Lines Overseas Management has been accused of fraud involving penny stocks in a civil lawsuit filed in the Los Angeles Superior Court in California.

David Marchant, editor of Offshore Alert, reports that the suit filed on September 27 by Computer Clearing Services Inc. (CCS) names the Bermuda-based investment firm along with CIBC Mellon Global Securities Services of Toronto, Canada; EquiTrade Securities Corporation, a broker-dealer of Lake Forest, California; Kim S. Carroll of Orange County California; Kathleen Sylvia Roebuck and Stephen Roebuck, all of EquiTrade.

The civil case is the latest in a line of legal concerns involving LOM. The US Securities and Exchange Commission, the British Columbia Securities Commission and the Bermuda Monetary Authority are all investigating LOM in respect to alleged securities violations.

Mr. Marchant reports that in this latest case the Glendale, California-base CCS is seeking damages of $3 million, alleging fraud, breach of contract and securities law violations. Its complaint stems from October 2002 when CCS began providing clearing services to EquiTrade and EquiTrade?s customers, including CIBC and LOM, for whom CCS opened an account titled ?CIBC MELLON GLOBAL SEC SVCS F/A/O Lines Overseas MNGMT?.

Mr. Marchant reports that in its complaint CCS alleges it sustained damages in excess of $3,000,000 after the defendants ?immediately engaged in a stock manipulation scheme to artificially inflate the price of five securities Interactive Lighting [ILGT, Oasis Entertainment [OEFO GYK Ventures Inc {GYKV, KNW Networks [KNWK and New Parts.com Inc. [NPCO.?

Mr. Marchant?s report goes onto detail the alleged stock manipulation scheme in which large positions of the penny stocks were allegedly purchased in the Account and sold to EquiTrade?s inventory accounts.

The CCS complaint is that EquiTrade ?made a market? in these various securities in order to artificially inflate the price of the securities and provide support for a price bid.?

CCS? complaint accuses EquiTrade of ?conspiring with the other defendants to sell the large worthless positions form the Account to the EquiTrade inventory accounts, which were finance by CCS in its role as a clearing firm?.

CCS is reported to have became suspicious of the activity in the inventory accounts in March last year.

The company complains that when it contacted EquiTrade to request the immediate payment of all inventory position ?EquiTrade stated it was withdrawing from NASD membership and refused to deposit sufficient funds to cover the debit balance in the inventory accounts.?

The CCS complaint states that ?As soon as the Defendants ceased supporting the bid for securities in the inventory accounts, the stock prices collapsed.? As of the close of business on March 21, 2003, ?CCS held inventory positions on behalf of defendants at a total acquisition cost of $3,390,866.

Upon EquiTrade?s refusal to deposit funds to cover the acquisition cost, CCS seized EquiTrade?s clearing deposit, firm accounts and accumulated credits totalling just under $300,000?

Mr. Marchant report from the legal files shows that ?CCS also made demand from CIBC and LOM to deposit funds to cover the acquisition costs to no avail. Therefore, CCS has been damaged in the amount of approximately $3,100,000.?

Mr. Marchant reports that the National Association of Securities Dealers expelled EquiTrade Securities Corporation from its membership in April last year for after it failed to pay a $7500 fine levied in one of seven NASD-regulatory actions and one arbitration it was involved with.

He wrote EquiTrade has also been subject to cease and desist orders issued by the Wisconsin Division of Securities, Department of Financial Institutions on December 20,2000 and the Minnesota Department of Commerce on February 21, 2001.

Mr. Marchant wrote: ?Both regulators accused EquiTrade of conducting business without being licensed, while, in Wisconsin, EquiTrade was also accused of filing an application that was materially false or misleading.?

A spokesman for LOM yesterday responded to the story in an e-mailed statement.

He said: ?LOM has not been served or otherwise been made aware of the existence of this suit prior to the article. LOM considers this suit to be entirely without merit and frivolous. The suit appears to pertain to alleged debts between the plaintiff and several of the defendants. LOM is not a proper party to the suit. As the plaintiff?s alleged debtor is no longer in business, we believe that LOM has been included only in the hope of securing a monetary settlement.?

LOM says that if and when it is served by the plaintiff, it will take the necessary steps to ?have itself dismissed as a defendant?.

The spokesman said that a few months ago Mr. Marchant reported on another similar legal action in Alabama in which LOM was also named and had a default judgement entered against it without LOM?s knowledge.

The LOM spokesman said yesterday: ?LOM?s motion to have that judgement set aside was subsequently granted by the court and we expect the case to be dismissed within two weeks. We note that while Mr. Marchant reported the initial story with great relish (as with the more recent one) he has not reported the fact that LOM was successful in having the judgement set aside.?