SEC Charges Kentucky Plastic Co. Scam
By Aaron Seward
October 7, 2008
www1.cchwallstreet.com
The SEC has charged a Kentucky man and his company with fraudulently raising between $8.2 million and $11.2 million from investors. According to the Commission’s complaint, James Turek issued false and misleading press releases that attracted at least 30 investors from across the country to purchase stock in Plasticon International, a company he controlled, between approximately January 2005 and April 2007.
Since 1988, Turek acted as president, CEO, chairman of the board of directors, and majority shareholder of Plasticon, a company purportedly been in the business of manufacturing products made from recycled plastics, including rebar supports used in concrete construction. Turek exercised complete control over Plasticon’s affairs until the company filed for bankruptcy in 2007. But he allegedly worked with William Howe to pull off his scam. The SEC claims that Howe helped to identify investors and lure them to invest in Plasticon.
Turek and Howe told investors that Plasticon would use invested money for Plasticon business, including the acquisition of other companies and equipment. Once an investor was snagged, Turek and Howe had them make their checks payable to a bank account in the name of LexReal, rather than Plasticon.
Much of the money that Turek took in as a result of his Plasticon stock offerings did not go to the purported purpose. He used at least $2.8 million of investor proceeds for matters wholly unrelated to his company’s business, including personal expenses. For example, at least $800,000 went to finance his personal bankruptcy. He transferred approximately $1.8 million to two of his other companies, Promotional Containers and TelcoBlue. He also loaned some of the money back to Plasticon with interest, and gave some of it to his sons.
In order to keep up appearances while the investment scam was in process, Turek issued multiple press releases, with the help of Howe, containing false statements about Plasticon’s business. Many of these press releases lied about the nature of Plasticon’s revenue and income. For example, on June 17, 2005, Turek issued a press release stating that Plasticon had “achieved profitability as of the end of the second quarter of 2005.” But in the company’s Form 10-QSB for the quarter, which was filed a year late in July 2006, reported a net loss of over $3 million on revenue of $135,244.
Other press releases misstated the facts about the company’s outstanding shares. In releases issued between 2005 and 2006, Turek assured investors that Plasticon would not issue additional shares, and that it would in fact reduce outstanding shares. But during that period, Plasticon increased its outstanding shares by 150%, from 2 billion to 5 billion.
Turek also issued press releases that misstated who owned Plasticon and the value of its patents, according to the SEC.
The SEC said that the misleading press releases had a significant effect on Plasticon’s stock price. During the period Plasticon’s closing price averaged $.0095, a 217% increase over the previous six months average closing price of $.0030. The trading volume also increased 400% from 7,983,532 shares to 39,605,647.
The Commission's complaint seeks permanent injunctions against Plasticon and Turek. It also seeks an accounting, disgorgement, prejudgment interest, civil penalties, an officer and director bar, and a penny stock bar against Turek. Finally, the suit hopes to get an order from the court for an accounting and disgorgement with respect to Turek’s other companies, LexReal, Promotional Containers, and TelcoBlue.
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