NEW JERSEY SECURITIES LAWYER WILLIAM LEVY ORDERED TO PAY $1.2 MILLION INTO COURT'S REGISTRY IN ELECTRO OPTICAL SYSTEMS CORP. CASE
On January 7, United States District Court Judge Denise Cote issued an order requiring New Jersey securities lawyer William N. Levy to pay $1,292,000 into the Court's registry pending trial on the merits of the Commission's action, SEC v. Cavanagh et al ., 98 Civ. 1818 (S.D.N.Y) (DLC). Levy consented to the order after the Commission discovered that Levy, whom the Commission has alleged participated in a scheme to manipulate the stock price of Electro Optical Systems Corp. (EOSC), had failed to disclose in his court-ordered accounting that he had profited by over $560,000 by selling EOSC shares during the manipulation. Levy previously was enjoined in 1976 for violating the antifraud and registration provisions of the federal securities laws in SEC v. Management Dynamics, Inc., 73 Civ. 2642 (S.D.N.Y.), Lit. Release 7445 (June 16, 1976), a similar case involving the unregistered sale of securities and stock manipulation.
The $1,292,000 will bring the total deposited in the registry of the Court to nearly $2 million. In addition, approximately $6,000,000 is frozen in bank accounts in Spain and Switzerland pending disposition of the Commission's case. Other funds traced to the defendants remain frozen in U.S. banks and brokerage accounts.
On March 13, 1998, the Commission filed its complaint and obtained a temporary restraining order against Levy, Thomas Cavanagh, Frank Nicolois and 10 other defendants and 19 relief defendants by alleging violations of the antifraud and registration provisions of the federal securities laws in connection with the defendants scheme to manipulate EOSC's stock price. The complaint alleges that the defendants controlled the supply of EOSC stock, inflated EOSC's share price from $.50 to over $5.00 in one day, and distributed false information about the company in press releases and Internet newsletters. As a result, the defendants reaped over $12,000,000 in profits by selling EOSC shares on the Internet, to primarily small, on-line investors.
On April 20, 1998, Judge Cote entered a preliminary injunction against the primary defendants pending trial on the merits. The 122-page District Court opinion stated that defendants Levy an Cavanagh "set in motion a plan . . . designed to line their pockets." In July 1998, the Commission amended its complaint, adding four defendants and seven relief defendants. On September 2,
1998, the U. S. Court of Appeals for the Second Circuit upheld the District Court's decision granting the preliminary injunction (155F.3d 129, 1998). In October 1998, the Commission's case was partially stayed by the District Court at the request of the defendants in view of a criminal investigation by the United States Attorney's Office for the Southern District of New York.
In addition to the funds frozen in the U.S. and abroad, to date, the Commission has recovered $2.3 million in disgorgement, interest and penalties from settling defendants, relief defendants and potential relief defendants. Two of the primary defendants, George Chachas and Maier Lehmann, have consented to the entry of injunctions alleging violations of the antifraud and registration provisions of the federal securities laws. Chachas paid $493,000 and Lehmann paid $630,000 in disgorgement and penalties. For further information see
LR-15669 and LR-15715. [SEC v. Cavanagh, et al. 98 Civ. 1818, SDNY, DLC] (LR-16035)
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