Broker's Personal Information Currently Approved Registrations with: Current Employment with NASD Member Firm(s)
SHELDON SAUL TRAUBE
CRD #809594
CA, CT, FL, MA, MI, NASD, NJ, NY, PA, TX, WA FIRST LIBERTY INVESTMENT GROUP, INC.
PHILADELPHIA , Pennsylvania
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Previous Employment
M. H. MEYERSON & CO., INC.SHELDON S. TRAUBE - CONSULTING & SECURITUNEMPLOYEDBEAR STEARNSFORBES INC - FORBES INVESTMENT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 15508 / September 25, 1997
Accounting and Auditing Enforcement
Release No. 966 / September 25, 1997
SEC v. Ferrofluidics Corporation, Ronald Moskowitz, Jan R. Kirk, Stephen P.
Morin, Jerome Allen, Bruce S. Moody, and The 1991 RPM Irrevocable Trust,
Civ. No. 97-Civ-7174 (S.D.N.Y.) (September 25, 1997)
On September 25, 1997 the Securities and Exchange Commission filed a
civil fraud action in the United States District Court for the Southern
District of New York against Ferrofluidics Corporation ("Ferrofluidics"),
Ronald Moskowitz, Jan R. Kirk, Stephen P. Morin, Jerome Allen, Bruce S.
Moody, and The 1991 RPM Irrevocable Trust (the "RPM Trust"). The
Commission's complaint alleges that from as early as July 1991 through
April 1993, Ferrofluidics, a NASDAQ-listed company, materially inflated its
revenues and earnings in financial statements filed with the Commission and
in other disclosures made to the investing public. The complaint alleges
that Ronald Moskowitz, Ferrofluidics' former chief executive officer,
chairman of the board of directors and largest shareholder, was the
architect of the fraudulent scheme, and that Jan Kirk, Stephen Morin and
Jerome Allen participated in the scheme and concealed the fraud from
Ferrofluidics' auditors. The complaint also alleges that defendant Bruce
Moody, the trustee of defendant RPM Trust, helped Moskowitz conceal his
beneficial interest in the Ferrofluidics shares held by the RPM Trust, and
facilitated Moskowitz's sale of Ferrofluidics stock valued at approximately
$13 million during the time of the fraudulent conduct.
The complaint alleges that defendants prepared and disseminated a
series of materially false and misleading statements concerning, among
other things, a 1992 sham private placement of stock by the company, sales
of the company's products, and equity investments made by the company.
Defendants also allegedly disseminated favorable projections concerning
Ferrofluidics' future business prospects and profitability, without having
any reasonable basis for such projections. The complaint alleges that, as
a result of defendants' activities, potential and actual investors in
Ferrofluidics were led to believe that Ferrofluidics was a prosperous
company with marketable and attractive products, and tremendous
opportunities for rapid growth and earnings. In fact, Ferrofluidics was
then experiencing significant losses and encountering problems developing
and manufacturing its products.
The complaint alleges that during the relevant period Moskowitz
(directly and through trusts that he controlled) and Allen sold
Ferrofluidics stock worth millions of dollars, in a series of private
placements and open market transactions, while in the possession of
material, nonpublic information about the company.
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The complaint alleges that the defendants (except Moody) violated the
antifraud provisions of the federal securities laws. Ferrofluidics,
Moskowitz, Kirk and Morin also violated certain reporting, internal
controls and record-keeping provisions of the federal securities laws. The
complaint also alleges that Allen violated Section 17(b) of the Securities
Act of 1933 by publishing and circulating The International Investor, a
newsletter that ran numerous articles recommending the securities of
Ferrofluidics, without disclosing that he had been compensated by the
company. The complaint also alleges that Moskowitz and the RPM Trust
violated Section 13(d) of the Securities Exchange Act of 1934 and Rule 13d-
2 thereunder by failing to make the disclosures and filings required of
persons who directly or indirectly acquire a beneficial interest of 5% or
more of any class of a registered equity security. For the same reasons,
Kirk and Morin allegedly violated Section 13(d) of the Exchange Act and
Rule 13d-1 thereunder.
The complaint alleges that Moody aided and abetted Moskowitz's and the
RPM Trust's violations of the antifraud provisions by helping Moskowitz
conceal his beneficial interest in the Ferrofluidics shares held by the
Trust, and by permitting Moskowitz's sales of Ferrofluidics shares while
Moskowitz possessed material nonpublic information about the company.
Moody allegedly aided and abetted the RPM Trust's violation of Section
13(d) of the Exchange Act and Rule 13d-2 thereunder by failing to make the
required disclosure concerning the Ferrofluidics shares beneficially owned
by Moskowitz in the Trust's Schedules 13D filed with the Commission.
The Commission is seeking injunctive relief, disgorgement of
defendants' ill-gotten gains, prejudgment interest, the imposition of civil
penalties against Moskowitz, Kirk, Allen, Morin and the RPM Trust, and
officer and director bars against Moskowitz, Kirk and Morin.
Simultaneously with the filing of the complaint, and without admitting or
denying the Commission's allegations, Ferrofluidics and Morin agreed to the
entry of permanent injunctions. Morin also consented to pay a $25,000
civil penalty, and to the entry of an order barring him for five years from
serving as an officer or director of a public company. Morin has also
offered to consent to a five-year bar from practicing as an accountant
before the Commission pursuant to Commission Rule of Practice 102(e).
In a related cease-and-desist proceeding (In the Matter of Kedar
Gupta, Alvan Chorney, and Herbert Moskowitz, Admin. Proc. File No. 3-9435),
the Commission's Division of Enforcement alleges that Gupta, Chorney and
Herbert Moskowitz failed to properly report on Schedules 13D their
ownership of Ferrofluidics shares, and that Gupta caused Ferrofluidics'
violation of the antifraud provisions of the Exchange Act by obtaining a
letter from a customer, containing materially false and misleading
information about the status of the customer's order, knowing that the
letter would be provided to Ferrofluidics' auditors.
The Commission previously instituted four related administrative
proceedings: In the Matter of Helen T. Chalut and Saleem Noorani, Admin.
Pro. File No. 3-9344 (July 1, 1997); In the Matter of Paul Y. Okuda,
Stephen A. Thorpe and David J. Chester, Admin. Pro. File No. 3-9345 (July
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1, 1997); In the Matter of Dickinson & Co. and Marshall T. Swartwood,
Admin. Pro. File No. 3-9321 (May 28, 1997) and In the Matter of Sheldon S.
Traube and George F. Sweeney, Admin. Pro. File No. 3-9283 (March 27, 1997).
In the Matter of Helen T. Chalut and Saleem Noorani, a settled cease-
and-desist proceeding, the Commission found that Chalut and Noorani caused
violations of the antifraud provisions based, respectively, on Chalut's
role in the sham private placement and Noorani's provision, at
Ferrofluidics' request, of back-dated letters relating to a commission
schedule that never existed, which Ferrofluidics provided to its auditors
as support for improper accounting entries. The Commission also found that
Noorani violated Section 15(a) of the Exchange Act for assisting
Ferrofluidics in selling 1,155,00 of its shares when he was not registered
as a broker-dealer. Chalut and Noorani were ordered to pay disgorgement of
$21,000 and $65,000, respectively.
In the Matter of Paul Y. Okuda, Stephen A. Thorpe and David J.
Chester, a contested administrative and cease-and-desist proceeding, the
Division alleges that Okuda and Chester violated or caused, and willfully
violated, aided, abetted, counseled, commanded, induced or procured; and
Thorpe violated or caused violations of the antifraud provisions based on
their participation as nominees in the sham private placement. The Order
also alleges that Chester, for commissions, assisted Ferrofluidics in
selling 365,000 of its shares when he was not registered as a broker-
dealer, in violation of Section 15(a) of the Exchange Act. The Division
seeks disgorgement and prejudgment interest against all three respondents
and civil money penalties and administrative sanctions against Okuda and
Chester.
In the Matter of Dickinson & Co. and Marshall T. Swartwood, a
contested administrative and cease-and-desist proceeding, the Division
alleges that Dickinson and Swartwood caused and willfully aided, abetted,
counseled, commanded, induced or procured violations of Section 17(b) of
the Securities Act in connection with Dickinson's publication of Sheldon
Traube's research reports on Ferrofluidics, which failed to disclose that
Ferrofluidics had paid for the reports or the amount of payment. The
Division seeks administrative sanctions and civil money penalties against
both respondents.
In the Matter of Sheldon S. Traube and George F. Sweeney, a settled
administrative and cease-and-desist proceeding, the Commission found that
Traube violated Section 17(b) of the Securities Act for his role in the
publication of the Ferrofluidics research reports discussed above. The
Commission found that Moskowitz arranged to have Sweeney bill Ferrofluidics
for Traube's work on the first report and to pay Traube after Sweeney's
bill had been paid. The Commission found that Sweeney caused Traube's
violation and ordered Traube and Sweeney to pay disgorgement and
prejudgment interest. Traube was also censured. |
