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Securities and Exchange Commission v. Labry

January 20, 2010

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
THOMAS A. LABRY AND CHEROKEE GAS SYSTEMS, INC., DEFENDANTS.



The opinion of the court was delivered by: Honorable James V. Selna United States District Judge

ORDER OF PRELIMINARY INJUNCTION AND ORDERS: (1) CONTINUING FREEZE OF ASSETS, (2) APPOINTING A PERMANENT RECEIVER, (3) PROHIBITING THE DESTRUCTION OF DOCUMENTS, (4) REQUIRING ACCOUNTING BY DEFENDANT THOMAS A. LABRY

This matter came to be heard upon the Court's Order to Show Cause Re Preliminary Injunction And Appointment Of Permanent Receiver, issued January 7, 2010. The OSC is included in the Temporary Restraining Order And Orders:

(1) Freezing Assets, (2) Appointing A Temporary Receiver, (3) Prohibiting The Destruction Of Documents, (4) Requiring Accountings, And (5) Granting Expedited Discovery; And Order To show Cause re Preliminary Injunction And Appointment Of Permanent Receiver ("TRO"). As set forth in the January 12, 2010 and January 15, 2010 Declarations of John W. Cotton, defendant Thomas A. Labry ("Labry") was personally served on January 7, 2010, by the Receiver with the Summons, Complaint, TRO and all supporting papers, as well as a Notice of Deposition requiring him to appear to be deposed by the Commission on January 12, 2010, pursuant to the expedited discovery provisions of paragraph XIX of the TRO.

The Court has considered all of the evidence filed by Plaintiff Securities and Exchange Commission ("Commission") in support of its Application Of Plaintiff Securities And Exchange Commission For A Temporary Restraining Order And Orders: (1) Freezing Assets, (2) Appointing A Temporary Receiver, (3) Prohibiting The Destruction Of Documents, (4) Requiring Accountings, And (5) Granting Expedited Discovery; And Order To show Cause re Preliminary Injunction And Appointment Of Permanent Receiver filed January 7, 2010 (the "Application"), as well as the papers filed by the Temporary Receiver on January 15, 2010, and the January 15, 2010 Declaration of C. Dabney O'Riordan in support of the Commission's Application For A Preliminary Injunction and Appointment Of A Permanent Receiver filed January 15, 2010 ("Supplemental O'Riordan Declaration"). No response by defendant Thomas A. Labry ("Labry") to the OSC has been filed with the Court. Nor has defendant Labry complied with paragraphs XVI-XVIII of the TRO, requiring him to provide schedules of desk top computers, laptop computers and/or personal digital assistants; relevant passwords; and an accounting to the Court and to the Commission, and to produce documents supporting the accounting to the Commission. Labry also failed to appear for his deposition on January 12, 2010, which deposition was noticed by the Commission in compliance with the expedited discovery provisions of paragraph XIX of the TRO. Based upon all of the evidence filed by the Commission, and the Receiver's Report, the Court finds:

A. This court has jurisdiction over the parties to, and the subject matter of, this action.

B. Good cause exists to believe that defendants Thomas A. Labry ("Labry") and Cherokee Gas Systems, Inc. ("Cherokee"), and each of them, have engaged in, are engaging in, and are about to engage in transactions, acts, practices and courses of business that constitute violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, and additionally that Cherokee has engaged in, is engaging in, and is about to engage in transactions, acts, practices and courses of business that constitute violations of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C §§ 77e(a) and 77e(c).

C. The Commission has demonstrated a probability of success on the merits in this action.

D. Good cause exists to believe that the defendants will continue to engage in such violations to the immediate and irreparable loss and damage to investors and to the general public unless they are restrained and enjoined.

Accordingly:

I. IT IS HEREBY ORDERED that the Commission's Application for a Preliminary Injunction and Appointment of a Permanent Receiver is GRANTED.

II. IT IS FURTHER ORDERED that defendant Cherokee, and its officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, making use of any means or instruments of transportation or communication in interstate commerce or of the mails, to sell, to offer to sell, or to offer to buy through the use or medium of any prospectus or otherwise any security, or carrying or causing any security to be carried through the mails or in interstate commerce for the purpose of sale or delivery after sale, unless a registration statement has been filed as to such security, in violation of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c).

III. IT IS FURTHER ORDERED that defendants Labry and Cherokee, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, in the offer or sale of any securities, by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails:

A. employing any device, scheme or artifice to defraud;

B. obtaining money or property by means of any untrue statement of a material fact or any omission 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; or

C. engaging in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser; in violation of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).

IV. IT IS FURTHER ORDERED that defendants Labry and Cherokee, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly, in connection with the purchase or sale of any security, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange:

A. employing any device, scheme or artifice to defraud;

B. making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

C. engaging in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person; in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.

V. IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, defendants Labry and Cherokee, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are preliminarily restrained and enjoined from, directly or indirectly:

A. transferring, assigning, selling, hypothecating, changing, wasting, dissipating, converting, concealing, encumbering, or otherwise disposing of, in any manner, any funds, assets, securities, claims, or other real or personal property, wherever located, of defendants Labry and Cherokee, or their subsidiaries or affiliates, ...


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