a writer who gives investment advice in the form of a subscription service) described AEHI as the best nuclear energy stock.3 On May 12 and May 13, 2010 -- two days in which AEHI did not issue a press release -- AEHIs stock price rose approximately seventy-five percent (75%), with a two-day combined trading volume of approximately 5.2 million shares. Ironically, the SEC would have the Court ignore the significant events in mid-May 2010, in favor of the conclusion that unspecified press releases issued throughout 2010 caused the rise in AEHIs stock price. Respectfully, in light of the specific significant events in May 2010, the SECs conclusion -- which is not supported by any

See, e.g., SECs Brief, pg. 2. For the Courts convenience, annexed to the Affirmation of Donald Gillispie, sworn to January 14, 2011 (Aff. Gillispie) as Exhibit A is a chart showing AEHIs stock performance for year 2010. 3 Nick Hodge is not affiliated with, controlled by, or compensated by, AEHI in any way whatsoever. Nor has AEHI has ever requested Mr. Hodges coverage. See, Aff. Gillispie, 33 and Exhs. B and C.
2

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 2

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 9 of 27

specific facts -- is not one that this Court should adopt. The SEC also alleges that AEHI issued a false and misleading private placement memorandum dated March 31, 2009, in an effort to defraud investors. In a Declaration by SEC attorney K.C. Waldron, sworn to December 14, 2010 (which accompanied the SECs moving papers) (Decl. Waldron), Ms. Waldron represented (at paragraph 15) that said private placement memorandum was obtained from UBS. That private placement memorandum is altered and was never issued by AEHI. The SEC was informed of this fact -- and the fact that the altered private placement memorandum has been floating around the internet by anti-nuclear activist groups -- but only stated that it would look into the matter. Thereafter, the SEC sent a letter to the Court dated January 7, 2010, admitting that the document was not received from a reputable source such as UBS (as sworn to in Ms. Waldrons originally declaration), but was instead was pulled from the internet (presumably by the SEC, but even that piece of the puzzle remains). What the SEC further failed to inform the Court, however, was that the website where the altered private placement memorandum was found, www.scribd.com, is merely a public forum containing documents uploaded by anonymous users. Indeed, the SEC has no good faith basis to allege that said private placement memorandum was issued or disseminated by AEHI, but, although filing a corrected declaration, nevertheless refuses to withdraw this allegation. Moreover, the SEC alleges that AEHI falsely claims that it did not pay for an independently written article that appeared in Pinnacle Digest. This SEC allegation is simply erroneous as well -- as now confirmed, under oath, by the President and Founder of the company that owns Pinnacle Digest.4 While the SECs pumping allegations are at best, tenuous, misleading and based on an anonymous internet posting, the SECs dumping allegations are simply wrong on the facts.

See, Affidavit of Aaron Hoddinott, dated January 14, 2011 (Aff. Hoddinott), 5.
19211-001 (368605)

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 3

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 10 of 27

First, the SEC alleges that Defendants scheme paid off when Brian Webb, Esq. and Jennifer Ransom sold their AEHI stock for the benefit of, and as nominees for, Mr. Gillispie. As indicated in the accompanying affidavits, however, those factual conclusions are without any merit. As documented therein: (i) the proceeds of Mr. Webbs stock sale went to his bona fide purchase of Mr. Gillispies 2007 Lexus Hybrid automobile;5 and (ii) the proceeds of Ms. Ransoms stock sale went to repaying Mr. Gillispie for his purchase of real estate for the benefit of Ms. Ransoms sister (whose house had been destroyed in a fire) and two loans.6 Second, the SEC alleges that AEHI falsely stated Mr. Gillispies compensation for fiscal year 2009, failed to report a material change in Mr. Gillispies compensation in fiscal year 2010 and that Mr. Gillispie, generally takes money from AEHI at will.7 Simply put, such allegations are erroneous -- as the SEC, among other things, double-counts Mr. Gillispies compensation,8 calls the repayment of loans (made by Mr. Gillispie to AEHI) compensation,9 and counts the monies transferred from Ms. Ransom to Mr. Gillispie for repayment of the purchase of a house, as compensation.10 The SEC is, again, simply wrong on the facts. The SECs allegations -- which were made without the SEC conducting a single interview of anyone affiliated with AEHI -- has likely caused irreparable damage to the careers of the individual defendants, halted the work of a legitimate company and decimated its stock price, causing direct monetary injury to the very investing public which it purportedly seeks to
5

See, Affidavit of Brian Webb, Esq., sworn to January 13, 2011 (Aff. Webb), 2-7 and Exhs. A-D; Aff. Gillispie, 51-53. 6 See, Affidavit of Jennifer Ransom, sworn to January 14, 2011 (Aff. Ransom), 11-19; Affidavit of Leo Estes, sworn to January 13, 2011 (Aff. Estes), 2-4; Aff. Gillispie, 32-45; Aff. Webb, 8-18 and Exhs. E-N. The dumping allegation also defies logic given that on or about that same time period, company insiders, including Mr. Gillispie, purchased AEHI shares. See, Aff. Gillispie, 35, fn. 9 and Exh. D. 7 SEC Brief, 8-9. 8 See, Affidavit of Rick Bucci, sworn to January 12, 2011 (Aff. Bucci), 7-10. 9 Id., 3-6 and Exhs. A-E. 10 See, supra, fn 6. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 4
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 11 of 27

protect. Respectfully, the relief sought by the SEC should be denied in its entirety. STATEMENT OF FACTS IN REPLY TO SEC ALLEGATIONS All relevant facts have been stated in the accompanying sworn affidavits and/or declarations of Donald Gillispie, Jennifer Ransom, Brian Webb, Esq., Rick Bucci, Aaron Hoddinott and Leo Estes. Instead of restating all of the facts, Defendants hereby incorporate by reference all such affidavits and declarations herein, and respectfully refer the Court to the contents thereof. Notwithstanding, for the Courts convenience, the following is a summary of the facts in reply to the SECs allegations. A. The SECs Allegation that AEHI is a Sham Business, is False AEHIs CEO, Mr. Gillispie, has over forty-five (45) years of experience in the nuclear energy industry and is well respected by his peers and in the community.11 AEHI is a public company that is currently going through the expensive and timely process of attempting to gain the approvals required in order to build a nuclear power plant in Payette County, Idaho.12 Those efforts have thus far been successful. On September 2, 2010, The Payette Chamber of Commerce announced its official endorsement of AEHI and the company's plan to build a nuclear power plant in Payette County, Idaho.13 The company has also received endorsements from the Fruitland Chamber of Commerce and every Mayor from Payette County. In addition, just a few days prior to the filing of this lawsuit, the Payette County Planning and Zoning Commissioners formally recommended rezone approval on the Payette County site (the first such approval given in the western United States in over thirty years).14 Prior to the commencement of this lawsuit, AEHI was a few weeks away from a Payette County Commissioners hearing on its request to rezone real property to
11 12

Aff. Gillispie, 3-9. Id. at 10-12, 20-28. 13 Id. at 26. 14 Id. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 5
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 12 of 27

allow for the construction of a nuclear reactor. The company has spent approximately $7 million in cash and $11 million in stock attempting to gain site approval for the power plant,15 and intends to fund the project by raising monies from investors and from loans (including the possibility of obtaining federally guaranteed loans being made available by the Climate Bill -- which specifically earmarked $54 billion for the construction of new nuclear power plants in the United States).16 The SECs conclusory argument that AEHI is sham company with no realistic possibility of building a nuclear power plant is not only false, it is an unreasonable conclusion given how far the company has already come in the approval process.17 B. The SECs General Allegation that the Quantity of AEHIs Press Releases Caused the Manipulation of AEHIs Stock Price, is False The SEC alleges that, Gillispies scheme to manipulate the market is working. AEHIs average closing price in March 2010 was $0.11 [a]nd, after AEHIs press release campaign, the price and volume soared. The September 2010 daily average closing price for the month rose to $0.77, representing a 700 percent increase18 In support thereof, the SEC only alleges that two (2) press releases (both in September 2010) are false and/or misleading.19 While that specific allegation is erroneous (as previously discussed and amplified upon below), the SECs allegation of a general fraudulent scheme based on the quantity of AEHIs press releases, is conclusory at best. In fact, a significant event (out of AEHIs control) occurred on May 12, 2010 which then created a higher plateau upon which the stock price fluctuated for the remainder of the year.20 As stated above, May 12-13, 2010 saw
15 16

Id. at 27. Id. at 28 and 31. 17 Id. at 26-28, 31. 18 See, e.g., SECs Brief, pg. 2. 19 Id. at pgs. 6-7. 20 Aff. Gillispie, 30-31 and Exh. A. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 6
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 13 of 27

AEHI stock price soar on the news of the U.S. Senates unveiling of the Climate Bill (which promoted the nuclear energy industry)21 -- and yet those are two days in which AEHI did not issue a press release. Simply put, there is no merit whatsoever to the SECs conclusory allegation that AEHIs press releases caused a rise in AEHIs stock price. Indeed, the SECs intentional omission of the significant events of May 12, 2010, speaks volumes. C. The SECs Allegation that Two AEHI Press Releases in September 2010 Contained False and/or Misleading Statements of Fact, is False

The SEC alleges that AEHIs press releases of September 7, 2010 and September 30, 2010 are false and/or misleading: On September 7, 2010, AEHI issued a press release claiming that Based on confidence in AEHIs accomplishments and long term potential, company directors and line officers have maintained their stock ownership, in which no shares have been sold since company inception. Waldron Decl., Ex. AA. On September 30, 2010, an AEHI press release quoted Donald Gillispie as stating, Recent insider purchases and the fact that neither, I, our CFO, board members, nor any officers who have day-to-day line responsibilities for running the company have sold a single share since the Companys inception speak to our strong confidence in the outlook of the business. Id. 34, Ex. DD. SEC Brief, pg. 6 (emphasis added). Given that: (i) Ms. Ransom was never AEHIs CEO, CFO, board member, director or an officer with day-to-day line responsibilities for running the company;22 and (ii) neither Ms. Ransom nor Brian, Webb, Esq. acted as nominees for Mr. Gillispie,23 the press releases are entirely accurate.

21
22

Id. Aff. Ransom, 6; Aff. Gillispie, 32-35. 23 Aff. Webb, 2-18; Aff. Ransom, 8, 11, 18-19; Aff. Gillespie, 36, 44-45, 51-53. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 7
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 14 of 27

D.

The SECs Allegation that Ms. Ransom Acted Inappropriately in Not Filing Forms 3, 4 or 5, is False

The SEC alleges that Ms. Ransom was required to file Forms 3, 4, or 5 disclosing her stock sale pursuant to Section 16(a) of the Exchange Act. See, SECs Brief, pg. 7. First, no such filing was legally required since Ms. Ransoms actual function at AEHI (as opposed to her title, which is not legally significant) was never that of an officer as that term is defined in Rule 240.16a-1(f).24 Second, Ms. Ransoms decision not to file Forms 3, 4, or 5 was at the advice of legal counsel (Pillsbury Winthrop Pittman Shaw, LLP).25 On this point, the fact that Ms. Ransom followed legal advice is dispositive as to her lack of intent to deceive the public or violate any rule or regulation. E. The SECs Allegation that Mr. Gillispie Used Nominees to Sell Stock and Failed to File Forms 3, 4 or 5, is False

The SEC alleges that Ms. Ransom and Mr. Webb acted as Mr. Gillispies nominees with

See, supra, fn. 22. Aff. Gillispie, 46-50 and Exhibits F and G; Aff. Ransom 9-10. Defendants waiver of the attorney-client privilege is limited solely to this one issue -- and does not constitute (nor is it intended to constitute) a wholesale waiver of the attorney-client privilege. See, e.g., Hernandez v. Tanninen, 604 F. 3d 1095, 1100 (9th Cir. 2010)(Disclosing a privileged communication or raising a claim that requires disclosure of a protected communication results in waiver as to all other communications on the same subject. (emphasis added)); Chevron Corporation v. Pennzoil Company, 974 F. 2d 1156 , 1162 (9th Cir. 1992)(As this court has held, the disclosure of information resulting in the waiver of the attorney-client privilege constitutes waiver only as to communications about the matter actually disclosed. (emphasis added)); Willnerd v. Sybase, Inc., 2010 U.S. Dis. LEXIS 135781 (D. Idaho 2010)(Guided by the principles of fairness, and having in mind the need to protect the frankness of client disclosures while seeking to protect against unfair partial disclosures, the Court concludes that Sybases disclosure of communications related to the Baum investigation does not justify a broad foray into Sybases privileged communications on similar, but not the same, subject matters. (emphasis added)). See also, Weil v. Investment/Indicators, Research & Management, 647 F. 2d 18, 25 (9th Cir. 1981); In re Von Bulow, 828 F. 2d 94, 102-103 (2d Cir. 1987); United States v. Nobles, 422 U.S. 225, 239-240 (1975); United States v. Plache, 913 F. 2d 1375, 1380 (9th Cir. 1990); United States v. Mendelsohn, 896 F. 2d 1183, 1189 (9th Cir. 1990). Defendants counsel has offered to enter a stipulation on this issue with the SEC (and supplied the SEC with what it believes to be controlling case law), but the SEC refused to so stipulate or provide a good faith basis for its refusal to do so.
25

24

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 8

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 15 of 27

respect to their sale of AEHI stock.26 The SECs failure to interview any of the relevant individuals involved (prior to filing its lawsuit), however, renders its allegations wholly uninformed, and in fact, absolutely false. The truth is: (i) the proceeds of Mr. Webbs stock sale went to his bona fide purchase of Mr. Gillispies 2007 Lexus Hybrid automobile;27 and (ii) the proceeds of Ms. Ransoms stock sale went to repaying Mr. Gillispie for his purchase of real estate for the benefit of Ms. Ransoms sister (whose house had been destroyed in a fire) and repayment of personal loans in the amount of $20,000.28 Moreover, because Mr. Gillispie sold absolutely no AEHI stock (directly or indirectly), he was not required to file Forms 3, 4 or 5. Simply put, the SECs allegations that Mr. Gillispie sold stock through Mr. Webb and Ms. Ransom are without any merit whatsoever. F. The SECs Allegation that AEHI Falsely Stated in a Private Placement Memorandum that it had Funding, is False

The SEC alleges that a purported AEHI Private Placement Memorandum, dated March 31, 2009 (the PPM), contains false statements of fact because it states that AEHI already has funding. SEC Brief, pgs. 9-10. At first, the SEC represented to the Court that it received the PPM from UBS.29 When the SEC was informed (by Defendants counsel) that the PPM was altered and not disseminated by AEHI, however, the SEC subsequently admitted in a letter to the Court (dated January 7, 2010) that the PPM was found on the internet website www.scribd.com (and thus not produced by UBS).30 Despite not having a good faith basis to allege that the PPM was created or disseminated
26 27

See, SEC Brief, pgs. 7-8. See, supra, fn. 5. 28 See, supra, fn. 6. 29 See, Decl. Waldron, 15. 30 Scribd.com is a file-sharing website. As it relates to the PPM, upon information and belief, the PPM was uploaded by anonymous scribd.com user, fng0312. See, Aff. Gillispie, 59-62. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 9
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 16 of 27

by AEHI (other than by accepting as true a document uploaded anonymously onto the internet), the SEC continues to pursue this claim without any basis in fact. The truth is that the actual March 31, 2009 PPM, which has an entirely different non-altered AEHI header/logo, states the project is seeking funding (emphasis added), which is precisely what it was doing by the issuance of a PPM to raise money!31 To assert otherwise is simply inaccurate. G. The SECs Allegation that AEHI Falsely Stated that Pinnacle Digest Was Not Compensated for Writing an Article Favorable to AEHI, is False

The SEC alleges that an AEHI press release (dated October 14, 2010) falsely stated that AEHI did not compensate Pinnacle Digest for writing an article (also dated October 14, 2010). SEC Brief, pg. 10. The SEC states that its basis for the allegation is that Pinnacles website disclosed that it had been paid to display and disseminate AEHI news. Id. (emphasis added). The SEC wrongfully assumes, however, that articles necessarily equates to news. AEHI paid Pinnacle Digest $150 per press release that Pinnacle disseminated on its behalf.32 The article in question, however, was written based on Pinnacle Digests own research and due diligence -- and AEHI did not provide Pinnacle Digest with any compensation in connection therewith.33 Contrary to the SECs allegations, the October 14, 2010 AEHI press release is accurate, as confirmed under oath by the President and Founder of the company that owns Pinnacle Digest.34 H. The SECs Allegation that Mr. Gillispie and AEHI Falsely Stated Mr. Gillispies Compensation in Form 10-K for Fiscal Year 2009, is False

The SEC alleges that AEHI and Donald Gillispie falsely stated Mr. Gillispies compensation in form 10-K for fiscal year 2009. Specifically, it is alleged that AEHI paid Mr.

31 32

Aff. Gillispie, 60 - 62; Exh. H. Aff. Gillispie, 67; Aff. Hoddinott, 3-4. 33 Aff. Gillispie, 68; Aff. Hoddinott, 5. 34 Aff. Gillispie, 69; Aff. Hoddinott, 6-7. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 10
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 17 of 27

Gillispie $55,000 more than what was publicly disclosed.35 That allegation is factually erroneous. As discussed in Mr. Buccis affidavit, and proven by the documentation annexed hereto, the SEC failed to take into account the fact that $50,000 constituted a repayment of advance by Mr. Gillispie, and the remaining $5,000 constituted the difference in prepaid compensation from 2009 and 2010.36 There is no merit whatsoever to the SECs allegations. I. The SECs Allegation that AEHI Failed to Disclose a Material Change in Mr. Gillispies 2010 Compensation, is False

The SEC alleges that Mr. Gillispie received over $773,859 in compensation from AEHI in 2010, and then failed to publicly disclose said material change in compensation.37 In arriving at that conclusion, the SEC makes numerous false assumptions of fact. First, the SEC states that in addition to Gillispies $306,500 salary, Energy Executive (Gillispies LLC) received at least $267, 359 in investor money from AEHI in 2010. SEC Brief, pg. 4. In arriving at that conclusion, however, the SEC double-counts Mr. Gillispies 2010 compensation. That is, Mr. Gillispie was paid through Energy Executive, he was not paid directly from AEHI.38 AEHI paid Energy Executive; Energy Executive paid Mr. Gillispie. In addition to double-counting Mr. Gillisies compensation, the SEC then adds on another $200,000 in so-called compensation from the monies he received from Ms. Ransom (i.e. the monies that Ms. Ransom repaid him for purchasing her sisters house and giving her two loans).39 Finally, given the SECs grossly negligible math, the company intended on publicly disclosing the increase in salary in the companys Form 10-K for fiscal year 2010 (which would

35 36

See, SEC Brief, pg. 8. Aff. Bucci, 3-6, Exhs. A-E. 37 See, SEC Brief, pg. 8. 38 Aff. Bucci, 7-10. 39 See, supra, fn. 6. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 11
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 18 of 27

not have been filed prior to the commencement of this lawsuit).40 As discussed herein, because the SECs allegations are factually erroneous in every material respect, the injunctive relief sought should be denied in its entirety. ARGUMENT A. Legal Standard for Preliminary Injunction

In considering the request for preliminary relief, the court must determine whether or not the moving party has establish[ed] that [it] is likely to succeed on the merits, that [it] is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in [its] favor, and that an injunction is in the public interest. Donald C. Winter, et al. v. Natural Resources Defense Council, Inc., et al., 129 S. Ct. 365, 374 (2008), citing Munaf v. Geren, 128 S. Ct. 2207 (2008). Thus, preliminary relief may be granted only if the moving party shows that irreparable injury is likely in the absence of an injunction. Garcoa, Inc. v. PH Beauty Labs, Inc., 2009 U.S. Dist. LEXIS 125205 at *6. If the moving party cannot do so, then the moving party must convince the district court that the public interest and balance of hardships tip in [its] favor." Id., quoting Southwest Voter Reg. Educ. Project v. Shelley, 344 F. 3d 914, 918 (9th Cir. 2003). However, when a government agency is the moving party and is seeking preliminary relief pursuant to a statute, the standard on which the court must rely is slightly altered. In such a case, the agency still carries the burden of showing that the statutory conditions required for issuance of the injunction are met, except that the agency is not required to show irreparable injury. United States v. Odessa Union Warehouse Co-op, 833 F. 2d 172, 175 (9th Cir. 1987), citing Navel Orange Admin. Comm. v. Exeter Orange Co., 722 F. 2d 449, 453 (9th Cir. 1983); SEC v. Management Dynamics, Inc., 515 F. 2d 801, 808 (2d Cir. 1975); United States v.
40

Aff. Bucci, 11.

19211-001 (368605)

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 12

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 19 of 27

Diapulse Corp., 457 F. 2d 25, 28 (2d Cir. 1972). In the present case, the SEC relies on 20(b) of the Securities Act of 1933 in seeking a preliminary injunction and temporary restraining order against AEHI. The conditions required by 20(b) for issuance of an injunction is a proper showing of a violation of the Securities Act. See, Securities Act, 20(b) (1933). To that end, a preliminary injunction enjoining violation of the securities laws is appropriate if the SEC makes a substantial showing of likelihood of success as to both a current violation and the risk of repetition. Securities and Exchange Commission v. Thomas Edward Cavanagh et al, 155 F. 3d 129, 132 (2d Cir. 1998) (emphasis added). As discussed herein, the SEC cannot meet its burden in any respect. B. The SEC Cannot Meet its Burden to Obtain Injunctive Relief

For the reasons discussed herein, the SEC cannot meet its burden of making a substantial showing as to both: (i) a current violation; and (ii) the risk of repetition. Nor is there any evidence before the Court showing that investors will suffer catastrophic financial loss absent injunctive relief (as argued by the SEC at page 13 of its Brief). 1. No Primary Violation of the Antifraud Provisions of the Federal Securities Laws has Occurred

The SEC alleges that AEHI and Gillispie violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act (and Rule 10b-5 thereunder) by: (i) falsely claiming in press releases that no officer has sold AEHI stock; (ii) misrepresenting in Form 10-K for fiscal year 2009 Gillispies cash compensation; (iii) failing to update information about Gillispies 2010 compensation; (iv) disseminating a Private Placement Memorandum containing a false and/or misleading statement of fact; and (v) generally, manipulating the market of AEHI stock. See, SEC Brief, pgs.13-14. The antifraud provisions at issue prohibit untrue statements of material fact or omissions of material facts necessary to make statement made no misleading. Section 17(a)(1) of the MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 13
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 20 of 27

Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5, require a finding of scienter to establish a violation. See, Aaron v. SEC, 446 U.S. 680, 697, 64 L. Ed. 2d 611, 100 S. Ct. 1945 (1980). Scienter, in the securities fraud context, has been defined by the Supreme Court as "intent to deceive, manipulate, or defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976). To act intentionally means to act deliberately, rather than mistakenly or inadvertently. Further, information is material if there is a substantial likelihood that disclosure of the misstated or omitted fact would have significantly altered the total mix of information available to the reasonable investor. Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). As stated herein, not only does the SEC fall far short of making a showing that Defendants acted with scienter and that any statements or omissions of fact were material -- the SECs factual allegations are patently false. First, AEHIs press releases of September 7, 2010 and September 30, 2010 are entirely accurate.41 Second, Mr. Gillispies compensation for fiscal year 2009 was accurately reported in AEHIs Form 10-K.42 Third, the SECs allegations regarding Mr. Gillispies compensation in 2010 is factually erroneous and the company intended on making the appropriate filing in AEHIs Form 10-K for fiscal year 2010.43 Fourth, the Private Placement Memorandum alleged to contain false and/or misleading statements of fact is altered, was never disseminated by Defendants and was found by the SEC
41 42

See, supra, pages 8-9. Aff. Bucci, 3-6, Exhs. A-E. 43 Id., 7-11. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 14
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 21 of 27

on an internet document-sharing website (wherein the document was uploaded anonymously).44 Finally, the SECs broad allegation of market manipulation is misleading and erroneous given the SECs intentional omission of significant events outside Defendants control which affected AEHIs stock price and volume (such as the U.S. Senates unveiling of its Climate Bill on May 12, 2010 -- which was AEHIs most significant trading day in 2010 (and also happened to be a day that AEHI did not issue a press release)).45 On that point, the SECs passing reference to emails in 2006 and 2007 (at page 5 of its Brief) cannot possibly form the basis for a finding of a current securities violation. Put simply, the SEC cannot make a showing of likelihood of success given that its factual allegations are demonstrably false. 2. No Aiding and Abetting of the Antifraud Provisions of the Federal Securities Laws Occurred

The SECs allegations regarding Mr. Gillispies and Ms. Ransoms alleged aiding and abetting AEHIs alleged violations of securities fraud (at pages 15-16 of its Brief) is frankly, outrageous. As stated above, the SEC is wrong in every material aspect of its allegations! Because the SEC cannot prove a likelihood of success as to a primary violation of securities law, the SECs frivolous allegations of aiding and abetting must fail accordingly. Indeed, as stated herein, the fact that Mr. Gillispie and Ms. Ransom followed the advice of counsel (with respect to not filing a Form 3, 4, or 5 regarding Ms. Ransoms sale of stock) wholly vitiates any argument that they acted with scienter. The SECs allegations of aiding and abetting are based on misrepresentations of fact and
44

See, supra, pages 8-9. The argument that the PPM announces that AEHI has funding a PPM which does not employ the AEHI proper logo or letterhead -- when the purpose of a PPM is to obtain funding, is not only nonsensical, but was never a AEHI PPM. All the SEC had to do was either look at the document and compare it to AEHIs other PPMs or take the time to ask the company, both of which it decided not to do. 45 See, supra, pages 6-8. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 15
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 22 of 27

are without any merit whatsoever. 3. No Violation of the Reporting Requirements of the Exchange Act Occurred

The SEC is not likely to succeed on its allegations that: (i) AEHI violated Section 13(a) of the Exchange Act and Rule 13a-11 (by failing to report material change in Mr. Gillispies compensation); or (ii) Mr. Gillispie and Ms. Ransom violated Section 16(a) and Rule 16a-3 of the Exchange Act (by failing to file forms detailing sales of AEHI stock). First, the SECs allegations regarding Mr. Gillispies change in compensation in 2010 is severely misrepresented to the Court. As stated above, the SEC double-counted Mr. Gillispies compensation and then wrongfully added $200,000 on top of the already artificially inflated amount.46 Mr. Gillispies increase in salary was certainly not material for a Chief Executive Officer that made a total compensation of $133,000 a year prior, but in any event, the company intended on publicly reporting Mr. Gillispies compensation in Form 10-K for fiscal year 2010.47 Second, the SEC is not likely to prevail on its claim that Mr. Gillispie and Ms. Ransom violated Section 16(a) and Rule 16a-3 of the Exchange Act. First and foremost, there is no evidence whatsoever that Mr. Gillispie sold any of his AEHI stock. Rather, the SEC relies on a tenuous argument that Mr. Webb (an officer of this Court) and Ms. Ransom acted as his nominees. That allegation is vehemently denied, with documentation in support thereof.48 With respect to Ms. Ransom, the answer is very simple -- her role at the company did not require her to file Forms 3, 4 or 5, but to remove any doubt, she sought and followed legal advice on the issue.49 The SEC is not likely to prevail on that issue.

46 47

Aff. Bucci, 7-10. Id., 11. 48 See, supra, pgs. 9-10. 49 See, supra, pgs. 8-9. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 16
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 23 of 27

C.

The Order Currently Restraining Defendants Assets Should be Lifted, Either in Whole or in Part

The exercise of the Courts discretion to issue ancillary relief must be "exercised only where necessary." SEC v. Hickey, 322 F. 3d 1123, 1131 (9th Cir. 2003). The SEC has made no factual showing of such a necessity herein. Rather, the SEC cites FTC v. H.N. Singer, Inc. for the proposition that, "an asset freeze is appropriate to prevent waste and dissipation of assets while litigation is pending to ensure their availability for restitution and disgorgement." SEC Brief, p. 18 (citing, SEC cites FTC v. H.N. Singer, Inc., 668 F. 2d 1107, 1112-1113 (9th Cir. 1982)). However, the court therein specifically found that, "freezing assets under certain circumstances...might thwart the goal of compensating investors if the freeze were to cause such disruption of defendants' business affairs that they would be financially destroyed." Id. at 1113, quoting, SEC v. Manor Nursing Centers, Inc., 458 F. 2d 1082, 1105-1106 (2d Cir. 1972). Thus, FTC remains consistent with the holding in SEC v. Hickey --"[t]hus, the disadvantages and possible deleterious effect of a freeze must be weighed against the considerations indicating the need for such relief." FTC, at 1113. As the moving party, the SEC has the burden of proof. As such, the SEC must show "a likelihood of dissipation of the claimed assets, or other inability to recover monetary damages, if relief is not granted." Johnson v. Couturier, 572 F. 3d 1067, 1085 (9th Cir. 2009). Here, not only does the SEC fail to make a showing of likely dissipation, but the continued wholesale restraint over all of Defendants assets will destroy any chance that AEHI had in which to accomplish its main goal of building a nuclear power plant. The SEC states that AEHI took in $5 million from investors in 2010 and there is currently $7 million frozen. See, SEC Brief, pgs. 1-2. Thus, on its face, the SEC cannot allege in good faith that there is any legitimate risk of asset dissipation absent injunctive relief. At most, the SEC alleges (albeit, erroneously) that Ms. Ransom and Mr. Webb wrongfully sold MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 17
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 24 of 27

stock (owned by them) and subsequently used or transferred proceeds of those stock sales. There is no allegation, however, that AEHIs bank accounts have been compromised in any way (or that there was ever any intent by Defendants to do so)50 -- and the fact that, as admitted by the SEC, more than the amount of monies raised by AEHI in 2010 currently remain in said accounts, wholly vitiates any SEC argument to the contrary. Moreover, the current ex parte order freezing all of Defendants assets and accounts has left AEHI wholly unable to operate its business (including paying its creditors and employees) -and leaving the individual defendants unable to pay their personal living expenses (including Ms. Ransom, who cares for her young child). Given that the SEC allegations are demonstrably false,51 the SEC falls far short in meeting its burden of showing a likelihood of success on the merits and cannot make a showing of even a possibility of asset dissipation. Respectfully, under the totality of the circumstances, the Court should lift the asset freeze in its entirety. AEHI is a legitimate company and should be permitted to proceed with its business in order to protect its investors. In the event the Court is inclined to continue to restrain certain assets (which again, The allegations that AEHI wrongfully funneled money to Relief Defendants Energy Executive and Bosco is without any merit whatsoever. Rather, the monies paid to those entities constituted Mr. Gillispies and Ms. Ransoms compensation, respectively (since they were paid through their entities, not directly). See, Aff. Bucci, 7-14. 51 Not only are the SECs allegations erroneous regarding Ms. Ransoms and Mr. Webbs stock sales, and Mr. Gillispies compensation, the SEC also completely misconstrues the monetary transfers regarding the Relief Defendants. Energy Executive received $277,359 from AEHI because such monies constituted Mr. Gillispies compensation (since he was paid not directly, but through Energy Executive) (see, Aff. Bucci, 7-10), and Bosco received $137,500 from AEHI because such monies constituted Ms. Ransoms compensation (since she was paid not directly, but through Bosco) (Aff. Bucci, 12-14; Aff. Ransom, 7). These transactions were perfectly legitimate and there is no evidence that monies were being fraudulently dissipated as summarily concluded by the SEC. In fact, in alleging that AEHI wrongfully transferred monies to the individual and Relief Defendants, the SEC -- outrageously -- misrepresents to the Court the facts upon which it basis its allegations. For example, Ms. Waldron represents in her sworn declaration (at 53 and 56) that annexed as Exhibits RR and UU, are checks from AEHI to Mr. Gillispie and Bosco, respectively. Even a cursory review of the referenced exhibits, however, shows that AEHI was neither a signatory nor a beneficiary to the checks in question. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 18
19211-001 (368605) 50

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 25 of 27

Defendants respectfully suggest it should not do), Defendants and Relief Defendants respectfully request that only a partial restraint remain -- thus permitting Defendants and Relief Defendants to pay expenses in the normal course, including, but not limited to, legal fees. D. An Order Preventing Alteration or Destruction of Documents is Unnecessary and Inappropriate Under the Circumstances

The SEC cites one Southern District of Florida case for the proposition that an order to preserve documents is appropriate in this litigation. See, SEC Brief, pg. 19.52 The SEC does not, however, cite one fact upon which it seeks such relief. There is no evidence (or even allegation) that Defendants do not intend on complying with their already existing obligations under the law -- nor is there any evidence suggesting that Defendants have or may in the future cause a spoliation of documents or information. Such requested relief should be denied accordingly. E. Any New Factual or Legal Arguments Raised in the SECs Reply Should be Disregarded

As discussed above and in the accompanying affidavits and declarations in opposition, the factual allegations asserted in the SECs moving papers are erroneous. As such, it is anticipated that the SEC may attempt to shift gears in its reply by offering new facts and/or legal arguments that were not raised in its moving papers or in opposition thereto. Any such an attempt, however, would be severely prejudicial to Defendants -- given that the relief being sought will, at a minimum, put a legitimate company out of business, destroy the possibility of bringing a nuclear power plant to Payette County, and irreparably damage the careers of at least two individuals. A moving party's attempt to introduce new facts or different legal arguments in reply
52

In the one case cited by the SEC (SEC v. Chemical Trust, 2000 U.S. Dist. LEXIS 19786, No. 00-CIV-8015, at * 17 and 35-36 (S.D. Fl. 2000), summary judgment was entered when defendants failed to offer any evidence (or even argument) as to why the relief requested should be denied. In fact, the defendants therein consented to disgorge their ill-gotten gains. Chemical Trust is not even remotely comparable to the case at bar. MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 19
19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 26 of 27

papers is improper. See, e.g., Lujan v. National Wildlife Federation, 497 U.S. 871, 894-895, 110 S. Ct. 3177, 3192 (1990) (court has discretion to disregard late-filed factual matters); Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007) ("district court need not consider arguments raised for the first time in a reply brief"); Jones v. Baltimore Life Ins. Co., No. Civ. S-06-1501 LKK/KJM, 2007 U.S. Dist. LEXIS 44825, 2007 WL 1713250, at *9 (E.D. Cal. June 11, 2007) ("[i]t is improper for a moving party to introduce new facts . . . in the reply brief than those presented in the moving papers"); Springs Industries, Inc. v. American Motorists Ins. Co., 137 F.R.D. 238, 239 (N.D. Tex. 1991) ("It cannot seriously be disputed that a movant is obligated to file with a motion the evidentiary materials necessary to justify the relief it seeks"). The SECs anticipated attempt to put new facts and legal arguments before the Court in its reply, should be disregarded in its entirety. CONCLUSION For all of the reasons cited above, and in the accompanying affidavits, Defendants and Relief Defendants respectfully request that all relief sought by the SEC be denied in its entirety, together with any other relief that this Court deems just and equitable. DATED this 14th day of January, 2011. GREENER BURKE SHOEMAKER P.A.

/s/ Richard H. Greener RICHARD H. GREENER Attorneys for Defendants and Relief Defendants DATED this 14th day of January, 2011.

THE ROTH LAW FIRM

/s/ Richard A. Roth RICHARD A. ROTH Attorneys for Defendants and Relief Defendants

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 20

19211-001 (368605)

Case 1:10-cv-00621-EJL Document 29

Filed 01/14/11 Page 27 of 27

CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the _____ day of January, 2011, a true and correct copy of the within and foregoing instrument was served upon: Securities and Exchange Commission Mark P. Fickes K.C. Allan Waldron David A. Berman Susan L. Lamarca Marc J. Fagel 4 Montgomery Street, 26th Floor San Francisco, CA 94104 Attorneys for Plaintiff Richard Roth The Roth Law Firm 295 Madison Avenue, Floor 22 New York, NY 10017 Attorney for Defendants and Relief Defendants U.S. Mail Facsimile: 1 (212) 542-8883 Hand Delivery Overnight Delivery Email: rich@rrothlaw.com; U.S. Mail Facsimile: 1 (415) 705-2501 Hand Delivery Overnight Delivery Email: fickesm@sec.gov; bermand@sec.gov; waldronk@sec.gov; lamarcas@sec.gov;

/s/ Richard J. Greener Richard H. Greener Monica R. Morrison

MEMORANDUM IN OPPOSITION TO PLAINTIFFS MOTION - P. 21

19211-001 (368605)