SEC settles with Global Development's Panella
2009-06-15 14:25 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 reached a $457,574 settlement with Dante Panella, one of six defendants in the alleged Global Development & Environmental Resources Inc. pump-and-dump. (All figures are in U.S. dollars.) The SEC said that Mr. Panella provided false and misleading information to a newsletter called The Grip, which wrote articles that helped push the stock from $1.79 to $5.15.
On June 11, 2009, the SEC filed a proposed consent judgment against Mr. Panella in the Middle District of Florida. According to the judgment, he has agreed to pay a $130,000 civil penalty, $314,542 in disgorgement of profits, plus interest. In addition, he has agreed to a five-year ban from penny stocks and to an order preventing future violations of the U.S. Securities Act. In settling the case, Mr. Panella did not admit to any wrongdoing.
Mr. Panella's settlement leaves former Vancouver broker Darko Mrakuzic as the final outstanding defendant. The SEC claimed that Mr. Mrakuzic made $1.2-million dumping the stock after the company falsely stated in news releases and tout sheets that it had $67-million in contracts. Like the other defendants, he participated in mediation in an attempt to settle out of court, but unlike the others, he was unable to reach an agreement. The other four defendants, Michigan resident Anthony Cimini Sr., California securities lawyer Carmine Bua, and Las Vegas residents Philip Pritchard and Pietro Cimino, consented to judgments permanently banning them from participating in penny stock offerings.
SEC's complaint
The SEC filed a civil complaint against Mr. Mrakuzic and the others on May 22, 2008, in the Middle District of Florida. The suit alleged that the men pumped Global Development between June and August, 2005, with false and misleading news releases and newsletter coverage. The SEC said Mr. Mrakuzic and Mr. Panella then made $1.2-million and $1.1-million dumping the stock.
The scheme began in June, 2005, when Mr. Mrakuzic received 2.7 million unrestricted shares of Global Development's predecessor by improperly converting a promissory note, the SEC claimed. The regulator said he had backdated the note by two years and had obtained a legal opinion from Mr. Bua that allowed him to convert the note into shares. He then transferred half of the stock to Mr. Panella, and held the rest through a private B.C. company that he controlled, Quantumvest Holdings Ltd., the SEC claimed. The suit identified Quantumvest as a relief defendant, which means the SEC could ask the judge to order it to pay out any money it received.
Once Mr. Panella and Mr. Mrakuzic had their shares, the company started touting sales that it did not have, according to the complaint. On Aug. 1, 2005, The Grip published an article falsely stating that the company had booked $67-million in sales, and predicted the stock would hit $20, the SEC said. The same day, the company's chief executive officer, Mr. Pritchard, allegedly wrote a news release claiming that defence contracting firm Halliburton Co. had bought its products.
Mr. Panella and Quantumvest then sold their illegally obtained shares into the market, the SEC said. According to the complaint, Mr. Panella told his broker that the stock would be "ridiculous" on Aug. 1, 2005, the day The Grip predicted a $20 price for the company. As predicted, the stock was very active that day, and Mr. Panella sold 241,000 shares for proceeds of $440,000, the complaint stated.
In addition to the pump-and-dump allegations, the SEC claimed that Global Development misappropriated $2.1-million that it raised in private placements in July, 2005. When it raised the money, the company told potential investors that it had $67-million in contracts, including one worth $28-million with a company called Atlantic Land, the SEC said. The company did not tell investors that Atlantic Land's owner was Global Development's president, Mr. Cimino. The company allegedly said it would use the money for salaries, equipment purchases, rent and other expenses. Instead, Mr. Pritchard and Mr. Cimino used it to buy residential properties, including a condominium at the Palms Casino in Las Vegas, and $1-million worth of Mercedes vehicles, the complaint stated.
The SEC sought penny stock bans, disgorgement of profits and appropriate civil penalties. In filing the case, it acknowledged the assistance of the B.C. Securities Commission.
Mrakuzic's answer
Mr. Mrakuzic filed his answer to the complaint on Dec. 16, 2008. In it, he denied any wrongdoing, and said that he relied on an opinion prepared by Mr. Bua, an experienced securities lawyer, which stated that his shares could be traded. He admitted that he sold the shares through his private company, Quantumvest. The case is scheduled for trial by jury on Oct. 5, 2009.
Mrakuzic's Vancouver brokerage career
Mr. Mrakuzic was a broker at Vancouver firms Wolverton Securities Ltd. and then Pacific International Securities Inc. between 1990 and 2000. He stopped working as a broker when PI fired him for allowing a client to circumvent a debt. The Investment Dealers Association later fined him $30,000 (Canadian) for his actions and banned him from working in the industry for one year.
The fine stemmed from a transaction for a client whose account had a debit of $61,449 (Canadian). The client wanted to transfer some shares to PI and have Mr. Mrakuzic sell them, but he did not want to deposit them to his account because of the debit position. To get around this, Mr. Mrakuzic deposited the shares in the account of Mr. Mrakuzic's father. He then sold the shares from that account and sent the proceed to the U.S. for the client. |
