SEC alleges Vegas firm deceived investors

Wednesday, June 13, 2001 | 10:59 a.m.

The Securities and Exchange Commission is accusing a small Las Vegas building materials company of violations of federal securities laws.

The SEC filed the complaint against World Homes Inc., its CEO, Merle Ferguson, and Susan Donohue, secretary and treasurer of the company, in Nevada federal court last week. The complaint alleges violations of the federal Securities Act and Exchange Act and seeks an injunction against the company and unspecified fines.

World Homes holds a patent on "Z Mix," a building material similar to cement made of clay, pulverized soft rock and shredded tires. The company markets the lightweight material as a method for reducing the time and cost of building houses.

World Homes stock fell nearly 20 percent after the company issued a statement disclosing the SEC complaint. It traded at 88 cents by midday, down 21 cents.

The SEC accused World Homes and Ferguson of issuing "several false and misleading press releases" from January 2000 through February 2001. The false claims, the SEC said, include: claims that World Homes operated a production facility for Z Mix; that World Homes had obtained $15 million in loan financing; and that World Homes had generated more than $480 million in contracted business. The SEC said these claims caused run-ups in the value of World Homes' stock, which trades over-the-counter.

The SEC also accused Ferguson and Donohue of engaging in improper stock sales. From July 1999 to February 20, the SEC said, World Homes registered 4.9 million shares of stock with a maximum value of $3.78 million. Many of these shares were issued to Ferguson and Donohue -- but were given to the two to raise money for the company, not to compensate them, the SEC claims.

The SEC said the two resold the shares and remitted most of the proceeds to the company, but failed to file registration statements detailing the stock sales with the SEC.

In its statement, World Homes stopped short of denying the SEC charges.

"World Homes is fully and actively cooperating with the SEC regarding this matter," Ferguson said in a statement. "The company believes that we have instituted policies and procedures which will guarantee complete compliance with the Federal securities law."

"World Homes remains totally committed to the marketing and selling of our Z Mix product and will continue to devote all of our energies and resources toward that goal," Ferguson said.