SEC v. FIRST RESOURCE GROUP LLC; and DAVID H. STERN, No. 0:12-cv-60137, Southern District of Florida (Jan. 26, 2012) — Complaint

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT
OF FLORIDA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
CASE NO.:
FIRST RESOURCE GROUP
LLC and
DAVID H. STERN,
Defendants.
COMPLAINT
Plaintiff Securities and Exchange Commission alleges
as follows:
INTRODUCTION
1. From December 2008 through at least May 2010, First Resource Group LLC and
its principal David
H. Stem engaged in a scheme in which they fraudulently touted the stock of
two thinly-traded microcap companies, sold each company's stock at the same time they were
touting it, and manipulated the market for each stock.
2. First Resource signed contracts with two stock promoters agreeing to solicit
investors
to buy stock of TrinityCare Senior Living, Inc. and Cytta Corporation. Pursuant to
these contracts, First Resource received shares of each company's stock as compensation for
soliciting investors. Stem and First Resource used telemarketers to contact investors. The
investors solicited by the telemarketers were registered representatives at broker-dealers. While
the First Resource telemarketers were recommending
to these investors that they purchase

TrinityCare and Cytta stock, Stem was selling First Resource's shares of the two stocks. Neither
Stem nor First Resources disclosed First Resource's stock sales to the investors being solicited.
3. Further, Stem also manipulated the markets for TrinityCare and Cytta's stock.
He purchased small amounts
of each stock at prices above the market to raise the market price
and create the false appearance
of legitimate trading activity. The manipulation was designed to
induce investors to purchase the stocks. Stem took advantage
of the manipulated stock prices
and sold large amounts
of First Resource's holdings of the two stocks at the fraudulently
elevated prices. Stem transferred the proceeds
of these stock sales from First Resource's
brokerage accounts to his personal account.
4. Through their conduct, Stem and First Resource violated Section 17(a) of the
Securities Act
of 1933 ("Securities Act"), 15 U.S.C. §  77q(a); Sections 10(b) and 15(a) of the
Securities Exchange Act
of 1934 ("Exchange Act"), 15 U.S.C. §§ 78j(b) and 780(a); and Exchange
Act Rule 10b-5,
17 C.F.R. § 240.1 Ob-5. Unless restrained and enjoined, the Defendants are
reasonably likely to engage in future violations
of the federal securities laws.
DEFENDANTS
5.
First Resource is a Florida limited liability company Stem organized in
September 2008. Its principal place
of business is  Fort Lauderdale, Florida. First Resource has
never been registered with the Commission in any capacity and has not registered any offering
of
securities under the Securities Act, or registered a  class of securities under the Exchange Act.
Its business was promoting penny stocks.
6.
Stern, 48, resides in Tamarac, Florida. Stem was First Resource's sole manager
during the relevant time period. Stem was not associated with a  registered broker, or dealer
during the relevant period.
2

JURISDICTION AND VENUE
7. This Court has jurisdiction over this action pursuant to Sections 20(b), 20( d), and
22(a)
of the Securities Act, 15 U.S.C. §§ 77t(b),  77t(d), and 77v(a); and Sections 21(d), 21(e),
and 27
of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa.
8. This Court has personal jurisdiction over the Defendants and venue is proper in
the Southern District
of Florida because the Defendants' acts, transactions, practices, and courses
of conduct giving rise to the violations alleged in this Complaint occurred in the Southern
District
of Florida. In addition, First Resource's principal place of business during the relevant
period was in the Southern District
of Florida, and Stem resides in the Southern District of
Florida.
9. The Defendants, directly and indirectly, have made use of the means and
instrumentalities
of interstate commerce, the means and instruments of transportation and
communication in interstate commerce, and the mails, in connection with the acts, transactions,
practices, and courses
of conduct set forth in this Complaint.
FACTS
I. Stern
and First Resource Used Telemarketers to Cold Call Investors and Tout
TrinityCare and Cytta Stock
10. First Resource signed agreements to promote TrinityCare and Cytta's stock.
Pursuant to these contracts, First Resource received 150,000 shares
of TrinityCare stock and
200,000 shares
of Cytta stock. At the same time that First Resource tel emarketers ,  acting at
Stem's direction, were recommending investors purchase TrinityCare and Cytta stock, Stem was
selling First Resource's shares. Stem transferred the proceeds, approximately $169,000, from
First Resource's brokerage accounts to his personal bank account.
3

11. From December 2008 through at least May 2010, Stem and First Resource paid
telemarketers to cold-call investors and solicit them to purchase shares
of TrinityCare and Cytta
stock, both penny stocks.
12. First Resource's telemarketing operation was located at the company's only
office, in Fort Lauderdale. Stem hired and trained First Resource's telemarketers. He gave the
telemarketers information about TrinityCare and the telemarketers used that information to
prepare sales scripts to pitch the stock to potential investors. Stem reviewed the draft scripts,
made edits, and approved the scripts before the telemarketers were allowed to use them. Stem
gave the telemarketers a computer database list
of registered representatives at broker-dealers to
cold call and pitch the stocks to. First Resource compensated its telemarketers with a small base
salary plus 6% commissions on any stock investors they solicited purchased.
13. Once an investor agreed to purchase one
of the stocks, the telemarketer who
solicited that investor gave Stem the investor's name, the brokerage firm where the investor's
account was held, and the number
of shares to be purchased. Stem monitored trading in
TrinityCare and Cytta on his computer. After he verified a  purchase by the solicited investor,
First Resource paid the telemarketer the 6% sales commission.
II.
Stem and First Resource Recommended TrinityCare and Cytta Stock By Means of
Material Misrepresentations to Investors
TrinityCare
14. From June 2009 through at least May 2010, First Resource's telemarketers made
material misrepresentations about TrinityCare's rapid revenue growth and a projected increase in
the company's stock price. When they solicited investors, First Resource telemarketers' claimed
TrinityCare stock "is going to be $5-7 in 6-12 months" and the company "is going to be a half-a-
billion dollar company in five years or roughly a $40 stock." Stem directed the telemarketers to
4

make these claims -  which appeared in the sales scripts Stem helped to create -  to potential
investors verbatim. In addition to the telemarketers' misrepresentations, Stem disseminated a
research report on TrinityCare stating that, for the year ending December 31, 2009, TrinityCare
would show a profit on revenues exceeding $7.2 million. First Resource's telemarketers and the
research report also claimed TrinityCare expected to add at least four newly constructed senior
living facilities. Tel em arketers, scripts falsely stated TrinityCare had secured $50 million in
financing commitments to construct these new facilities and that the financing was "90% backed
by HUD," the
u.S. Department of Housing and Urban Development.
15. However, as Stem and First Resource knew, were severely reckless in not
knowing, or should have known, there was no reasonable basis for any
of these claims. Stem
knew, was severely reckless in not knowing, or should have known, that TrinityCare had lost
money for the previous two years and had no realistic prospects
of revenues. Stem knew, was
severely reckless in not knowing, or should have known, that TrinityCare had not obtained
financing for the new senior living facilities, which were the source
of the company's projected
revenue growth. Stem also knew, was severely reckless in not knowing, or should have known,
that TrinityCare was only at the "pre-application" stage to obtain
Hun financing for the new
facilities. Because
of the company's poor business prospects, and because during the relevant
time period TrinityCare's stock traded at between $0.41 and $1.95, First Resource and Stem had
no reasonable basis to project the stock price would grow to between $5 and $7 a  share in the
following year.
16. In addition, Stem was manipulating the market for, and selling First Resource's
holdings
of TrinityCare stock for his personal financial benefit, while First Resource
telemarketers, with his knowledge, were making these misrepresentations to investors.
5

17. First Resource and Stem also made material misrepresentations regarding Cytta's
projected sales figures when they touted its stock from December 2008  through April 2009.
Stem disseminated
to investors a research report on Cytta touting Cytta's "[s]ales projections for
2010-2014 should exceed $500 million with a pre-tax net
of over $400 million."
18. However, these statements were false because, as Stem and First Resource knew,
were severely reckless in not knowing, or should have known, the company had had no profits
since its inception in 1997. Further, in the year ended December 31, 2008, Cytta had revenues of
only $35,000 and net losses of$70,000. Moreover, according to its Form 10-Q filed on February
23, 2009, the company's auditors' expressed doubts the company could continue
as a  going
concern.
19. In addition, Stem was manipulating the market for, and selling First Resource's
holdings
of Cytta stock for his personal financial benefit, while he and First Resource were
making these misrepresentations
to investors.
III. Stern and First Resource Scalped Investors To Whom They Recommended
TrinityCare and Cytta Stocks
20. At the same time First Resource, Stem and First Resource's telemarketers were
recommending TrinityCare and Cytta stock, Stem and First Resource were selling the shares
promoters had paid the company. Stem and First Resource did not disclose their sales to the
investors they solicited to buy the stock, a practice known as "scalping."
21. In June 2009, First Resource received 150,000 TrinityCare shares from a
promoter in exchange for promoting TrinityCare. From June 2009 to May 2010, while First
Resource's telemarketers were recommending TrinityCare stock
to potential investors, Stem and
6

First Resource sold approximately 92,000 of those shares, in approximately 84 different
transactions, for proceeds
of approximately $100,000.
22. For example, on October 5, 2009, a  First Resource telemarketer solicited an
investor to purchase 5,000 shares
of Trinity Care. On that same day, Stem sold 2,300 shares from
First Resource's brokerage account.
23. First Resource received 200,000 Cytta shares in December 2008 from another
promoter in exchange for promoting Cytta. Between December 2008 and April 2009, while First
Resource's telemarketers were recommending Cytta stock to potential investors, First Resource
sold 32,150
of those shares, in approximately 11 different transactions, for proceeds of
approximately $69,000.
24. For example, on April 17, 2009, a First Resource telemarketer solicited a
purchase
of 250 shares of Cytta stock at $2.23. On that same day, Stem sold 3,450 shares of
Cytta from First Resource's account.
25. First Resource, Stem, and the telemarketers did not disclose that First Resource
was selling TrinityCare
or Cytta shares while recommending the purchase of those stocks to
investors. Nor did the research reports First Resource and Stem disseminated about TrinityCare
and Cytta disclose that Stem and First Resource were selling their shares.
IV. Stern Manipulated the Markets For Trinity Care and Cytta Stock
26. From December 2008 through at least May 2010, First Resource and Stem
manipulated the markets for TrinityCare and Cytta stock to create the false appearance the
markets for the stocks were liquid and active to induce investors to buy the stocks. Stem and
First Resource also manipulated the markets in TrinityCare and Cytta stock to facilitate First
7

Resource's sales of its own TrinityCare and Cytta stock. Stern took advantage of the higher,
manipulated price and sold large amounts
of First Resource's shares.
27. To boost or support the stocks' price, Stern systematically submitted bids for
small amounts
of TrinityCare or Cytta stock at  prices higher than the stock's then-existing price.
On numerous occasions, Stern placed the daily high bid for the stock.
28. For example, on several days in February 2010, he made numerous purchases
of
small quantities of TrinityCare to bid up the price and to create the false impression of trading
activity to induce registered representatives
to purchase TrinityCare shares and allow him to sell
larger amounts
of the stock at a higher price. The following table summarizes Stern's
manipulative trading in TrinityCare in February 2010:
2/5/2010
100
at $1.00 2,000 at $0.55 - $1.00
7,100 $0.55
$1.00
2/8/2010
100
at $1.00 1,000 at $0.55 1,100 $0.55 $1.00
2/12/2010 100
at $1.00
1,900
at $0.65
2,000 $0.65 $1.00
2116/2010
100 at $0.95
4,900
at $0.65 5,000 $0.65
$1.00
2/19/2010
100
at $1.00 2,900 at $0.65
3,000 $0.65 $1.00
2/22/2010 100
at $1.00
2,900
at $0.65 3,000 $0.65
$1.00
2/23/2010 351
at $0.90 - $0.93
2,100
at $0.65 2,662 $0.65 $0.95
2/24/2010 119 at $0.70
2,719 $0.96
$0.96
2/26/2010
5,370
at $0.65 9,750 $0.98 $0.98
Tot. Purchases 1,070 Tot. Sales 23,070
29. Stern's manipulation continued. During the summer of 2009, this trading
increased TrinityCare's stock price from $1.55 a  share on June 17, 2009 to $1.95 on July
10,
2009. After the manipulation ended, TrinityCare's share price dropped to $0.41 a share.
30. Similarly, Stern made numerous purchases
of small quantities of Cytta stock to
drive up the stock's price and create the false impression
of trading activity to induce investors to
purchase Cytta shares. Stern then took advantage
of the manipulated price and sold larger
amounts
of First Resource's Cytta stock.
8

31. Stem's manipulation had a  significant effect on the market for Cytta' s  stock.
From December 2008 to April 2009, when Stem was manipulating the stock, Cytta's stock
traded around
$3 a  share. By the end of April 2009, when First Resource and Stem stopped
manipulating Cytta's stock (and First Resource's telemarketers stopped touting it), Cytta stock
became almost worthless. Cytta's stock price peaked in January 2009 at $3.25 per share, but
dropped to $0.04 per share in April 2009.
32. In a  number
of instances, Stem bought small amounts of Cytta stock at a  price
above the market price to boost or support the stock's price. Then, later that same day, Stem
took advantage
of the manipulated price and sold a much larger number of Cytta shares.
33. From December 2008 through at least May 2010, First Resource and Stem
profited
by more than $169,000 from sales of Trinity Care and Cytta shares Stem made while he
fraudulently touted these companies, scalped investors, and manipulated the markets in the two
stocks.
COUNT I
VIOLATIONS OF SECTION 17(8)(1) OF THE SECURITIES ACT
34. The Commission repeats and realleges paragraphs 1 through 33 of its Complaint.
35. From December 2008 through at least May 2010, First Resource and Stem
directly and indirectly,
by use of the means or instruments of transportation or communication in
interstate commerce and
by use of the mails, in the offer or sale of securities, as described in this
Complaint, knowingly or recklessly employed devices, schemes
or artifices to defraud.
36.
By reason of the foregoing, First Resource and Stem, directly or indirectly
violated, and, unless enjoined are reasonably likely to violate, Section 17(a)(I)
of the Securities
Act,
15 U.S.C. § 77q(a).
9

COUNT II
VIOLATIONS OF SECTIONS 17(a)(2) AND 17(a)(3)
OF THE SECURITIES ACT
37. The Commission repeats and realleges paragraphs 1 through 33 of its Complaint.
38. From December 2008 through at least May 2010, First Resource and Stem,
directly and indirectly,
by use of the means or instruments of transportation or communication in
interstate commerce and
by the use of the mails, in the offer or sale of securities: (a) obtained
money or property
by means of untrue statements of material facts and omissions to state
material facts necessary to make the statements made, in the light
of the circumstances under
which they were made, not misleading; or (b) engaged in transactions, practices and courses
of
business which operated as a fraud or deceit upon purchasers and prospective purchasers of such
securities.
39.
By reason of the foregoing, First Resource and Stem, directly or indirectly
violated, and, unless enjoined are reasonably likely to violate, Sections 17(a)(2) and 17(a)(3)
of
the Securities Act, 15 U.S.C. §§ 77q(a)(2) and 77q(a)(3).
COUNT
III
VIOLATIONS OF SECTION 10(b) AND RULE 10b-5
OF THE EXCHANGE ACT
40. The Commission repeats and realleges paragraphs 1 through 33 of its Complaint.
41. From December 2008 through at least May 2010, First Resource and Stem,
directly and indirectly,
by use of the means and instrumentality of interstate commerce, and of
the mails in connection with the purchase or sale of securities, knowingly or recklessly: (a)
employed devices, schemes or artifices to defraud; (b) made untrue statements
of material facts
and omitting to state material facts necessary in order to make the statements made, in the light
10

of the circumstances under which they were made, not misleading; or (c) engaged in acts,
practices and courses of business which operated as a fraud upon the purchasers of such
securities.
42.
By reason of the foregoing, First Resource and Stem, directly or indirectly
violated, and, unless enjoined are reasonable likely to violate Section 1
O(b) of the Exchange Act,
15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.IOb-5.
COUNT IV
VIOLATIONS
OF SECTION 15(a) OF THE EXCHANGE ACT
43. The Commission repeats and realleges Paragraphs 1 through 33 of this complaint.
From December 2008 through at least May 2010, First Resource and Stem, while acting as
or
associated with a broker or dealer, effected transactions in, or induced or attempted to induce the
purchase
or sale of, securities while they were not registered with the Commission as a broker or
dealer or when they were not associated with an entity registered with the Commission as a
broker-dealer.
44.
By reason of the foregoing, First Resource and Stem directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate, Section 15( a) of the
Exchange Act,
15 U.S.C. § 780(a).
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that the Court:
Declaratory Relief
Declare, determine and find the Defendants committed the violations of the federal
securities laws alleged in this Complaint.
11

Permanent Injunctive Relief
Issue a  Pennanent Injunction, restraining and enjoining First Resource and Stem, their
officers, agents, servants, employees, attorneys, and all persons in active concert or participation
with them, and each
of them, from violating Section 17(a) of the Securities Act and Sections
10(b) and 15(a)
of the Exchange Act and Exchange Act Rule 10b-5.
Disgorgement and Prejudgment Interest
Issue an Order requiring each Defendant to disgorge all ill-gotten gains, including
prejudgment interest, resulting from the acts or courses
of conduct alleged in this Complaint.
Civil Money Penalties
Issue an Order directing each Defendant to pay civil money penalties pursuant to Section
20(d)
of the Securities Act, 15 U.S.C. § 77t(d); and Section 21(d) of the Exchange Act, 15
U.S.C. § 78u( d).
Penny Stock Bar
Issue an Order pursuant to Section 20(g) of the Securities Act, 15 U.S.C. §  77t(g), and
Section 21(d)(6)
of the Exchange Act, 15 U.S.C. § 78u(d)(6), barring Defendant Stem from
participating in an offering
of penny stock, including engaging in activities with a broker, dealer,
or issuer for purposes
of issuing, trading, or inducing or attempting to induce the purchase or sale
of any penny stock.
Further Relief
Grant such other and further relief as may be necessary and appropriate.
Retention of Jurisdiction
Further, the Commission respectfully requests the Court retain jurisdiction over this
action in order to implement and carry out the tenns
of all orders and decrees that it may enter, or
12

to entertain any suitable application or motion by the Commission for additional relief within the
jurisdiction
of this Court.
Dated: January 26, 2012
By:
Respectfully submitted,
~
Edward D. McCutcheon
Senior Trial Counsel
Florida Bar No. 683841
Direct Dial: (305) 982-6380
E-mail: [email protected]
Attorney for Plaintiff
U.S.
Securities and Exchange Commission
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
Telephone: (305) 982-6300
Facsimile: (305) 536-4154
13

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

v. 

CASE NO.: 

FIRST RESOURCE GROUP LLC and 
DAVID H. STERN, 

Defendants. 

COMPLAINT 

Plaintiff Securities and Exchange Commission alleges as follows: 

INTRODUCTION 

1. From December 2008 through at least May 2010, First Resource Group LLC and 

its principal David H. Stem engaged in a scheme in which they fraudulently touted the stock of 

two thinly-traded microcap companies, sold each company's stock at the same time they were 

touting it, and manipulated the market for each stock. 

2. First Resource signed contracts with two stock promoters agreeing to solicit 

investors to buy stock of TrinityCare Senior Living, Inc. and Cytta Corporation. Pursuant to 

these contracts, First Resource received shares of each company's stock as compensation for 

soliciting investors. Stem and First Resource used telemarketers to contact investors. The 

investors solicited by the telemarketers were registered representatives at broker-dealers. While 

the First Resource telemarketers were recommending to these investors that they purchase 

Case 0:12-cv-60137-XXXX Document 1 Entered on FLSD Docket 01/26/2012 Page 1 of 13 



   

TrinityCare and Cytta stock, Stem was selling First Resource's shares of the two stocks. Neither 

Stem nor First Resources disclosed First Resource's stock sales to the investors being solicited. 

3. Further, Stem also manipulated the markets for TrinityCare and Cytta's stock. 

He purchased small amounts of each stock at prices above the market to raise the market price 

and create the false appearance of legitimate trading activity. The manipulation was designed to 

induce investors to purchase the stocks. Stem took advantage of the manipulated stock prices 

and sold large amounts of First Resource's holdings of the two stocks at the fraudulently 

elevated prices. Stem transferred the proceeds of these stock sales from First Resource's 

brokerage accounts to his personal account. 

4. Through their conduct, Stem and First Resource violated Section 17(a) of the 

Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a); Sections 10(b) and 15(a) of the 

Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78j(b) and 780(a); and Exchange 

Act Rule 10b-5, 17 C.F.R. § 240.1 Ob-5. Unless restrained and enjoined, the Defendants are 

reasonably likely to engage in future violations of the federal securities laws. 

DEFENDANTS 

5. First Resource is a Florida limited liability company Stem organized in 

September 2008. Its principal place of business is Fort Lauderdale, Florida. First Resource has 

never been registered with the Commission in any capacity and has not registered any offering of 

securities under the Securities Act, or registered a class of securities under the Exchange Act. 

Its business was promoting penny stocks. 

6. Stern, 48, resides in Tamarac, Florida. Stem was First Resource's sole manager 

during the relevant time period. Stem was not associated with a registered broker, or dealer 

during the relevant period. 

2 

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JURISDICTION AND VENUE 

7. This Court has jurisdiction over this action pursuant to Sections 20(b), 20( d), and 

22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d), and 77v(a); and Sections 21(d), 21(e), 

and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa. 

8. This Court has personal jurisdiction over the Defendants and venue is proper in 

the Southern District of Florida because the Defendants' acts, transactions, practices, and courses 

of conduct giving rise to the violations alleged in this Complaint occurred in the Southern 

District of Florida. In addition, First Resource's principal place of business during the relevant 

period was in the Southern District of Florida, and Stem resides in the Southern District of 

Florida. 

9. The Defendants, directly and indirectly, have made use of the means and 

instrumentalities of interstate commerce, the means and instruments of transportation and 

communication in interstate commerce, and the mails, in connection with the acts, transactions, 

practices, and courses of conduct set forth in this Complaint. 

FACTS 

I. Stern and First Resource Used Telemarketers to Cold Call Investors and Tout 
TrinityCare and Cytta Stock 

10. First Resource signed agreements to promote TrinityCare and Cytta's stock. 

Pursuant to these contracts, First Resource received 150,000 shares of TrinityCare stock and 

200,000 shares of Cytta stock. At the same time that First Resource tel emarketers , acting at 

Stem's direction, were recommending investors purchase TrinityCare and Cytta stock, Stem was 

selling First Resource's shares. Stem transferred the proceeds, approximately $169,000, from 

First Resource's brokerage accounts to his personal bank account. 

3 

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11. From December 2008 through at least May 2010, Stem and First Resource paid 

telemarketers to cold-call investors and solicit them to purchase shares of TrinityCare and Cytta 

stock, both penny stocks. 

12. First Resource's telemarketing operation was located at the company's only 

office, in Fort Lauderdale. Stem hired and trained First Resource's telemarketers. He gave the 

telemarketers information about TrinityCare and the telemarketers used that information to 

prepare sales scripts to pitch the stock to potential investors. Stem reviewed the draft scripts, 

made edits, and approved the scripts before the telemarketers were allowed to use them. Stem 

gave the telemarketers a computer database list of registered representatives at broker-dealers to 

cold call and pitch the stocks to. First Resource compensated its telemarketers with a small base 

salary plus 6% commissions on any stock investors they solicited purchased. 

13. Once an investor agreed to purchase one of the stocks, the telemarketer who 

solicited that investor gave Stem the investor's name, the brokerage firm where the investor's 

account was held, and the number of shares to be purchased. Stem monitored trading in 

TrinityCare and Cytta on his computer. After he verified a purchase by the solicited investor, 

First Resource paid the telemarketer the 6% sales commission. 

II. Stem and First Resource Recommended TrinityCare and Cytta Stock By Means of 
Material Misrepresentations to Investors 

TrinityCare 

14. From June 2009 through at least May 2010, First Resource's telemarketers made 

material misrepresentations about TrinityCare's rapid revenue growth and a projected increase in 

the company's stock price. When they solicited investors, First Resource telemarketers' claimed 

TrinityCare stock "is going to be $5-7 in 6-12 months" and the company "is going to be a half-a-

billion dollar company in five years or roughly a $40 stock." Stem directed the telemarketers to 

4 

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make these claims - which appeared in the sales scripts Stem helped to create - to potential 

investors verbatim. In addition to the telemarketers' misrepresentations, Stem disseminated a 

research report on TrinityCare stating that, for the year ending December 31, 2009, TrinityCare 

would show a profit on revenues exceeding $7.2 million. First Resource's telemarketers and the 

research report also claimed TrinityCare expected to add at least four newly constructed senior 

living facilities. Tel em arketers, scripts falsely stated TrinityCare had secured $50 million in 

financing commitments to construct these new facilities and that the financing was "90% backed 

by HUD," the u.S. Department of Housing and Urban Development. 

15. However, as Stem and First Resource knew, were severely reckless in not 

knowing, or should have known, there was no reasonable basis for any of these claims. Stem 

knew, was severely reckless in not knowing, or should have known, that TrinityCare had lost 

money for the previous two years and had no realistic prospects of revenues. Stem knew, was 

severely reckless in not knowing, or should have known, that TrinityCare had not obtained 

financing for the new senior living facilities, which were the source of the company's projected 

revenue growth. Stem also knew, was severely reckless in not knowing, or should have known, 

that TrinityCare was only at the "pre-application" stage to obtain Hun financing for the new 

facilities. Because of the company's poor business prospects, and because during the relevant 

time period TrinityCare's stock traded at between $0.41 and $1.95, First Resource and Stem had 

no reasonable basis to project the stock price would grow to between $5 and $7 a share in the 

following year. 

16. In addition, Stem was manipulating the market for, and selling First Resource's 

holdings of TrinityCare stock for his personal financial benefit, while First Resource 

telemarketers, with his knowledge, were making these misrepresentations to investors. 

5 

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17. First Resource and Stem also made material misrepresentations regarding Cytta's 

projected sales figures when they touted its stock from December 2008 through April 2009. 

Stem disseminated to investors a research report on Cytta touting Cytta's "[s]ales projections for 

2010-2014 should exceed $500 million with a pre-tax net of over $400 million." 

18. However, these statements were false because, as Stem and First Resource knew, 

were severely reckless in not knowing, or should have known, the company had had no profits 

since its inception in 1997. Further, in the year ended December 31, 2008, Cytta had revenues of 

only $35,000 and net losses of$70,000. Moreover, according to its Form 10-Q filed on February 

23, 2009, the company's auditors' expressed doubts the company could continue as a going 

concern. 

19. In addition, Stem was manipulating the market for, and selling First Resource's 

holdings of Cytta stock for his personal financial benefit, while he and First Resource were 

making these misrepresentations to investors. 

III. Stern and First Resource Scalped Investors To Whom They Recommended 
TrinityCare and Cytta Stocks 

20. At the same time First Resource, Stem and First Resource's telemarketers were 

recommending TrinityCare and Cytta stock, Stem and First Resource were selling the shares 

promoters had paid the company. Stem and First Resource did not disclose their sales to the 

investors they solicited to buy the stock, a practice known as "scalping." 

21. In June 2009, First Resource received 150,000 TrinityCare shares from a 

promoter in exchange for promoting TrinityCare. From June 2009 to May 2010, while First 

Resource's telemarketers were recommending TrinityCare stock to potential investors, Stem and 

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First Resource sold approximately 92,000 of those shares, in approximately 84 different 

transactions, for proceeds of approximately $100,000. 

22. For example, on October 5, 2009, a First Resource telemarketer solicited an 

investor to purchase 5,000 shares of Trinity Care. On that same day, Stem sold 2,300 shares from 

First Resource's brokerage account. 

23. First Resource received 200,000 Cytta shares in December 2008 from another 

promoter in exchange for promoting Cytta. Between December 2008 and April 2009, while First 

Resource's telemarketers were recommending Cytta stock to potential investors, First Resource 

sold 32,150 of those shares, in approximately 11 different transactions, for proceeds of 

approximately $69,000. 

24. For example, on April 17, 2009, a First Resource telemarketer solicited a 

purchase of 250 shares of Cytta stock at $2.23. On that same day, Stem sold 3,450 shares of 

Cytta from First Resource's account. 

25. First Resource, Stem, and the telemarketers did not disclose that First Resource 

was selling TrinityCare or Cytta shares while recommending the purchase of those stocks to 

investors. Nor did the research reports First Resource and Stem disseminated about TrinityCare 

and Cytta disclose that Stem and First Resource were selling their shares. 

IV. Stern Manipulated the Markets For Trinity Care and Cytta Stock 

26. From December 2008 through at least May 2010, First Resource and Stem 

manipulated the markets for TrinityCare and Cytta stock to create the false appearance the 

markets for the stocks were liquid and active to induce investors to buy the stocks. Stem and 

First Resource also manipulated the markets in TrinityCare and Cytta stock to facilitate First 

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Resource's sales of its own TrinityCare and Cytta stock. Stern took advantage of the higher, 

manipulated price and sold large amounts of First Resource's shares. 

27. To boost or support the stocks' price, Stern systematically submitted bids for 

small amounts of TrinityCare or Cytta stock at prices higher than the stock's then-existing price. 

On numerous occasions, Stern placed the daily high bid for the stock. 

28. For example, on several days in February 2010, he made numerous purchases of 

small quantities of TrinityCare to bid up the price and to create the false impression of trading 

activity to induce registered representatives to purchase TrinityCare shares and allow him to sell 

larger amounts of the stock at a higher price. The following table summarizes Stern's 

manipulative trading in TrinityCare in February 2010: 

2/5/2010 100 at $1.00 2,000 at $0.55 - $1.00 7,100 $0.55 $1.00 
2/8/2010 100 at $1.00 1,000 at $0.55 1,100 $0.55 $1.00 

2/12/2010 100 at $1.00 1,900 at $0.65 2,000 $0.65 $1.00 
2116/2010 100 at $0.95 4,900 at $0.65 5,000 $0.65 $1.00 
2/19/2010 100 at $1.00 2,900 at $0.65 3,000 $0.65 $1.00 
2/22/2010 100 at $1.00 2,900 at $0.65 3,000 $0.65 $1.00 
2/23/2010 351 at $0.90 - $0.93 2,100 at $0.65 2,662 $0.65 $0.95 
2/24/2010 119 at $0.70 2,719 $0.96 $0.96 
2/26/2010 5,370 at $0.65 9,750 $0.98 $0.98 

Tot. Purchases 1,070 Tot. Sales 23,070 

29. Stern's manipulation continued. During the summer of 2009, this trading 

increased TrinityCare's stock price from $1.55 a share on June 17, 2009 to $1.95 on July 10, 

2009. After the manipulation ended, TrinityCare's share price dropped to $0.41 a share. 

30. Similarly, Stern made numerous purchases of small quantities of Cytta stock to 

drive up the stock's price and create the false impression of trading activity to induce investors to 

purchase Cytta shares. Stern then took advantage of the manipulated price and sold larger 

amounts of First Resource's Cytta stock. 

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31. Stem's manipulation had a significant effect on the market for Cytta' s stock. 

From December 2008 to April 2009, when Stem was manipulating the stock, Cytta's stock 

traded around $3 a share. By the end of April 2009, when First Resource and Stem stopped 

manipulating Cytta's stock (and First Resource's telemarketers stopped touting it), Cytta stock 

became almost worthless. Cytta's stock price peaked in January 2009 at $3.25 per share, but 

dropped to $0.04 per share in April 2009. 

32. In a number of instances, Stem bought small amounts of Cytta stock at a price 

above the market price to boost or support the stock's price. Then, later that same day, Stem 

took advantage of the manipulated price and sold a much larger number of Cytta shares. 

33. From December 2008 through at least May 2010, First Resource and Stem 

profited by more than $169,000 from sales of Trinity Care and Cytta shares Stem made while he 

fraudulently touted these companies, scalped investors, and manipulated the markets in the two 

stocks. 

COUNT I 

VIOLATIONS OF SECTION 17(8)(1) OF THE SECURITIES ACT 

34. The Commission repeats and realleges paragraphs 1 through 33 of its Complaint. 

35. From December 2008 through at least May 2010, First Resource and Stem 

directly and indirectly, by use of the means or instruments of transportation or communication in 

interstate commerce and by use of the mails, in the offer or sale of securities, as described in this 

Complaint, knowingly or recklessly employed devices, schemes or artifices to defraud. 

36. By reason of the foregoing, First Resource and Stem, directly or indirectly 

violated, and, unless enjoined are reasonably likely to violate, Section 17(a)(I) of the Securities 

Act, 15 U.S.C. § 77q(a). 

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COUNT II 

VIOLATIONS OF SECTIONS 17(a)(2) AND 17(a)(3) 
OF THE SECURITIES ACT 

37. The Commission repeats and realleges paragraphs 1 through 33 of its Complaint. 

38. From December 2008 through at least May 2010, First Resource and Stem, 

directly and indirectly, by use of the means or instruments of transportation or communication in 

interstate commerce and by the use of the mails, in the offer or sale of securities: (a) obtained 

money or property by means of untrue statements of material facts and omissions to state 

material facts necessary to make the statements made, in the light of the circumstances under 

which they were made, not misleading; or (b) engaged in transactions, practices and courses of 

business which operated as a fraud or deceit upon purchasers and prospective purchasers of such 

securities. 

39. By reason of the foregoing, First Resource and Stem, directly or indirectly 

violated, and, unless enjoined are reasonably likely to violate, Sections 17(a)(2) and 17(a)(3) of 

the Securities Act, 15 U.S.C. §§ 77q(a)(2) and 77q(a)(3). 

COUNT III 

VIOLATIONS OF SECTION 10(b) AND RULE 10b-5 
OF THE EXCHANGE ACT 

40. The Commission repeats and realleges paragraphs 1 through 33 of its Complaint. 

41. From December 2008 through at least May 2010, First Resource and Stem, 

directly and indirectly, by use of the means and instrumentality of interstate commerce, and of 

the mails in connection with the purchase or sale of securities, knowingly or recklessly: (a) 

employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts 

and omitting to state material facts necessary in order to make the statements made, in the light 

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of the circumstances under which they were made, not misleading; or (c) engaged in acts, 

practices and courses of business which operated as a fraud upon the purchasers of such 

securities. 

42. By reason of the foregoing, First Resource and Stem, directly or indirectly 

violated, and, unless enjoined are reasonable likely to violate Section 1 O(b) of the Exchange Act, 

15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.IOb-5. 

COUNT IV 

VIOLATIONS OF SECTION 15(a) OF THE EXCHANGE ACT 

43. The Commission repeats and realleges Paragraphs 1 through 33 of this complaint. 

From December 2008 through at least May 2010, First Resource and Stem, while acting as or 

associated with a broker or dealer, effected transactions in, or induced or attempted to induce the 

purchase or sale of, securities while they were not registered with the Commission as a broker or 

dealer or when they were not associated with an entity registered with the Commission as a 

broker-dealer. 

44. By reason of the foregoing, First Resource and Stem directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section 15( a) of the 

Exchange Act, 15 U.S.C. § 780(a). 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that the Court: 

Declaratory Relief 

Declare, determine and find the Defendants committed the violations of the federal 

securities laws alleged in this Complaint. 

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Permanent Injunctive Relief 

Issue a Pennanent Injunction, restraining and enjoining First Resource and Stem, their 

officers, agents, servants, employees, attorneys, and all persons in active concert or participation 

with them, and each of them, from violating Section 17(a) of the Securities Act and Sections 

10(b) and 15(a) of the Exchange Act and Exchange Act Rule 10b-5. 

Disgorgement and Prejudgment Interest 

Issue an Order requiring each Defendant to disgorge all ill-gotten gains, including 

prejudgment interest, resulting from the acts or courses of conduct alleged in this Complaint. 

Civil Money Penalties 

Issue an Order directing each Defendant to pay civil money penalties pursuant to Section 

20(d) of the Securities Act, 15 U.S.C. § 77t(d); and Section 21(d) of the Exchange Act, 15 

U.S.C. § 78u( d). 

Penny Stock Bar 

Issue an Order pursuant to Section 20(g) of the Securities Act, 15 U.S.C. § 77t(g), and 

Section 21(d)(6) of the Exchange Act, 15 U.S.C. § 78u(d)(6), barring Defendant Stem from 

participating in an offering of penny stock, including engaging in activities with a broker, dealer, 

or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale 

of any penny stock. 

Further Relief 

Grant such other and further relief as may be necessary and appropriate. 

Retention of Jurisdiction 

Further, the Commission respectfully requests the Court retain jurisdiction over this 

action in order to implement and carry out the tenns of all orders and decrees that it may enter, or 

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to entertain any suitable application or motion by the Commission for additional relief within the 

jurisdiction of this Court. 

Dated: January 26, 2012 

By: 

Respectfully submitted, 

~ 
Edward D. McCutcheon 
Senior Trial Counsel 
Florida Bar No. 683841 
Direct Dial: (305) 982-6380 
E-mail: [email protected] 

Attorney for Plaintiff 
U.S. Securities and Exchange Commission 
801 Brickell Avenue, Suite 1800 
Miami, Florida 33131 
Telephone: (305) 982-6300 
Facsimile: (305) 536-4154 

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