NASD

RESPONDENT FAILED TO COMPLY WITH AN ARBITRATION AWARD OR SETTLEMENT AGREEMENT OR TO SATISFACTORILY RESPOND TO AN NASD REQUEST TO PROVIDE INFORMATION CONCERNING THE STATUS OF COMPLIANCE.

Other

Suspension

PURSUANT TO ARTICLE VI, SECTION 3 OF NASD BY-LAWS, AND NASD RULE 9510 SERIES, RESPONDENT'S NASD REGISTRATION IS SUSPENDED AUGUST 3, 2006 FOR FAILING TO COMPLY WITH AN ARBITRATION AWARD OR SETTLEMENT AGREEMENT IN ARBITRATION CASE# 05-01050 OR TO SATISFACTORILY RESPOND TO AN NASD REQUEST TO PROVIDE INFORMATION CONCERNING THE STATUS OF COMPLIANCE.

NASD

RESPONDENT FAILED TO COMPLY WITH AN ARBITRATION AWARD OR SETTLEMENT AGREEMENT OR TO SATISFACTORILY RESPOND TO AN NASD REQUEST TO PROVIDE INFORMATION CONCERNING THE STATUS OF COMPLIANCE.

Other

Suspension

PURSUANT TO ARTICLE VI, SECTION 3 OF NASD BY-LAWS, AND NASD RULE 9510, RESPONDENT'S NASD REGISTRATION IS SUSPENDED DECEMBER 8, 2005 FOR FAILING TO COMPLY WITH AN ARBITRATION AWARD OR SETTLEMENT AGREEMENT IN ARBITRATION CASE #04-03324 OR TO SATISFACTORILY RESPOND TO AN NASD REQUEST TO PROVIDE INFORMATION CONCERNING THE STATUS OF COMPLIANCE.

NASD

NASD CONDUCT RULES 2110, IM-1000-1, NASD BY-LAWS ARTICLE V, SEC. 2 AND NASD PROCEDURAL RULE 8210-RESPONDENT DID NOT AMEND OR CAUSE TO BE AMENDED HIS FORM U4 TO REFLECT THAT TWO INVESTMENT-RELATED LAWSUITS HAD BEEN FILED OR WERE PENDING. RESPONDENT ALSO REFUSED TO APPEAR FOR TESTIMONY AND FAILED TO RESPOND TO REQUESTS FOR INFORMATION.

Decision

Bar

DEFAULT DECISION RENDERED DECEMBER 29,2005 WHEREIN RESPONDENT IS BARRED FROM ASSOCIATION WITH ANY NASD MEMBER IN ANY CAPACITY. DECISION IS FINAL JANUARY 26, 2006.

MISREPRESENTATIONS, BREACH OF FIDUCIARY DUTY, BREACH OF CONTRACT, SUITABILITY, NEGLIGENCE.

$556,396.63

CLIENTS INVESTED THE PRIVATE PLACEMENT WITH THE HOPES OF MAKING GOOD RETURNS ON THEIR INVESTMENT TO OFFSET SOME MARKET LOSSES AT THE TIME. THE INVESTMENT HAS NOT PERFORMED AS THEY HAD HOPED AND NOW ARE ALLEGING UNSUITABILITY. CUSTOMER HELD THAT HE WAS AN ACCREDITED INVESTOR AND RETIRED HISTORY PROFESSOR WHO UNDERSTOOD THE RISKS OF THE INVESTMENT AND NON-LIQUID NATURE OF THE INVESTMENT.

1.FRAUD SALE OF SECURITIES (STOCK)- 14 COUNTS, ALL FELONIES, PLED NO CONTEST, FOUND GUILTY BY COURT 2. SECURING WRITINGS BY DECEPTION (STOCK), 18 COUNTS, ALL FELONIES, PLED NO CONTEST, FOUND GUILTY BY THE COURTS

FELONY

CONVICTED ON 10/24/2006 ON ALL COUNTS AND SENTECED TO 4 YEARS AND $2,347,350 RESTITUTION AND HAS PAID $700,000 TOWARDS RESTITUTION.

OHIO DIVISION OF SECURITIES

IT WAS ALLEGED THAT PEARSON SOLD BRUNDYN SERIES A PREFERRED STOCK TO OHIO INVESTORS WITHOUT DISCLOSING THE STOCK INVOLVED A HIGH DEGREE OF RISK IN VIOLATION OF ORC SECTION 1707.44(G) AND ALSO SOLD STOCK TO CUSTOMERS FOR WHICH THE STOCK WAS NOT SUITABLE.

Order

Cease and Desist/Injunction

NA

NA

INDIANA SECURITIES DIVISION

PEARSON FAILED TO PROVIDE A PROPERLY PREPARED PROSPECTUS TO SELKE. PEARSON CAUSED THOMAS TO PURCHASE FSI THROUGH THE USE OF HIGH-PRESSURE SALES PRACTICES. FSI WAS AN UNSUITABLE INVESTMENT FOR SELKE, CAUSING PEARSON TO VIOLATE IND. ADMIN. CODE. PEARSON RECOMMENDED SELKE SELL ANNUITIES TO PURCHASE FSI, AND THE SELL RECOMMENDATIONS WERE UNSUITABLE, CAUSING PEARSON TO VIOLATE IND. ADMIN. CODE. PEARSON MADE GUARANTEES OF FSI'S DIVIDEND PAYMENT TO SELKE AND THOMAS, IN VIOLATION OF IND. ADMIN. CODE. PEARSON MADE GUARANTEES OF FSI'S FUTURE STOCK PRICE AND PROMISED TO REPURCHASE SHARES, IN VIOLATION OF IND. ADMIN. CODE. FSI WAS AN UNSUITABLE INVESTMENT FOR THOMAS, CAUSING PEARSON TO VIOLATE. PEARSON FAILED TO DISCLOSE TO SELKE AND THOMAS THAT FSI WAS A SVETE-CONTROLLED ENTITY. PEARSON FAILED TO DISCLOSE THE CONFLICTS INHERENT IN A.CH., A SVETE-OWNED COMPANY, SELLING FSI, SVETE-ISSUED SECURITIES. THESE WERE MATERIAL FACTS OMITTED IN VIOLATION OF IND. CODE. PEARSON MADE FALSE PROMISES ABOUT THE EXPECTED RETURN OF FSI, COMMITTING FRAUD BY MISREPRESENTING MATERIAL FACTS, IN VIOLATION OF IND. CODE. PEARSON MISREPRESENTED THE RISKS OF FSI TO SELKE AND THOMAS, COMMITTING FRAUD BY MISREPRESENTING MATERIAL FACTS, IN VIOLATION OF IND. CODE. FSI WAS A FRAUD, CONSISTING OF NO REAL INVESTMENT ACTIVITY AND NO BENEFICIAL USE OF INVESTOR ASSETS. FSI CONVERTED INVESTOR ASSETS TO NON-INVESTMENT USE IN ONE OF SVETE'S MULTITUDINOUS COMPANIES AND FOR HIS PERSONAL GAIN. PEARSON PARTICIPATED IN THE FRAUD BY SELLING THE FRAUDULENT INVESTMENT TO SELKE AND THOMAS, WITHOUT INFORMING SELKE AND THOMAS OF THE RISKS OF THE INVESTMENT. PEARSON FURTHER COMMITTED FRAUD BY REASSURING SELKE AND THOMAS, BETWEEN INVESTMENT DATE AND 2004, THAT FSI/BRUNDYN WAS A VIABLE INVESTMENT WHEN, IN FACT, FSI/BRUNDYN WAS INCAPABLE OF PAYING INVESTORS. FOLLOWING THE EXPIRATION OF PEARSON'S INDIANA SECURITIES REGISTRATION, PEARSON CONTINUED TO OFFER AND SELL SECURITIES IN INDIANA.

Order

Monetary/Fine

$240,000.00

Revocation/Expulsion/Denial

Disgorgement/Restitution

Cease and Desist/Injunction

Bar

AS OF 11/12/04, PEARSON IS FULLY AND PERMANENTLY BARRED FROM ANY INVOLVEMENT IN THE SECURITIES INDUSTRY IN INDIANA TO THE FULL EXTENT OF THE COMMISSIONER'S POWER AND THE INDIANA SECURITIES ACT.

UNSUITABILITY, MISREPRESENTATION, NEGLIGENCE, BREACH OF FIDUCIARY DUTY, BREACH OF CONTRACT

$135,279.21