Former Lines Overseas Management president Brian Lines has lost an attempt to avoid giving the US Securities and Exchange Commission (SEC) a tape-recording of a telephone conversation he had nearly seven years ago with SEC attorneys who were looking into alleged stock manipulation, according to the OffshoreAlert newsletter.

Allowing Lines to withhold the tape from the SEC "would run counter to the interests of justice", stated US District Judge Denise Cote in a ruling at the US District Court for the Southern District of New York on November 13, 2009 in which she denied Lines' motion for a protective order.

The recording is of an unsolicited call that Lines made to the SEC on February 3, 2003, in what the the judge suggested was apparent attempt to lift a trading ban that the regulator had imposed four days earlier on the shares of publicly-listed shell company Sedona Software Solutions Inc.

LOM's interest stemmed from its role as an investment banker for a privately-held purported gold mining company, Renaissance Mining Corp., whose public announcement that it was planning a reverse take-over of Sedona in January, 2009 had caused Sedona's share price to jump from three cents to more than $9.

In the announcement, it was claimed that LOM would raise $6 million at $3 per share for the Sedona/Renaissance merged entity in a private offering. According to the SEC, Brian Lines and his brother Scott Lines, who is LOM's managing director, sold 159,000 Sedona shares for between $8.95 and $9.40 per share on the open market from January 21 to 27, 2003 to reap "illegal proceeds" of approximately $1.5 million.

More than four years later, the SEC filed a civil complaint at federal court in Manhattan alleging securities fraud against Brian Lines, Scott Lines, Bermuda Stock Exchange-listed LOM (Holdings) Ltd., and its subsidiaries Lines Overseas Management Ltd., LOM Capital Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Cayman) Ltd., and LOM Securities (Bahamas) Ltd. and some of their clients regarding trading in the stock of Sedona and another publicly-listed shell company, SHEP Technologies Inc. from 2002 to mid-2003.

The defendants have been accused of profiting by at least The defendants have been accused of profiting by at least $5.8 million from the two alleged schemes. LOM denies this.

After a protracted legal battle in the US and Bermuda that initially began in June 2004, LOM and Brian Lines agreed to produce documents and other material, including "all recordings of telephone calls on the LOM telephone extension of Brian Lines within the possession, custody and control of LOM concerning Sedona, SHEP and/or the SEC's investigations".

Pursuant to the agreement, LOM and Lines produced over 260 Brian Lines recordings in September 2008 and in January 2009, according to the SEC. However, one recording was missing – the February 3, 2003 telephone conversation, prompting the SEC to ask the court to compel its production.

In opposing the move, Brian Lines claimed that, notwithstanding the fact that he called the SEC, not the other way around, the SEC knew he was legally represented by LOM's in-house counsel, David Surmon, at the time of the February 3, 2003 conversation and, as such, by talking to him about the investigation, the SEC's attorneys had committed an "intentional violation" of Rule 4.2 (a) of the American Bar Association's Model Rules of Professional Conduct, which prohibits attorneys from having direct contact with someone they know is represented in the matter by an attorney.

Lines' attorneys, Philip Smith and Kate Woodall, of Patton Boggs law firm, stated: "The Court will recall that the Bermuda Court of Appeals issued an order several years ago that enjoined LOM from producing any tape recordings from Brian Lines' telephone extension at LOM.

"The Bermuda Court found that his phone was recorded without his knowledge and it was therefore a violation of his right to privacy and the Bermuda telecommunications laws.

"While we understand that United States discovery rules may trump competing foreign court orders in a proper case – Brian Lines has allowed the production of all his other calls in this action – the Bermuda Court's order is entitled to comity to the extent it does not conflict with United States law. Here, the recording was not only a violation of Brian Lines' rights under Bermuda law, it was a violation of United States rules of professional conduct governing the SEC's attorneys."

However, in her ruling on November 13, US District Judge Denise Cote rejected Lines' arguments.

She said "the SEC's participation in this communication will not taint these proceedings.

"Indeed, it would run counter to the interests of justice to allow Lines to withhold the tape recording of this call," stated the judge.

"Having failed to achieve his goal of getting the ban on trading lifted, Lines is not entitled to bar evidence of those efforts."