SECURITIES AND EXCHANGE COMMISSIONIn the Matter of
EDWARD ALEXANDER,
Respondent.
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS, MAKING
FINDINGS, AND IMPOSING
A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Edward Alexander ("Alexander") be instituted.
Accordingly, IT IS ORDERED that cease-and-desist proceedings pursuant to Section 21C of the Exchange Act be, and hereby are, instituted.
II.
In anticipation of the institution of these cease-and-desist proceedings, Alexander has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings set forth herein, except that Alexander admits the jurisdiction of the Commission over him and the subject matter of these proceedings, Alexander consents to the issuance of this Order Instituting Cease-and-Desist Proceedings, Making Findings and Imposing a Cease-and-Desist Order ("Order").
III.
On the basis of this Order and the Offer, the Commission finds that:
A. Alexander is the president and sole shareholder of Proton Laboratories, Inc., ("Proton Laboratories") a privately-held California corporation headquartered in Alameda, California. Proton Laboratories' product is a device that treats tap water with electrolysis, creating "Functional Electrolytic Water."
B. As of November 7, 2001, Proton Laboratories had signed a letter of intent to be acquired by Knowledge Networks, Inc. ("Knowledge Networks"), a Nevada corporation headquartered in Dana Point, California. The common stock of Knowledge Networks is registered pursuant to Section 12(g) of the Exchange Act, and has been so registered since at least May 5, 2000. Shares of Knowledge Networks common stock are quoted on the Over-the-Counter Bulletin Board.
C. On November 7, 2001, Alexander issued a press release on behalf of Proton Laboratories entitled "Proton Laboratories and its Strategic Business Partner Working With U.S. Government Agencies to Combat Anthrax." The release stated, among other things, that "Proton Laboratories and its strategic business partner, First Austin Company of Las Vegas, are currently working with United States government agencies to determine the effect of Functional Electrolytic Water in containing and eliminating several types of bio-terrorism germs and viruses, including anthrax. . . . " The release further stated, "Under stringent protocols, laboratory tests are being conducted at the University of Texas, Medical and Science Research Facilities and the Center for Disease Control (CDC). . . . " The press release also mentioned Knowledge Networks' intent to acquire Proton, and it included Knowledge Networks' ticker symbol in its headline. The inclusion of this ticker symbol led news services and internet sites to categorize Proton's press release as news about Knowledge Networks.
D. The November 7, 2001 press release contained misrepresentations of material fact, in that no government agency was working with Proton or its product to test the effectiveness of the product in combating anthrax. Contrary to the representation in the press release, as of November 7, 2001:
Neither Proton nor anyone acting on its behalf had ever contacted the Center for Disease Control or any other government agency about testing Proton's product for use against anthrax.
Proton's product had never been tested for use against anthrax by anyone, including any government agency.
E. Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit, in connection with the purchase or sale of any security, making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
F. Alexander knew, or was reckless in not knowing, that these statements set forth in Section III.C., above, were false and misleading at the time they were made.
G. Alexander committed or caused the violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by issuing publicly the statements set forth in Section III.C., above.
H. While engaged in the conduct described above, Alexander directly and indirectly used the means or instrumentalities of interstate commerce or the mails.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the cease-and-desist order specified by Alexander in his Offer.
Accordingly, IT IS ORDERED, pursuant to Section 21C of the Exchange Act, that Alexander cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
By the Commission.
http://www.sec.gov/litigation/admin/34-45473.htm