SEC Enforcement Actions 2013

Benjamin S. Staples and Benjamin O. Staples – Florida Terminally Ill Investment and Securities Fraud Litigation and FINRA Arbitration Attorney

Published on: September 22, 2013 | By Russell L. Forkey, P.A.

SEC Charges Father and Son in South Carolina for Fraudulent Program Designed to Profit From Fate of Terminally Ill

The Securities and Exchange Commission recently charged a father and son in Lexington, S.C., with operating a fraudulent investment program designed to illegally profit from the deaths of terminally ill individuals.

The SEC alleges that Benjamin S. Staples and his son Benjamin O. Staples deceived brokerage firms and bond issuers and made at least $6.5 million in profits by lying about the ownership interest in bonds they purchased in joint brokerage accounts opened with people facing imminent death who were concerned about affording the high costs of a funeral. The Stapleses recruited the terminally ill individuals into their program by offering to pay their funeral expenses if they agreed to open the joint accounts and sign documents that relinquished their ownership rights to the accounts or any assets in them.

Jenifer E. Hoffman, Joch C. Boschert and Bryan T. Zuzga – Florida Prime Bank Offering and Ponzi Scheme Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney

Published on: September 21, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission v. Jenifer E. Hoffman, John C. Boschert, and Bryan T. Zuzga, Civil Action No. 5:13-cv-00455 (U.S. District Court for the Middle District of Florida)

The Securities and Exchange Commission (“Commission”) has charged Jenifer E. Hoffman and John C. Boschert, the former principals of Assured Capital Consultants, LLC – a now-dissolved Florida company – and Bryan T. Zuzga, the company’s purported escrow agent, for their involvement in a fraudulent prime bank offering and Ponzi scheme.

According to the Commission’s complaint, filed in U.S. District Court for the Middle District of Florida, between approximately January and September 2009, Assured Capital, through Hoffman, Boschert, and Zuzga, raised at least $25 million from investors, through false representations and fake documents. The complaint alleges that Hoffman and Boschert represented to investors that their money would be invested in Assured Capital’s offshore, confidential trading program which, in turn, would invest in blocks of medium term notes. As the complaint further alleges, Hoffman and Boschert enticed investors with claims of exorbitant profits and with the illusion of safety by telling them that the investment would provide weekly returns of up to 50% and that it was performing, safe, and guaranteed. In addition, Hoffman and Boschert represented to investors their money would remain safe in an Assured Capital escrow account that would be used to secure a line of credit for investing in the company’s offshore trading program. Furthermore, Hoffman, Boschert, and Zuzga told investors that Zuzga controlled the escrow account as Assured Capital’s escrow agent and that he was a licensed attorney. Moreover, Hoffman provided investors with fake bank documents and a sham verification letter, notarized by Zuzga, purporting to confirm Assured Capital had $500 million at a Panamanian bank.

Walter v. Gerasimowicz, Meditron Asset Management, LLC., and Meditron Management Group, LLC. – South Florida Securities and Investment Fraud FINRA Arbitration and Litigation Attorney

Published on: September 20, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission Decision as to Walter V. Gerasimowicz, Meditron Asset Management, LLC, and Meditron Management Group, LLC, is Declared Final

The initial decision of an administrative law judge with respect to Walter V. Gerasimowicz, Meditron Asset Management, LLC (“MAM”), and Meditron Management Group, LLC (“MMG”) (Respondents), has become final. The law judge found that on May 3, 2013, after Respondents’ offer of settlement, the Commission issued an order (Continuation Order) that required Respondents to pay disgorgement and third-tier civil penalties. The disgorgement and penalty amounts were decided by summary disposition, pursuant to 17 C.F.R. ‘ 201.250. Walter V. Gerasimowicz, Admin. Proc. No. 3-15024 (A.L.J. Apr. 19, 2013). The Respondents were ordered to pay disgorgement, jointly and severally, of $3,143,029.41, plus prejudgment interest, and pay third-tier civil penalties, jointly and severally, of $1,950,000.

Walter V. Gerasimowicz was the sole owner, Chairman, CEO and CCO of MAM, a registered investment adviser. He was also the sole owner of an unregistered investment adviser MMG. Respondents were found to have violated the antifraud provisions within the meaning of Section 21B(b)(3) of the Exchange Act, 203(i)(2) of the Advisers Act, and 9(d)(2) of the Investment Company Act, when they illicitly used funds obtained from investors totaling approximately $2,650,000, in order to keep solvent a private company, where Gerasimowicz served as its President and Chairman of the Board. The funds were lost and the company was bankrupted. The law judge ordered Respondents to disgorge $2,650,000, the amount of diverted funds stipulated in the Continuation Order, and $493,029.41, representing management and incentive fees retained by Respondents. The law judge also found that there were “no unique or compelling reasons” why prejudgment interest should not accrue in accordance with 17 C.F.R. ‘ 201.600, and so ordered Respondents to pay the prejudgment interest on the total disgorgement amount of $3,143,029.4. The law judge also found that Respondents violated the antifraud provision and that their violative actions “involved fraud [and] reckless disregard of a regulatory requirement” within the meaning of Sections 21B(b)(3) of the Exchange Act, 203(i)(2) of the Advisers Act, and 9(d)(2) of the Investment Company Act such that substantial penalties were warranted because Respondents abused the fiduciary duty owed to their advisory client. A total third-tier penalty amount of $1,950,000 was ordered against Respondents, jointly and severally. The law judge found that Gerasimowicz had not introduced any evidence to support his assertion of his inability to pay any disgorgement, interest, or penalties ordered in the proceeding.

Joseph Paul Zada – South Florida Mail and Wire Fraud Litigation and FINRA Arbitration Attorney

Published on: September 20, 2013 | By Russell L. Forkey, P.A.

Joseph Paul Zada Indicted for Fraud

The Securities and Exchange Commission (Commission) recently announced that on September 4, 2013, a Grand Jury sitting in the United States District Court for the Southern District of Florida returned an Indictment charging Joseph Paul Zada with 21 counts of mail fraud, two counts of wire fraud, two counts of money laundering, and two counts of interstate transportation of stolen property. The Indictment also seeks forfeiture of properties obtained as a result of the alleged criminal violations.

The Indictment alleges that from at least January 1998 through August 2009, Zada caused over twenty investors to invest over $20 million based on materially false statements and omissions. According to the Indictment, Zada attracted investors by projecting an image of great wealth, portraying himself as a successful businessman and investor with connections to Saudi Arabian oil ventures. He also hosted extravagant parties, drove expensive luxury vehicles, and maintained expensive homes in Wellington, Florida and Grosse Pointe, Michigan. The investors sent money to Zada with the understanding that he would use the funds to invest in various oil ventures on their behalf. The investors usually received promissory notes reflecting the principal amount of their investment. Zada deposited investors’ funds into bank accounts he controlled. Instead of investing the funds in oil ventures, Zada used the money to support his lavish lifestyle and to make purported returns on investments to prior investors.

Short Selling (Rule 105 of Regulation M) – South Florida Prohibited Short Sale Litigation and FINRA Arbitration Attorney

Published on: September 20, 2013 | By Russell L. Forkey, P.A.

The Securities and Exchange Commission Recently Charged 23 Firms with Short Selling Violations in Crackdown on Potential Manipulation in Advance of Stock Offerings:

The Securities and Exchange Commission (Commission) recently announced enforcement actions against 23 firms for short selling violations as the agency increases its focus on preventing firms from improperly participating in public stock offerings after selling short those same stocks. Such violations typically result in illicit profits for the firms.

The enforcement actions are being settled by 22 of the 23 firms charged, resulting in more than $14.4 million in monetary sanctions.

Unit Investment Trust (UIT) – South Florida Investment Adviser Securities and Investment Fraud, Mismanagement and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Published on: September 17, 2013 | By Russell L. Forkey, P.A.

In the Matter of Sarkauskas & Associates, Inc. and James M. Sarkauskas

Recently, the Securities and Exchange Commission issued a settled Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Section 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (Order) against Sarkauskas & Associates, Inc. (the Adviser) and James M. Sarkauskas (Sarkauskas).

The Order finds that the Adviser, a Wisconsin-based investment adviser, and its principal, Sarkauskas, violated Sections 206(1) and (2) of the Advisers Act when they purchased unit investment trust (UIT) units bearing transactional sales charges in their clients’ accounts without disclosing that identical no-load UIT units sold at net asset value with no transactional sales charges were available for purchase, and that the Adviser’s purchases of the units bearing transactional sales charges substantially increased the Respondents’ compensation, thereby creating a conflict of interest. The Order further finds that between August 2009 and August 2012, the Adviser, through Sarkauskas, collected $331,433.98 in such sales charges in addition to the Adviser’s asset management fees.

False and Misleading Information Investment and Securities Fraud Florida Litigation and FINRA Arbitration Attorney

Published on: September 17, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission Charges Operator of Miami-Dade County’s Largest Hospital with Misleading Investors about Financial Condition

The Securities and Exchange Commission (“Commission”) recently charged the operator of the largest hospital in Miami-Dade County with misleading investors about the extent of its deteriorating financial condition prior to an $83 million bond offering.

An SEC investigation found that the Public Health Trust, which is the governing authority for Jackson Health System, misstated present and future revenues due to breakdowns in a new billing system that inaccurately recorded revenue and patient accounts receivable. The Public Health Trust projected a non-operating loss in the official statement accompanying the bond offering in August 2009, but reported a figure that was more than four times lower than what was ultimately reported at the end of the 2009 fiscal year. The Public Health Trust also failed to properly account for an adverse arbitration award, and misrepresented that its financial statements were prepared according to U.S. Generally Accepted Accounting Principles (GAAP).

South Florida Money Manager Fraud, Mismanagement and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Published on: September 17, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission Charges Purported Money Manager in New York Who Schemed Investors and Lied to Commission Examiners

The Securities and Exchange Commission (Commission) recently charged the owner of a New York-based investment advisory firm with defrauding investors while grossly exaggerating the amount of assets under his management.

The SEC alleges that Fredrick D. Scott of Brooklyn, N.Y., registered his firm ACI Capital Group as an investment adviser and then embarked on a series of fraudulent schemes targeting individual investors and small businesses. Scott repeatedly touted ACI’s registration under the securities laws and falsely claimed the firm’s assets under management to be as high as $3.7 billion to bolster his credibility when offering too-good-to-be-true investment opportunities. As Scott solicited funds from investors after promising them very high rates of return, he simply stole their money almost as soon as they deposited it with ACI. Scott paid no returns to investors and illegally used their money to fund such personal expenses as his children’s private school tuition, air travel and hotels, department store purchases, and several thousand dollars in dental bills.

Paul Marshall, Bridge Securities, LLC., Bridge Equity, Inc. and FOGFuels, Inc. – South Florida Investment Advisor and Broker/Dealer Theft, Breach of Fiduciary Duty and Negligence FINRA Arbitration and Litigation Attorney

Published on: September 12, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission v. Paul Marshall, Bridge Securities, LLC a/k/a Bridge Financial, Bridge Equity, Inc. and FOGFuels, Inc., Civil Action No. 1:13-CV-3032 (N.D. Ga.)

SEC Charges Atlanta-Based Investment Adviser Representative and Related Companies with Securities Fraud

Recently, the Securities and Exchange Commission filed an emergency action seeking a temporary restraining order and other emergency relief in federal court in the Northern District of Georgia, charging Paul Marshall (Marshall), a state-registered investment adviser representative, and three Atlanta-based companies that he owned and controlled – Bridge Securities, LLC, Bridge Equity, Inc. (collectively, the Bridge Entities) and FOGFuels, Inc. (FOGFuels) – with violations of the federal securities laws for misappropriating client funds.

Affinity Fraud – Haitian-American Investors – South Florida Affinity Investment Fraud FINRA Arbitration and Litigation Attorney

Published on: September 12, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission Defendant Indicted in $30 Million Ponzi Scheme and Affinity Fraud Targeting Haitian-American Investors

The Securities and Exchange Commission recently announced that on July 2, 2013, the United States Attorney’s Office for the Southern District of Florida filed criminal charges against George Louis Theodule, a defendant in a now settled SEC action. The 40-count indictment charges Theodule with securities fraud, wire fraud, and money laundering. According to the indictment, Theodule, among other things, falsely presented himself as a financial expert who would double investors’ funds within three months by placing trades through their investment accounts. The indictment also alleges that Theodule operated a Ponzi scheme that raised more than $30 million from thousands of investors. Theodule allegedly perpetrated the fraud through Creative Capital Consortium, LLC and Creative Capital Concept$, LLC (the “Creative Capital entities”), among other entities he controlled.

In December 2008, the Commission halted Theodule’s on-going fraud at Creative Capital when it filed an emergency civil enforcement action against him and his companies. The SEC’s complaint alleged that the defendants had raised more than $23 million from thousands of mostly Haitian-American investors through a fraudulent, unregistered offering of securities nationwide, and operated a Ponzi scheme, having lost at least $18 million trading stocks and options through a network of purported investment clubs. The SEC obtained a restraining order to halt the fraudulent activity, and thereafter a receiver was appointed by the United States District Court for the Southern District of Florida to identify and trace assets. In October 2009, the Court entered a Judgment of Permanent Injunction and Other Relief against Theodule. The Judgment entered by consent, enjoined Theodule from violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and also ordered Theodule to pay disgorgement with prejudgment interest and a civil penalty. In March 2010, the Court entered a Final Judgment ordering him to pay disgorgement in the amount of $5,099,512, prejudgment interest of $202,638 and imposed a civil penalty of $250,000.