| DEBRA A. VALENTINE General Counsel CONNIE WAGNER Attorneys for Plaintiff UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. SELKET PRECIOUS METALS INC., and PAUL H. BYUS, Defendants. CIVIL ACTION NO. COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), by its undersigned attorneys, allege: 1. The FTC brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to secure a permanent injunction and other equitable relief against defendants for their deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). JURISDICTION 2. This Court has subject matter jurisdiction over this matter pursuant to 15 U.S.C. §§ 45(a), 52, and 53(b) and 28 U.S.C. §§ 1331, 1337(a) and 1345. VENUE 3. Venue in this district is proper under 15 U.S.C. § 53(b) and 28 U.S.C. § 1391(b) and (c). THE PARTIES 4. Plaintiff, the FTC, is an independent agency of the United States government created by statute, 15 U.S.C. §§ 41-58. The FTC enforces Section 5(a)of the FTC Act, 15 U.S.C. § 45(a), that prohibits, among other things, deceptive acts or practices, in or affecting commerce. The FTC may initiate federal district court proceedings to enjoin violations of the FTC Act and to secure such equitable relief as is appropriate in each case. 15 U.S.C. § 53(b). 5. Defendant Selket Precious Metals, Inc. ("Selket"), is a Nevada corporation. Its principal place of business is 322 S. Sunland, Ridgecrest, CA 93555. Its registered office in Nevada is located at 1350 East Flamingo Rd., #405, Las Vegas, NV 89119. Selket purportedly is engaged in the development, mining and sale of precious metals from the Herculean Mine located in Baker, Oregon. Selket transacts business in the Eastern District of California. 6. Defendant Paul H. Byus is president of Selket Precious Metals and has an ownership interest in the company. Individually, or in concert with others, he directs, controls, formulates, or participates in the acts and practices of Selket, including the acts and practices complained of below. He transacts or has transacted business in the Eastern District of California. COMMERCE 7. At all times material to this complaint, defendants' course of business, including the acts and practices alleged herein, has been and is in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' COURSE OF CONDUCT 8. Since at least January of 1995, and continuing thereafter, defendants have maintained a substantial course of trade in the offer and sale of unregistered stock in Selket Precious Metals, Inc., a precious metals mining company. Defendants represent that they are seeking to raise $1,375,000, purportedly to finance equipment necessary to bring the Herculean Mine into commercial operation. Defendants require a $10,000 minimum stock purchase per consumer. 9. Defendants market their investments to consumers across the country, making initial contact over the Internet, via a web page that provides an email address and telephone number to consumers. Consumers who contact defendants by telephone and/or email are provided with written promotional materials. Defendants also promote investments in Selket with telephone sales pitches. 10. Defendants tout investments in Selket by claiming that an investment offers low risk and high returns in a short time. Defendants base this claim, in part, on the anticipated increase in demand for tangible assets resulting from fears about Year 2000 computer problems. Illustrative of the defendants' claims about the profitability and low risk of an investment in their mining ventures are the following written and oral claims:
11. In addition, since at least February of 1999, and continuing thereafter, defendants have offered for sale "gold certificates" redeemable for gold obtained from the Herculean Mine. Defendants market these gold certificates to consumers across the country over the Internet, via a web site, and through written promotional materials and telephone sales presentations. 12. Defendants promote the sale of gold certificates to consumers by capitalizing on fears about impending disaster and financial collapse that the Y2K computer bug will allegedly cause on January 1, 2000. Defendants represent to consumers that an investment in gold certificates will be safe notwithstanding the Y2K breakdown. Illustrative of defendants' claims about the safety of this investment in gold certificates are the following written representations:
13. Defendants promote the sale of gold certificates to consumers by promising a 100 percent return on their investment. Illustrative of defendants claims about the profitability of this investment in gold certificates is the following written statement:
14. Defendants, individually or in concert with others, have used the above representations, or others like those described above, to induce consumers to invest in their mining venture by purchasing stock or "gold certificates." DEFENDANTS' VIOLATIONS OF THE FTC ACT 15. Defendants represent, expressly or by implication, that an investment in Selket or its gold certificates, is likely to yield a substantial short term return with minimal risk. In fact, an investment in Selket or its gold certificates is not likely to yield a substantial short term return with minimal risk. 16. Defendants represent, expressly or by implication, that the Herculean mine will be fully operational within a few months. In fact, the Herculean mine will not be fully operational within a few months. 17. Defendants represent, expressly or by implication, that the Herculean Mine is likely to profitably produce at least 300 troy ounces of gold per week. In fact, the Herculean Mine is unlikely to profitably produce at least 300 troy ounces of gold per week. 18. Therefore, defendants' representations as set forth in Paragraphs 14 through 16 above, are false and misleading, and constitute deceptive acts or practices in violation of the FTC Act, 15 U.S.C. § 45(a). CONSUMER INJURY 19. Defendants' violations of Section 5(a) of the FTC Act have, in fact, injured and will continue to injure consumers. Because of defendants' misrepresentations about their mining ventures, consumers have made and will continue to make investments that are likely to lose money and cause substantial financial injury absent injunctive relief. THIS COURT'S POWER TO GRANT RELIEF 20. Section 13(b) of the FTC Act empowers this Court to issue injunctive and other relief against violations of the FTC Act and, in the exercise of its equitable jurisdiction, to award redress to remedy the injury to consumers, to order disgorgement of monies resulting from defendants' unlawful acts or practices, and to order other ancillary equitable relief. PRAYER FOR RELIEF WHEREFORE, plaintiff requests that this Court: (1) Award plaintiff all temporary and preliminary injunctive and ancillary relief that may be necessary to avert the likelihood of consumer injury during the pendency of this action, and to preserve the possibility of effective final relief, including, but not limited to, temporary and preliminary injunctions, appointment of a receiver, and an order freezing each defendant's assets; (2) Enjoin defendants permanently from violating Section 5(a) of the FTC Act, including such violations that occur in connection with the offer and sale of investments in mining ventures; (3) Award plaintiff such relief as the Court finds necessary to redress injury to investors resulting from defendants' violations of Section 5(a) of the FTC Act, including, but not limited to, the rescission of contracts or refund of money, and the disgorgement of unlawfully obtained monies; and (4) Award plaintiff the cost of bringing this action as well as such additional equitable relief as the Court may determine to be just and proper. Respectfully submitted, Debra A. Valentine CONNIE WAGNER Date: ____________ |