Dante Panella
secinfo.com
JUNUM SHAREHOLDERS
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SEC target Mrakuzic loses motion to dismiss
2008-12-03 14:32 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-GDVE) Global Development & Environmental Resources
by Mike Caswell
The U.S. Securities and Exchange Commission has defeated a motion by former Vancouver broker Darko Mrakuzic, who had sought to have a pump-and-dump case against him dropped. Mr. Mrakuzic said that since he did not pump the stock in question, Global Development & Environmental Resources Inc., then he did not defraud anybody when he sold his shares.
The SEC filed the case on May 22, 2008. It claimed that Mr. Mrakuzic fraudulently acquired 2.7 million of the company's shares with a backdated note, and then dumped them as the stock climbed to $5.15. The SEC alleged that another defendant, Dante Panella, had arranged for a tout sheet to predict a $20 price for the company. (All figures are in U.S. dollars.)
Mr. Mrakuzic filed a motion to have the charges dropped on Sept. 11, 2008. He said that the SEC failed to identify a single action that he took to pump the stock.
Florida judge James Whittemore ruled against him in an order dated Nov. 26, 2008. The judge said that the SEC had alleged sufficient facts that, if true, would establish that Mr. Mrakuzic fraudulently dumped the stock.
The SEC claimed that Mr. Mrakuzic identified a shell company that Global merged with. He also signed a note that led to the company illegally issuing shares to his own private holding company, Quantumvest Holdings, the judge noted.
"While the SEC does not specifically allege that Mrakuzic had any involvement in the promotional campaign ... a strong inference is raised that Mrakuzic knowingly participated in the fraudulent scheme," the order reads.
With his motion to dismiss having failed, Mr. Mrakuzic must now file an answer to the allegations. Presumably a trial date or settlement will follow.
The judge has also denied a motion by Mr. Panella to have the case against him dropped. Mr. Panella had argued that he only introduced the company to a Florida newsletter writer and a public relations firm.
The SEC's complaint
The SEC filed a complaint against Mr. Mrakuzic on May 22, 2008, in U.S. District Court for the Middle District of Florida. The other defendants were Michigan resident Anthony Cimini Sr., California securities lawyer Carmine Bua, Las Vegas residents Philip Pritchard and Pietro Cimino, and Florida resident Dante Panella.
According to the suit, the men pumped Global from $1.79 to $5.15 between June and August of 2005 with misleading news releases and paid touts. Mr. Mrakuzic and Mr. Panella then made $1.2-million and $1.1-million respectively dumping the stock, the SEC claimed.
The news releases allegedly stated that the company was negotiating $80-million in projects, and that defence contracting firm Halliburton Co. was a client. The SEC said Mr. Pritchard and Mr. Cimini issued the news, even though they "knew Halliburton had never been a client and knew the company had no support for its current project backlog or project negotiation claims."
At the same time, Mr. Panella allegedly arranged for a newsletter called The Grip to publish an article on the stock. The article falsely stated that the company had booked sales of $67-million, and it predicted a price of $20 for the stock, the SEC said.
"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 SEC said.
Prior to this, Mr. Mrakuzic had acquired 2.7 million of the company's shares with a backdated promissory note, according to the complaint. He had the note backdated by two years so he could convert it into free-trading shares, according to the suit.
He transferred half of the stock to Mr. Panella, and both men sold their shares into the market, the SEC said.
During the selling, Mr. Panella allegedly told his broker that the stock would be "ridiculous" on Aug. 1, 2005. As predicted, it was just that; Global Development rose to $3 from $1.79 on volume of 472,600 shares. The company issued a letter to shareholders touting the purported Halliburton deal that day, and The Grip published its $20 price prediction as well.
Mr. Panella allegedly sold $311,000 worth of shares, before telling his broker to hold off because more news was coming.
In addition to the note allegations, the SEC also claimed that Global Development misappropriated money it raised. According to the complaint, the company raised $2.1-million privately in July, 2005, telling investors it had a $67-million contract backlog, including one worth $28-million with a company called Atlantic Land.
It failed to disclose that Atlantic Land was owned by Mr. Cimino, and that it did not actually do any business with Atlantic Land, the SEC said.
The SEC claimed that Mr. Cimino and Mr. Pritchard used the money they raised for personal enrichment, by buying a preconstruction condominium at the Palms Casino in Las Vegas and by paying for Mercedes vehicles.
The SEC sought penny stock bans, disgorgement of profits and appropriate civil penalties. It acknowledged the assistance of the B.C. Securities Commission in filing the case.
Mrakuzic fined by the IDA
Between 1990 and 2000, Mr. Mrakuzic was a broker for Wolverton Securities Ltd. and Pacific International Securities Inc. His career ended when he was fired by PI and later fined by the Investment Dealers Association.
PI first disciplined him in January, 1999, after he carried out 30 undeclared short sales in a client's account. He sold short four of those stocks contrary to direct instructions from his supervisor. When PI discovered what he had done, it made him donate $2,500 to charity to redeem himself.
Unredeemed, one year later, PI suspended him after an internal investigation revealed that he had helped a client circumvent a debt owed to the brokerage. The client wanted to transfer some shares to PI and have Mr. Mrakuzic sell them.
The problem was, the client's account at PI had a debit of $61,449 at the time. To get around this, Mr. Mrakuzic allowed the client to deposit the shares to the account of Mr. Mrakuzic's father. He then sold the stock from that account, and on the client's instructions, sent the proceeds to the U.S.
The IDA investigated his handling of the transaction, and eventually launched a case against him. On Feb. 3, 2004, he agreed to pay $30,000 to settle that case and to a one-year ban from working in the brokerage industry.
According to BCSC records, he has not worked at a Vancouver brokerage since.
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