Bermuda's largest independent financial services firm is facing an investigation by the Securities and Exchange Commission (SEC) for alleged securities fraud involving millions of dollars.

Bermuda-based Lines Overseas Management (LOM) Ltd. and its principal officers, Scott and Brian Lines, are being investigated for alleged securities fraud in the United States.

A 102-page court filing states that investigations are being conducted into possible fraud, market manipulation, and reporting violations in the securities of three United States public companies: Sedona Software Solutions, Inc.; SHEP Technologies, Inc.; and HiEnergy Technologies.

LOM managing director Scott Lines was stopped at Miami International Airport in Florida by SEC staff who issued investigative subpoenas on April 20, 2004.

In the subpoenas the SEC staff requested that Scott Lines and LOM provide testimony, and that they produce documents relating to trading in HiEnergy, Sedona, and SHEP securities for the period of January 1, 2002 through to the present. Mr. Lines and LOM's records custodian were also required to appear for testimony in Washington, D.C. on May 4 and 5, 2004.

As of June 9, 2004, Mr. Lines and LOM had not complied with the subpoenas "in every respect", according to the court filing.

"Neither LOM nor Mr. Lines has produced the required documents nor have Mr. Lines or LOM appeared for testimony.

In fact, counsel for Scott Lines has notified the staff that Mr. Lines will not appear for testimony as required by the subpoenas."

The SEC is now asking the United States District Court for the District of Columbia to enter an order to show why Mr. Lines and LOM, who are represented by legal firm Conyers, Dill and Pearman, have not complied with the subpoenas and direct them to do so.

The investigation began with Sedona in January of 2003, when staff of the SEC Enforcement Division were authorised to investigate whether anti-fraud provisions of the federal securities laws were or are being violated by any persons or entities in connection with the offer, sale and/or purchase of securities in Sedona.

During the course of that investigation, SEC staff identified apparent fraud, market manipulation, and reporting violations in the securities of SHEP, involving some of the same actors from the Sedona investigation including the Lines brothers and LOM.

In April of 2003, SEC staff were also authorised to investigate HiEnergy. "During the course of the Sedona and HiEnergy investigations the staff has developed facts which indicate that significant trading in the securities of each of these three US registrants occurred on US markets through accounts at LOM which used its own accounts at US firms and its depository and clearing agreements with US firms to execute the trades for the benefit of LOM customers and Brian and Scott Lines personally," the court filing stated.

LOM representatives contacted The Royal Gazette to say they would send out a Press release by 5 p.m. yesterday, but at Press time nothing had been received from the company.

LOM was formed in 1992 and has offices in Bermuda, Grand Bahama and Grand Cayman.