ALJ Orders Cease and Desist of Illegal Employee Stock Option Programs

August 28, 2008

ALJ Orders Cease and Desist of Illegal Stock Option Programs

An administrative law judge ordered James Y. Lee
to cease and desist from violations of the registration provisions of
the securities laws and to disgorge $2,866,375 of ill-gotten gains.
From 2002 to 2005, Lee advised and guided several microcap issuers in
raising millions of dollars by selling their common stock to the public
in violation of the registration requirements.  Lee introduced at least
fourteen clients (the Issuers) to so-called employee stock option
programs, under which the Issuers sold billions of shares of common
stock in unregistered offerings. Under the programs, the Issuers
improperly registered the shares underlying the stock options on Form
S-8 registration statements and then received the bulk of the sales
proceeds as payment for the options’ exercise price. Lee introduced the
programs to the Issuers, helped implement the programs, and provided
advice on how to administer the programs, even though he knew, or
should have known, that his conduct was contributing to the Issuers’
registration violations.

August 28, 2008 in SEC Action | Permalink

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