A lawyer for the US Securities and Exchange Commission has told a US Court that Bermuda?s Scott and Brian Lines ?have been at the epicentre of at least two suspected fraudulent schemes, yet LOM and its officers have done everything possible to keep the SEC from getting to the bottom of it?.

Magistrate Judge Alan Kay of the United States District Court for the District of Columbia heard from SEC lawyer Mark Lowman after LOM lawyers argued that LOM and its managing director Scott Lines should not be ordered to comply with the investigative subpoenas that SEC staff personally served on Mr. Lines at Miami International Airport on April 20, 2004.

The subpoenas stem from an SEC investigation of alleged securities fraud involving Sedona Software Solutions Inc. and SHEP Technologies Inc., both of Vancouver, Canada, and HiEnergy Technologies Inc., of Irvine, California.

According to last week?s court transcripts, the SEC lawyer said that the foreign brokerage firm has been conducting business of trading US securities through US brokerage firms on the US securities market ?while seeking to avoid one of the basic responsibilities that market participants have with the SEC, which is to provide information to the commission when one of its employees, one of its customers, or one of its officer may have violated federal securities laws?.

?What you have here is you have a company whose very business model is to market a cloak of secrecy to its customers to hide their activities behind from agencies like the SEC and other foreign regulators,? Mr. Lowman said according to transcripts from the hearing.

Mr. Lines? lawyer Ivan Knauer challenged the jurisdiction of the court to enforce the SEC?s subpoenas against Scott Lines. The SEC served the subpoenas on the Bermuda resident at the Miami International Airport when he went to see a doctor in Boston.

Mr. Knauer argued that the court could only justify calling Mr. Lines to the D.C. court if it was satisfied that the Bermuda resident had sufficient minimum contacts with the US. He said jurisdiction did not exist.

He later told the court: ?The SEC can?t be permitted to manufacture their own jurisdiction over Scott Lines based on their own investigation when they?re trying to figure out whether anything happened anyway. And this Court may not order Scott Lines to comply with the subpoena without violating international law under that concept of manufactured jurisdiction, because there is no underlying action for specific jurisdiction to attach to.?

Mr Lines said in an earlier declaration that he did not do business, have property or take vacation in the US.

Mr. Knauer said: ?There has been no purposeful availment of the protections of the laws of this country, no purposeful contacts with this country regarding subject matter at issue. There?s no allegation that he directed trades into he United States in any of the stock that is at issue in this case.?

Mr. Lowman later responded that it did not matter whether or not the action was pending in D.C. or in Florida because, as long as SEC subpoenas are severed in the US, the SEC had nation-wide service of process.

In his case to the court, Mr. Lowman said that the trades that are the subject of the SEC?s investigation ?were made through accounts Lines owned, with accounts that Lines controlled, accounts of which he served as a broker for, and which generated trading profits for Mr. Lines.?

Mr. Lowman said: ?Now we?d submit that falls squarely within what we?re looking for in our investigation. Did he exercise that control? If not, who did? He has personal knowledge.?

LOM lawyer Reid Figel addressed the two subpoenas issued to LOM in the context of the enforcement proceedings.

?LOM?s only real contacts as a corporate entity is executing trades through broker dealers in the United States,? he said adding that LOM did not have a US office, phone number, answering service or designated agent for service of process in the United States. He also said LOM did not solicit business or customers in the United States

Mr. Knauer said the issue of enforcing the subpoenas ?raises very serious issues of jurisdiction and questions about the extraterritorial application of US powers on foreign litigants?.

He warned that if the court issues an order, LOM intends to challenge the jurisdictional issue all the way up to the DC court of Appeals.

Mr. Lowman later told the court that general jurisdiction existed over LOM because LOM ?engaged in systematic and continuous business operations in the US securities market?.

?It?s undisputed that it has six brokerage accounts with US brokerage firms, so that it may place trades on its own behalf, on behalf of its officers and on behalf of its clients in US securities of US companies on US markets. And of those accounts, LOM engages in thousands of transactions per month, and millions of shares worst millions of trades,? he said adding that LOM solicits US customers and manages that relationship through their US-registered website.

?LOM established all the trimmings of a US brokerage firm, with the exception of that bricks and mortar building,? Mr. Lowman said.

He also told the court that LOM has submitted to jurisdiction of two other US regulators when it advanced its own business needs, the New York Stock Exchange and the IRS.

Mr. Figel also argued that the SEC subpoenas were addressed to the wrong companies. The subpoena regarding Sedona was addressed to the LOM Group of Companies with a definition section that said ?Lines were the companies?. The Hienergy subpoena was served on the actual corporation, LOM Management which Mr. Figel pointed out was one of four subsidiaries of LOM Holdings.

Mr. Lowman responded that case law made it clear that the ?misnomer of a company is not a fatal error in a legal document?.

?If you look at their website and you try to find these people, what name pops up? The website is the name that is on the subpoena,? he said adding that the parties involved knew who the SEC wanted.

?We named the right party. If you look at the subpoena and look at the terms of the subpoena and what we were seeking, they knew who we wanted because they were dealing with this because we?ve been fighting over this for months.?

Mr. Lowman said that the SEC served thousands of subpoenas during the year and has had to bring only ten subpoena enforcement?s including the LOM-related subpoenas.

?If there was a way that we feel that we could get this from an alternative source, we would not be standing here,? he said later adding: ?Some of the information we?re missing indicates who executed the trade, what broker, on what account who authorised it. That?s all captured in their computer system. They don?t want us to have that.?

Magistrate Judge Kay reserved his decision in the matter.