FINAL JUDGMENT IMPOSING PERMANENT INJUNCTIONS AND OTHER RELIEF AGAINST CASTLE
SECURITIES, CORP. AND MICHAEL STUDER FOLLOWING TRIAL ON THE MERITS
The Commission announced today that, after a full trial on the merits,
in the action SEC v. U.S. Environmental, et al, 94 Civ. 6608 SDNY (PKL),
the U.S. District Court for the Southern District of New York issued an
opinion and order providing the Commission with full relief against the
remaining two defendants in this action: (1) Defendant Castle
Securities, Corp., a broker-dealer located in Freeport, New York, that
has been registered with the Commission since Dec. 5, 1984; and (2)
Defendant Michael T. Studer, age 50, a resident of Rockville Centre, New
York, the President of Castle since its inception and a part owner of
Castle's parent company. The Commission's Amended Complaint, filed on
Oct. 23, 1995, alleged that Studer, Castle, and other individuals,
including defendant Mark D'Onofrio, defendant Ramon D'Onofrio, and
Richard Kirschbaum (the D'Onofrio Group) conducted in 1989 and 1990 a
classic fraudulent blind pool offering, subsequent market manipulation
and fraudulent sale of the underlying securities of U.S. Environmental,
Inc. (USE), as well as in the public offering of the securities of USE's
predecessor, Windfall Capital Corporation (Windfall).
In its opinion and order, entered on July 21, the found that Castle and
Studer violated various antifraud provisions of the federal securities
laws. Among other things, the Court found that: (1) "Castle made the
market for USE securities and oversaw the manipulations of the stock
price from $0.05 to $5.50;" (2) "The D'Onofrio Group guaranteed Castle's
market making profits for USE securities;" and (3) "Castle under
Studer's oversight, allowed the D'Onofrio Group to employ Castle's
market making services for purposes of executing D'Onofrio's matching
orders and wash trades."
Regarding the Windfall offering, the Court found, among other things,
that: "[w]hen Windfall was incorporated and before Windfall became a
public company, Windfall's initial shares were issued to individuals and
a corporation with pre-existing personal and business relationships with
Studer, Castle and the D'Onforio Group." The Court further found that
Castle, Studer and other defendants "made material misrepresentations of
fact and omitted to disclose material facts" in Windfall's Form S-18 and
amendments, including that (1) "Studer acted as an undisclosed promoter
and Castle acted as an undisclosed underwriter;" (2) "y
prearrangement among the D'Onofrio [G]roup, Studer, Castle [and two
other defendants], the Windfall Offering was acquired entirely by the
D'Onofrio [G]roup, [two other defendants,] Studer, Castle, and their
nominees;" and (3) [t]he D'Onofrio Group would commence a public
offering through resales after the Windfall Offering purportedly closed,
and after the stock price had been manipulated upwards to several
dollars per USE share."
The final judgment permanently enjoins Castle and Studer from committing
future violations of (1) Section 17(a) of the Securities Act of 1933
(Securities Act), and Section 10(b) of the Securities Exchange Act of
1934 (Exchange Act) and Rule 10b-5; (2) Rule 101 of Regulation M; (3)
Section 5(a) and 5(c) of the Securities Act; and (4) Section 15(c) of
the Exchange Act and Rules 10b-3, 10b-5 and 15c1-2 thereunder. Further,
the final judgments require Castle and Studer to jointly disgorge to the
Commission within sixty days ill-gotten gains totaling $132,224 plus
prejudgment interest from September 30, 1990 through the present. [SEC
v. U.S. Environmental, Inc., et al., USDC, SDNY, Civil Action No. 94
Civ. 6608 (PKL)] (LR-18256) |
