re:Robert T. Kirk Jr.(EGBT FAME)-> SEC SUES WASHINGTON, D.C. ATTORNEY THOMAS PROUSALIS AND FLORIDA INVESTMENT
BANKER ROBERT KIRK FOR IPO FRAUD SCHEME
The Commission today filed a complaint in the U.S. District Court for
the Southern District of New York charging Thomas T. Prousalis, Jr. and
Robert T. Kirk, Jr. with committing fraud in connection with the June
2000 initial public offering by busybox.com, Inc. Prousalis was
securities counsel for busybox and Kirk was the majority owner and
president of Barron Chase Securities, Inc., the lead underwriter for the
offering. Prousalis is a resident of McLean, Virginia and is licensed
to practice in Washington, D.C. Kirk is a resident of Parkland,
Florida.
The complaint alleges that Barron Chase agreed to underwrite a firm
commitment offering that would raise approximately $12.8 million for
busybox. After informing busybox that Barron Chase was having
difficulty selling the IPO securities to bona fide investors, Kirk and
Prousalis devised and executed a fraudulent scheme to complete the
offering. According to the complaint, Kirk and Prousalis arranged for
busybox insiders to "purchase" IPO securities using undisclosed bonuses,
and for Prousalis to receive an inflated and undisclosed legal fee that
was to be paid using IPO securities. Barron Chase secretly financed
these transactions and, during the IPO closing, Kirk and Prousalis
caused busybox to repay Barron Chase out of the proceeds of the
offering. The complaint further alleges that the scheme gave Prousalis
and the insiders almost 20% of the securities offered in the IPO, and
reduced the proceeds available to busybox by over $2.1 million. The IPO
registration statement and prospectus did not disclose the insiders'
stock purchases, the inflated legal fee paid to Prousalis, Barron
Chase's financing of these transactions or the repayment to Barron Chase
using IPO proceeds.
As set forth in the complaint, the fraudulent scheme misled investors as
to the financial health and future viability of the company. The
complaint alleges that Prousalis and Kirk's firm benefited financially
from the scheme by receiving fees of approximately $1.25 million and
$1.5 million, respectively. Finally, the Commission charged that, after
the IPO was completed, Prousalis owned more than 5% of the company's
outstanding stock, but failed to report his holdings on a Schedule 13D,
as required by law. He also failed to report the subsequent sale of all
of his busybox IPO stock.
The Commission charges that Prousalis and Kirk violated the antifraud
provisions of the federal securities laws, Section 17(a) of the
Securities Act of 1933 and Section 10(b) of the Securities Exchange Act
of 1934 and Rule 10b-5 thereunder. Prousalis is also charged with
violating Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2
thereunder. The Commission is seeking permanent injunctions,
disgorgement of defendants' ill-gotten gains, prejudgment interest, and
the imposition of civil penalties against Prousalis and Kirk.
Also today, the U.S. Attorney's Office for the Southern District of New
York announced the filing of related criminal charges against Prousalis
and Kirk. The Commission thanks the U.S. Attorney's Office for the
Southern District of New York and NASD Regulation for their cooperation.
The Commission's investigation is continuing. [SEC v. Thomas T.
Prousalis, Jr. and Robert T. Kirk, Jr., USDC, SDNY, Civil Action No. 04-
CV-00081] (LR-18533) |
