SEC v. Escala Group, Inc.; Gregory Manning; and Larry Lee Crawford, CPA, No. LR-20965, Southern District of New York (Mar. 23, 2009) — Press Release

U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20965 / March 23, 2009 Accounting and Auditing Enforcement Release No. 3031 / March 23, 2009 Securities and Exchange Commission v. Escala Group, Inc., Gregory Manning, and Larry Lee Crawford, CPA, Civil Action No. 09 CV 2646 (DLC) (S.D.N.Y., March 23, 2009) SEC Charges Escala Group, Inc., its Former CEO and CFO with Disclosure and Accounting Fraud Concerning Related Party Transactions with Parent Company Afinsa Escala enters into a proposed simultaneous settlement The Securities and Exchange Commission today filed a disclosure and accounting fraud case against then-NASDAQ National Market issuer Escala Group, Inc.; its founder and former CEO Gregory Manning, 62; and its former CFO 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. The SEC complaint alleges 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: 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; falsely representing that Escala sold Afinsa several large stamp archives at prices determined by reference to independent stamp catalogues and appraisals when in fact Manning set the catalogue prices and influenced and edited the appraisals; and falsely reporting a payment for business combination-related expenses as the "sale" of certain antiques. The complaint alleges that Escala and Manning also violated the antifraud provisions by selling back to Afinsa in a round-trip transaction inventory acquired from Afinsa in direct contravention of Escala's public promise not to do so. The complaint alleges that these false and misleading disclosures and omissions were material in that the related-party transactions contributed over $80 million to Escala's revenues and allowed Escala to meet its forecasts for either revenue or pre-tax net income for the third quarter and for year-end of fiscal year 2004, and for the first quarter and year-end in fiscal 2005. According to the complaint, as a result of these transactions, Escala went from trading at $1.47 per share on January 23, 2003, to a $32-per-share company with a purported market cap of $898 million in the span of a few years. The complaint charges Escala with violations of Sections 10(b), 13(a), 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b), 78m(a), 78m(b)(2)(A) and (B)] and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-13, [17 C.F.R. §§ 240.10b-5, 240.12b-20, 13a-1 and 13a-13]. Simultaneous with the filing of the complaint in a Consent and proposed Final Judgment submitted for the Court's consideration, without admitting or denying the allegations in the complaint, Escala consented to a permanent injunction against future violations of these provisions. The complaint charges defendants Manning and Crawford with violations of Sections 10(b) and 13(b)(5) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78m(b)(5)] and Exchange Act Rules 10b-5, 13b2-1, 13b2-2, and 13a-14, [17 C.F.R. §§ 240.10b-5, 240.13b2-1, 240.13b2-2 and 240.13a-14], aiding and abetting Escala's violations of Sections 13(a), and 13(b)(2)(A) and (B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13, and seeks permanent injunctions against future violations, disgorgement of ill-gotten gains, prejudgment interest, civil penalties, and officer and director bars. The Commission acknowledges the assistance of the Special Prosecutions Office for Financial Offenses relating to Corruption, Madrid, Spain. The Commission's investigation in this matter is ongoing as to the role of others. SEC Complaint

U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20965 / March 23, 2009 Accounting and Auditing Enforcement Release No. 3031 / March 23, 2009 Securities and Exchange Commission v. Escala Group, Inc., Gregory Manning, and Larry Lee Crawford, CPA, Civil Action No. 09 CV 2646 (DLC) (S.D.N.Y., March 23, 2009) SEC Charges Escala Group, Inc., its Former CEO and CFO with Disclosure and Accounting Fraud Concerning Related Party Transactions with Parent Company Afinsa Escala enters into a proposed simultaneous settlement The Securities and Exchange Commission today filed a disclosure and accounting fraud case against then-NASDAQ National Market issuer Escala Group, Inc.; its founder and former CEO Gregory Manning, 62; and its former CFO 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. The SEC complaint alleges 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: 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; falsely representing that Escala sold Afinsa several large stamp archives at prices determined by reference to independent stamp catalogues and appraisals when in fact Manning set the catalogue prices and influenced and edited the appraisals; and falsely reporting a payment for business combination-related expenses as the "sale" of certain antiques. The complaint alleges that Escala and Manning also violated the antifraud provisions by selling back to Afinsa in a round-trip transaction inventory acquired from Afinsa in direct contravention of Escala's public promise not to do so. The complaint alleges that these false and misleading disclosures and omissions were material in that the related-party transactions contributed over $80 million to Escala's revenues and allowed Escala to meet its forecasts for either revenue or pre-tax net income for the third quarter and for year-end of fiscal year 2004, and for the first quarter and year-end in fiscal 2005. According to the complaint, as a result of these transactions, Escala went from trading at $1.47 per share on January 23, 2003, to a $32-per-share company with a purported market cap of $898 million in the span of a few years. The complaint charges Escala with violations of Sections 10(b), 13(a), 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b), 78m(a), 78m(b)(2)(A) and (B)] and Exchange Act Rules 10b-5, 12b-20, 13a-1, and 13a-13, [17 C.F.R. §§ 240.10b-5, 240.12b-20, 13a-1 and 13a-13]. Simultaneous with the filing of the complaint in a Consent and proposed Final Judgment submitted for the Court's consideration, without admitting or denying the allegations in the complaint, Escala consented to a permanent injunction against future violations of these provisions. The complaint charges defendants Manning and Crawford with violations of Sections 10(b) and 13(b)(5) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78m(b)(5)] and Exchange Act Rules 10b-5, 13b2-1, 13b2-2, and 13a-14, [17 C.F.R. §§ 240.10b-5, 240.13b2-1, 240.13b2-2 and 240.13a-14], aiding and abetting Escala's violations of Sections 13(a), and 13(b)(2)(A) and (B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13, and seeks permanent injunctions against future violations, disgorgement of ill-gotten gains, prejudgment interest, civil penalties, and officer and director bars. The Commission acknowledges the assistance of the Special Prosecutions Office for Financial Offenses relating to Corruption, Madrid, Spain. The Commission's investigation in this matter is ongoing as to the role of others. SEC Complaint