Securities and Exchange Commission v. Eric Aronson, Vincent Buonauro, Jr., Robert Kondratick, Fredric Aaron, PermaPave Industries, LLC, PermaPave USA Corp., PermaPave Distributions, Inc., Verigreen, LLC, and Interlink-US-Network, Ltd., Defendants, and Caroline Aronson, Deborah Buonauro, DASH Development, LLC, Aron Holdings, Inc., PermaPave Construction Corp., Dymoncrete Industries, LLC, Dymon Rock LI, LLC, and Lumi-Coat, Inc., Relief Defendants, Civil Action No. 11 Civ. 7033 (S.D.N.Y. filed Oct. 6, 2011)
District Court Finds Eric Aronson Liable for Operating a Ponzi Scheme, Issues Permanent Injunctions Against Remaining Individual Defendants and Grants Other Relief
The Securities and Exchange Commission recently announced that U.S. District Court Judge Jed S. Rakoff has ruled that Defendant Eric Aronson violated the antifraud and other provisions of the federal securities laws. In addition, the Court entered orders of permanent injunctions against Defendants Vincent Buonauro and Fredric Aaron and further imposed officer and director and penny stock bars against Aaron. Furthermore, the Court ordered Aronson’s wife, Relief Defendant Caroline Aronson, to disgorge the ill-gotten gains she received from her husband.
The Commission’s Complaint, filed in October 2011, alleged that, from 2006 to 2010, PermaPave Industries and its affiliates raised more than $26 million from the sale of promissory notes and “use of funds” agreements to over 140 investors. Eric Aronson, Vincent Buonauro and others told investors that there was a tremendous demand for the product – permeable paving stones – and that investors would be repaid from the profits generated by guaranteed product sales. In reality, there was little demand for the product, and defendants used investors’ money to make “interest” and “profit” payments to earlier investors and to fund management’s lavish lifestyles. In addition, shortly after an affiliate of PermaPave Industries acquired a majority stake in Interlink-US-Network, Ltd., Eric Aronson, Fredric Aaron – who was the attorney for Eric Aronson and the entity defendants – and others issued a press release stating that a company that had never heard of Interlink intended to invest $6 million in Interlink.
On August 6, 2013, the Court granted in part the Commission’s motion for summary judgment. Finding that the Commission proved an “almost endless fraud” with evidence that Eric Aronson and others raised millions from investors, misappropriated the funds raised, and then converted the investments several times over to delay and ultimately avoid repayment, the Court ruled that Eric Aronson, age 45 and resident of Syosset, New York, violated Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Subsequently, on December 11, 2013, the Court granted the Commission’s motion for reconsideration of the Court’s summary judgment order and ruled that Eric Aronson also violated Section 20(e) of the Exchange Act by aiding and abetting Interlink’s violations of Exchange Act Sections 10(b) and 13(a) and Rules 10b-5, 12b-20 and 13a-11. Relief for these violations will be determined at a later date.
The Court also granted summary judgment on the Commission’s claim for disgorgement against Caroline Aronson, age 43 and resident of Syosset, New York. On December 23, 2013, the Court issued a final judgment ordering Caroline Aronson to pay the full disgorgement amount sought, $296,262.
Also on December 23, 2013, the Court issued judgments as to Vincent Buonauro, age 42 and resident of West Islip, New York, and Fredric Aaron, age 49 and resident of Plainview, New York. Vincent Buonauro agreed to consent to the judgment as to him, which enjoins him from violating Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b) and 15(a) and Rule 10b-5. Fredric Aaron also agreed to consent to the judgment as to him, which enjoins him from violating Exchange Act Section 10(b) and Rule 10b-5 and from aiding and abetting violations of Exchange Act Section 13(a) and Rules 12b-20 and 13a-11. The judgment as to Fredric Aaron also imposes five year officer and director and penny stock bars. The Commission’s claims for monetary relief against Vincent Buonauro and Fredric Aaron will be determined at a later date.
The Commission’s civil action also continues against Relief Defendant Deborah Buonauro. The Court previously issued final judgments against all entity defendants and entity relief defendants on January 19, 2012 and against Defendant Robert Kondratick on October 17, 2012.
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