NASDAQ Market-Issuer Escala Consents to Final Judgment in Accounting and Disclosure Fraud Case

Holding:

Without admitting or denying the allegations in the complaint filed by the Securities and Exchange Commission (“SEC”), Escala Group, Inc. (“Escala”) consented to a permanent injunction against future violations of anti-fraud and reporting provisions of federal securities laws, specifically the Securities Exchange Act of 1934 (“Exchange Act”) and its implementing rules. The SEC filed the disclosure and accounting fraud case against then-NASDAQ national market issuer Escala; its founder and former chief executive officer Gregory Manning, 62; and its former chief financial officer Larry Lee Crawford, 60, alleging fraudulent related party transactions between Escala and its parent company, Afinsa Bienes Tangibles, S.A. ("Afinsa"). Escala is a network of companies in the collectibles market specializing in stamps, among other things. Afinsa was a privately held Spanish company that sold investments in portfolios of stamps in Europe. According to the complaint, the fraudulent related-party transactions ceased after May 2006, when Spanish authorities raided Afinsa's offices and charged Afinsa and certain individuals with engaging in a massive unlawful pyramid scheme.

Detailed Summary:

The SEC complaint alleged a fraudulent business scheme based upon the secret and dramatic manipulation of collectible stamp values, in which Escala, Manning, and Crawford violated the antifraud and reporting provisions of the federal securities laws by:

1.      failing to disclose the related party status of Barrett & Worthen, Inc., resulting in control of the Brookman Catalogue, and failing to disclose the revenues obtained by virtue of Afinsa and Manning’s control of the prices in the Brookman Catalogue;

2.      falsely representing that Escala sold Afinsa several large stamp archives at prices determined by reference to independent stamp…

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