SEC Charges Six in Pump-and-Dump Case By Matthew Dublin
June 12, 2008
The SEC has charged a Nevada-based environmental engineering company and five men with running a pump-and-dump scheme and shirking registration requirements.
From June through August of 2005, Global Development & Environmental Resources, Darko Mrakuzic, Dante Panella, Anthony Cimini Sr., and Philip Prichard, allegedly conducted a scheme to avoid registration regulations and manipulate the company’s stock, according to the Commission’s complaint. It also charged Prichard and Pietro Cimino with masterminding a fraudulent offering scheme involving Global’s stock.
The defendants allegedly avoided registration requirements by obtaining a fraudulently backdated convertible promissory note together with a forged assignment in order to assign the note to three foreign entities. According to the SEC’s complaint, the men then converted the note into unrestricted Global shares.
They then issued bogus press releases on behalf of Global with the help of an investor relations firm based in Florida. The releases misled investors about the company’s client list, revenue projections, and pending contracts, charged the SEC.
The SEC has also settled related fraud charges against Carmine Bua, a California-based securities attorney. It charged Bua with issuing a fraudulent legal opinion that authorized the issuance of purportedly unrestricted Global stocks at the heart of the fraud, stated the complaint. The attorney drafted an assignment and legal opinion letter for the unrestricted shares despite having knowledge that note and its assignment were not legitimate.
Without admitting or denying the charges, Bua has consented to a final judgment requiring him to pay disgorgement and civil money penalties for an amount not yet determined, as well as a penny stock bar.
The Commission charged Mrakuzic, a resident of British Columbia, with illegally selling Global shares into an artificially pumped-up market, netting roughly $1.2 million. It charged Panella with similar violations, by which he allegedly made a profit of $1.1 million.
During July of 2005, Global, Prichard, Global’s CEO, and Global president and director, Pietro Cimino, facilitated a private offering of the company’s stock and allegedly provided investors with offering materials containing the same misinformation as the press releases. The private offering enabled Global to collect a total of close to $2.1 million, which Prichard and Cimino took for personal expenditures, charged the regulator.
One example of the defendants’ efforts to mislead the investing public include an August 1, 2005 letter to Global shareholders, which stated the company had over $67 million in booked sales. The letter also touted purported negotiations for more than $80 million in projects. Global also claimed that defense contractor Halliburton was a major client who regularly purchased products from the company. Prichard and Panella repeated such statements in an interview with the editor of The Grip, an investment newsletter on pink sheet stocks.
Both Pritchard and Cimino knew that all of the claims made in the release and the interview were patently false, charged the regulator. The result of the misinformation effort proved effective, as Global’s share price shot up on August 1, 2005 by 67% and closed that day at a high of $3.00. And the company’s stock to traded almost 500,000 shares, an increase of 270% from the previous day, stated the complaint.
The Commission suspended trading of Global stock on August 23, 2005 due to concerns over the conduct alleged its current case against the defendants. The SEC is seeking disgorgement, prejudgment interest, civil penalties, and penny stock bars against all the defendants. Officer and director bars are also being sought against Prichard, Cimino and Cimini.
The regulator acknowledged the assistance of the British Columbia Securities Commission with the investigation.
Have a comment? Let us know what you think of this or another CCH Wall Street story by clicking here. |
