Scott Lines? ?reasonable offer? to resettle his testimony on alleged stock market manipulation is ?far too little, too late?, the US Securities and Exchange Commission said last week in a document filed with the US District Court.

Two years after being served with subpoenas for information related to an SEC probe of possible fraud and manipulation involving Sedona Software Solutions and SHEP Technologies, the managing director of Lines Overseas Management said he would comply with the requirement to give deposition testimony. However, he asked the court to resettle his testimony outside of the US and offered to either pay for a videoconference hook-up or for the usual travel and per diem costs for two SEC attorneys to travel to Bermuda or elsewhere.

The SEC noted in its response to his resettlement motion that just after it commenced subpoena enforcement proceedings in June, 2004 Mr. Lines rejected a proposal from Commission staff to take his testimony in Bermuda on the grounds of the United States consulate.

In its response last week, it also deemed Mr. Lines? attempt to use the fact that the Commission has recently moved its offices within Washington, D.C. ?a ruse to inject into this proceeding a purportedly new objection to the SEC?s subpoenas that he has been in receipt of ? but has failed to comply with ? for nearly two years?.

As for Mr. Lines? argument that the US District Court had no authority to order him, as a foreign national, to the United States, the SEC said Mr. Lines had already lost this line of argument ?before three forums?.

?Lines offers no explanation as to why this Court, which has ruled that it has personal jurisdiction over Lines, lacks the authority to order his appearance to testify. As this Court previously found, Lines? actions that were directed into the US made his prospect of being ?haled? into a US court reasonably foreseeable and, thus, permissible,? the SEC said.

The SEC also deemed two other arguments invalid. Mr. Lines had cited ?reasonable concerns? that if he re-entered the US the SEC or the Justice Department may serve additional subpoenas on him, or take other action on a claim that he is a material witness.? He also argued that as managing director of LOM he was ?too busy? to travel.

The SEC responded that it has not chosen to enforce the subpoenas as subterfuge to lure Mr. Lines into the US in order to expose him to further service of legal process.

?The Commission seeks what it is statutorily entitled to under the provisions of the federal securities laws with respect to any witness it subpoenas in connection with Commission investigations: timely testimony in the United States. Senior corporate officers from large US and international corporations, with worldwide operations and thousands of employees, routinely find time in their hectic schedules to appear at the SEC?s offices to testify in connection with Commission investigations. The Commission expects ? and is entitled to ? no less from Lines here.?

The Commission stated its expectation was not unreasonable since LOM, derives millions of dollars of revenue through its participation in and transactions on the United States securities markets

?Should the Court credit Lines? unsubstantiated fear of receiving civil or criminal prosecution by United States law enforcement agencies, it would create a convenient procedural dodge for other, similarly-situated witnesses in the future,? the SEC said.

The SEC noted that Mr. Lines had previously proposed that the SEC conduct the interview on neutral territory in Canada.

?Lines offers no explanation as to how his schedule would accommodate more distant travel to testify in Canada, yet not accommodate a shorter trip to Washington, D.C.,? the SEC said.

To allay Mr. Lines? fears, the SEC said the Court could bring in an unprecedented requirement for the Commission to refrain from serving Lines with any further legal process during any travel associated with his testifying before the Commission.

Such a requirement would be less burdensome than the equally unprecedented requirement of mandating a four person investigative team travel to a foreign country to perform their official duties as an accommodation to a person that the Court has personal jurisdiction over, the SEC said.

?The Commission staff, as US officials, cannot simply travel to Bermuda on their own accord and engage in a US related law enforcement activity on foreign soil. The Commission has to notify the Department of State, which in turn must receive express permission from the Bermuda Government for the Commission staff to enter their country,? the SEC said.

The Commission opposed Mr. Lines offer to use video conferencing as an ?unduly cumbersome? method. The SEC noted that Division of Enforcement staff relies upon the opportunity to observe subtle witness reactions to decide on their credibility that may not be discernible in a videoconference link.

In the event the court decides to resettles the testimony, the SEC asked for it to be located on the grounds of a United States embassy or consulate to afford the Commission staff protection and eliminate any question as to whether United States perjury laws and obstruction of justice laws apply, while minimising the potential of offending a foreign government because US law enforcement activities are occurring on their territory.

US Magistrate Judge Alan Kay partially stayed that portion of his order for obedience with the SEC subpoenas, which required Mr. Lines to testify at SEC offices no later than March 13. The stay will be effective until the Motion to Set Testimony Location has been fully briefed and ruled upon by the Court.