From today's SEC Digest:
CIVIL INJUNCTIVE ACTION COMMENCED AGAINST PUBLIC RELATIONS FIRM CORPORATE RELATIONS GROUP, INC AND SIXTEEN OTHER DEFENDANTS FOR SECURITIES FRAUD IN CONNECTION WITH THE TRADING AND PROMOTION OF THE STOCK OF 15 MICROCAP COMPANIES
On September 27, the Commission filed a civil injunctive action in the United States District Court for the Middle District of Florida against 17 defendants alleging securities fraud in connection with the trading and promotion of the stock of at least 15 different microcap companies. The defendants include Corporate Relations Group, Inc., a Winter Park, Florida-based public relations firm, and it president Roberto E. Veitia. The Commission alleges that the defendants realized profits of at least $20 million in connection with their illegal activity, which began at least as early as September 1994 and continued beyond December 1996. The Commission is seeking injunctions, disgorgement and fines.
The complaint alleges that CRG, Veitia and two of Veitia's associates, James W. Spratt III and James A. Skalko, obtained free or deeply discounted securities from public companies in return for touting the companies. These defendants then sold these securities while they recommended them as good investments. Also, while touting one client, these defendants also offered and paid bribes to registered representatives to push the stock to their customers. The complaint alleges that the publications fraudulently failed to disclose the receipt of securities as compensation, the selling activity by the defendants, or the bribes that were paid.
The complaint alleges that Veitia used two Costa Rican entities to acquire securities. The Commission alleges that Veitia and Jose Antonio Gomez Cortes, the president of Fondo de Adquisiciones E Inversiones Internacionales XL, S.A. and C.A. Oportunidad, S.A., defrauded issuers by falsely representing that Fondo and Oportunidad were bona fide offshore purchasers when, in reality, they acted as fronts for CRG and Veitia.
The complaint alleges that CRG, Gulf Atlantic Publishing, Inc., Veitia, Spratt, Skalko, Jack R. Rodriguez, Fondo, Oportunidad, Gomez, Michael Parnell, and Ammonia Hold, Inc. violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act). The complaint alleges that CRG, Gulf Atlantic, Veitia, Spratt, and Skalko violated Section 17(b) of the Securities Act. The Commission is charging CRG, Stratcomm Media Ltd., Veitia, Spratt, Skalko, Fondo, Oportunidad, Gomez, Parnell, Ammonia Hold, New Concepts L.L.C., Arnold Zousmer, Charles J. Lidman, CJL Corporation, Pow Wow, Inc., and Rodriguez with violating Section 5 of the Securities Act. The Commission is charging CRG, Stratcomm, Spratt, Skalko, and Rodriguez with violations of Section 15(a) of the Exchange Act. Finally, the complaint alleges that Stratcomm and Veitia are liable for all of CRG's violations, as controlling persons of CRG, under Section 20 of the Exchange Act. [SEC v. Corporate Relations, et al., Civil Action No. 99-1222-CV-22-A, M.D. Fla., Orlando] (LR-16294)
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