Lines Overseas Management yesterday declared "entirely false" allegations by the US Securities and Exchange Commission that it had destroyed phone records related to a regulatory probe into alleged securities fraud.

The SEC made the accusation in a Status Report to the US District Court for the District of Columbia yesterday ? almost a year after a Magistrate Judge ordered LOM and its managing director Scott Lines to comply with subpoenas for information in respect of the SEC's investigation of alleged securities fraud involving Sedona Software Solutions Inc., SHEP Technologies Inc and HiEnergy Technologies Inc.

The Bermuda parties objected to that order last February and are still awaiting the ruling of the District Court Judge assigned to review the case. LOM and the Lines family deny any wrongdoing.

Yesterday, the SEC reported to the US District Court that it still has not received the "most relevant information concerning Scott Lines' involvement in the market manipulation schemes" involving Sedona Software Solutions and SHEP Technologies Inc.

It also said significant developments came to light last week underscoring the need for the District Court to rule on the enforcement of the SEC subpoenas.

The SEC filing pointed to an April 2005 meeting of LOM's Audit Committee in which it said "a member of that committee disclosed to LOM's auditor the substance of LOM's tape-recorded telephone conversations involving Brian Lines' role in the Sedona matter, but then told the auditor that LOM had destroyed all Sedona-related tape recordings, as well as all other tape recordings of telephone conversations."

"We are deeply concerned that LOM may have destroyed evidence that was subject to the Sedona Subpoenas during the pendency of this action.

"Moreover, it further underscores the need for an order of this Court to enforce the Sedona Subpoenas to prevent any further destruction of evidence relevant to the SEC's investigation," the SEC said.

A LOM spokesman said yesterday that LOM and its counsel view certain allegations in the SEC report as "inflammatory and factually incorrect".

LOM's counsel plans to file a response to the SEC's report in which they "look forward to demonstrating the inaccuracies".

"No Sedona-related phone records (or any Sedona-related records) have been destroyed.

"The SEC's allegation to the contrary is entirely false," LOM said in a statement.

The SEC also reported that LOM had refused to comply with requests for information related to the Bermuda Monetary Authority's probe of LOM's its alleged role in the Sedona market manipulation. The SEC said these documents include tapes of interviews with Scott and Brian Lines, a copy of the BMA's inspector's report provided to LOM and copies of any notices that LOM received regarding the BMA's intent to take regulatory action against LOM or any individual as a result of the BMA's investigation. asked whether LOM had received any such notices regarding BMA regulatory action. LOM did not respond. The BMA said that it was in the midst of reviewing the SEC filing and was not able to offer a comment yesterday.

SEC lawyers said in their report that information from the BMA's investigation has taken on greater significance due to recent developments that LOM has "failed to disclose to its investors or to this Court".

In a previous court filing LOM stated that the BMA completed its investigation in 2003 and had not taken action to date.

"LOM thus created the impression that the BMA had found no basis upon which to take action against LOM for violations of Bermudan law or for other regulatory lapses. In fact, on December 2, 2005, LOM reached a resolution with the BMA related to the BMA's Sedona investigation into LOM's conduct. As part of that resolution, LOM demanded that the terms of the resolution be kept confidential from the SEC, the investing public and consequently the courts," the SEC said.

Although the BMA is the independent regulator for the Island, also asked Finance Minister Paula Cox yesterday whether her ministry was concerned about how the SEC's accusations against this publicly traded, Bermuda-based company might reflect on the Island's regulatory scheme. We also asked whether Government was doing anything to help settle the matter.

Ms Cox responded that Government had enhanced Bermuda's regulatory and legislative framework to provide the independent regulator with the necessary powers to carry out effective regulation and supervision, request information and where necessary compel production of information which it may share with another regulator.

"In the recent case, the Authority has carried out a full and thorough investigation of a licensed provider and has taken the necessary actions to ensure that investors are protected and that the investment provider will be operating in a prudent manner," she said adding that while it is not the Minister's role to intervene into individual cases, the Ministry must be ever mindful of the impact on the investment community and individual investors.