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The SEC is accusing Jasper Knabb, the former chief executive officer of Pegasus Wireless Corp., and Stephen Durland, its current top executive, of making more than $30 million through the illegal sales and using the proceeds to buy cars, homes and boats.
The SEC also says that Tammy Knabb, Knabb's wife at the time, improperly enriched herself as a result of the transactions. She owns several pieces of property in Horry County, according to county records, including some in Little River.
Durland lives in West Palm Beach, Fla., and Jasper Knabb lives in Anchorage, Alaska. It was not clear whether the Knabbs were still married.
Attorneys for the Knabbs and Durland either declined to comment or couldn't be reached Wednesday.
The SEC is seeking to recover the earnings from the Knabbs and Durland, which could be used to pay back investors, said Bob Leach, an attorney for the SEC. It is also asking for Durland and Knabb to be barred from serving as officers of any public company.
According to the lawsuit, Durland and Knabb issued hundreds of millions of shares to friends and family, who then dumped the shares on the open market and funneled millions of dollars to the two executives. The stock price was diluted in the process.
The SEC alleges that Knabb and Durland failed to report these transactions as required and falsely claimed in its filings that much of the stock was issued to satisfy a phony business debt.
Among the intermediaries were some of Knabb's relatives and an entity managed by Knabb's personal pilot, the lawsuit says. It also lists Herman Jones, a member of the Horry-Georgetown Technical College Commission and owner of Captain Benjamin's Calabash Seafood in Myrtle Beach.
On Wednesday, Jones, who is not listed as a defendant in the case, said he did not think he did anything improper. He also said he lost money on the company, which filed for bankruptcy twice in 2008, though both cases were dismissed.
"I was under the impression and feeling that whatever I did was proper and fair and legal," he said. "But that's as much as I know to tell you."
Among the investors was Rep. Liston Barfield, R-Aynor, according to the bankruptcy documents.
According to the SEC's lawsuit, Knabb and Durland merged Pegasus, which existed only on paper after several failed ventures, with OTC Wireless, which designed wireless networking devices, in 2005.
They then publicized several acquisitions through news releases, and stock prices rose as high as $18.69. Today they are trading for under a penny, the lawsuit says, largely as a result of news articles questioning the company's valuation and reports that Durland and Knabb headed other companies whose stock rose and fell in short periods of time.
The company announced in 2007 that it was closing its Fremont, Calif., facility and was moving its headquarters to the Bahamas, the lawsuit says. By July 2007, the company had ceased operations and terminated most employees. It maintains a mailing address in Palm Beach, Fla.
Contact MIKE CHERNEY at 444-1765.
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