California securities lawyer Carmine Bua
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SEC target Mrakuzic files motion to dismiss
2008-10-16 15:55 ET - Street Wire
by Mike Caswell
Former Vancouver broker Darko Mrakuzic has filed a motion to dismiss civil fraud charges he faces for the alleged pump-and-dump of a pink sheets company, Global Development & Environmental Resources Inc. He claims he legally traded his shares as other people issued misleading news releases.
The U.S. Securities and Exchange Commission filed civil fraud charges against Mr. Mrakuzic and others on May 22, 2008. The SEC claimed that he made $1.2-million while misleading news releases boosted the company to $5.15. (All figures are in U.S. dollars.)
The SEC's complaint
The SEC filed the charges in U.S. District Court for the Middle District of Florida. In addition to Mr. Mrakuzic, the SEC named as defendants Michigan resident Anthony Cimini Sr., California securities lawyer Carmine Bua, Las Vegas residents Philip Pritchard and Pietro Cimino, and Florida resident Dante Panella.
The SEC claimed that Mr. Pritchard and Mr. Cimino touted Global Development with false and misleading news releases in August, 2005. They told investors the company was negotiating $80-million in projects, and that defence contracting firm Halliburton Co. had purchased its products.
At the same time, a newsletter called The Grip predicted a $20 price for the stock.
"The investing public responded immediately to this false information as Global's share price increased more than 67 percent, with the stock closing at its daily high of $3.00," the complaint alleged.
Mr. Mrakuzic, meanwhile, had acquired 2.7 million shares of the company with a backdated promissory note, the SEC claimed. The note was backdated by two years so it could be converted into free-trading shares.
Mr. Mrakuzic allegedly held the shares through Quantumvest Holdings, a private B.C. company he controlled. He transferred half of the stock to Mr. Panella, and sold the rest through an unidentified Canadian brokerage, for proceeds of $1.2-million, the SEC said.
In addition to the note allegations, the SEC claimed that Global Development misappropriated money it raised.
According to the complaint, the company raised $2.1-million privately and told investors it would use it for salaries, equipment purchases and other operating costs. Instead, Mr. Pritchard and Mr. Cimino allegedly used it to buy properties for themselves, including preconstruction condos at the Palms Casino in Las Vegas.
The SEC sought disgorgement of profits, appropriate civil penalties and penny stock bans.
Mrakuzic's motion to dismiss
Mr. Mrakuzic filed a motion to dismiss one of the two charges against him on Sept. 11, 2008. He says the SEC has not identified a single action that he took to pump the stock.
According to Mr. Mrakuzic, the SEC is asking the court to infer that he manipulated the stock simply because he profited from selling its shares. "The SEC has made no allegation that Mrakuzic even knew about the false information being released into the markets," the motion reads.
He also says the allegations over the backdated note should be dismissed, because the SEC is asking the court to find him liable for the actions of an unidentified "agent." The SEC said the agent worded a note agreement and sent a draft of the note to Mr. Cimini. The agent was not charged or named.
According to the motion, the SEC is trying to vicariously attribute the actions of that "agent" to Mr. Mrakuzic.
Mr. Mrakuzic faces two charges in the complaint, but he is only asking for one to be dismissed. He says the judge should drop one charge that alleges he made untrue statements. He is not asking the court to dismiss a charge he faces for the sale of unregistered securities.
Mrakuzic disciplined by IDA
Mr. Mrakuzic had a 10-year brokerage career in Vancouver that ended badly. He had worked at Wolverton Securities Ltd. from April 16, 1990, to Feb. 16, 1994, and at Pacific International Securities Inc. from Feb. 1, 1995, to Feb. 11, 2000.
During that time, he was disciplined by PI, later suspended and eventually fired by PI, and then investigated by the Investment Dealers Association.
In January, 1999, PI disciplined him for carrying out 30 undeclared short sales in a client's account. He had sold short four stocks contrary to direct instructions from his supervisor. PI required him to donate $2,500 to charity to redeem himself.
A year later, PI suspended him after an internal investigation revealed he helped a client circumvent a debt owed to PI by allowing the client to keep assets (stock) out of his (the client's) account. The client deposited the shares into the account of Mr. Mrakuzic's father.
He also admitted that he had failed to disclose his interest in a company called Autoco.com. The brokerage fired him on Feb. 11, 2000.
The IDA also investigated the matter, and eventually launched a case against him.
On Feb. 3, 2004, Mr. Mrakuzic agreed to pay $30,000 to settle the case. He also agreed to a one-year ban and to 12 months of close supervision as a condition of his reapproval.
BCSC records indicate he never returned to the brokerage industry. |
