Here's the summary from today's SEC Digest:
SEC SUES WELL-KNOWN PENNY STOCK TRADER AND ACCOMPLICES FOR FRAUD FOR ROLE IN SYSTEMS OF EXCELLENCE MANIPULATION; SEVEN OTHERS CHARGED WITH REGISTRATION VIOLATIONS; AMOUNT RECOVERED FOR VICTIMS NOW APPROACHES $15 MILLION
The Commission announced that it filed two lawsuits on January 30, 2001, against a total of ten defendants to recover ill-gotten gains arising from the manipulation of Systems of Excellence, Inc. (SOE) stock.
The Complaint Against Rosen, Diversified, Radcliffe, and Calvo
The Commission filed its first complaint against Jerome "Jerry" Rosen (Rosen), a well-known penny stock trader working from the Florida branch of J. Alexander Securities, Inc., Joseph D. Radcliffe (Radcliffe), William A. Calvo III (Calvo), and Diversified Corporate Consulting Group (Diversified), a company controlled by Radcliffe and Calvo, in the United States District Court for the Southern District of Florida. The complaint seeks permanent injunctions, disgorgement of all ill-gotten gains, prejudgment interest, and civil penalties. The complaint alleges that Rosen accepted a bribe in the form of SOE stock from Charles Huttoe (Huttoe), then the President of SOE, to manipulate the price of SOE stock. According to the complaint, Rosen conspired with Huttoe, Sheldon Kraft (Kraft), a promoter previously charged in this scheme, and defendants Radcliffe and Diversified to obtain an exclusive supply of SOE stock, at favorable prices, to support his fraudulent and manipulative trading activity. Rosen, the trader at J. Alexander exclusively responsible for the firm's market making activity in SOE, sold stock short to other market makers, only to cover his sales at no risk with stock supplied at various times by Kraft, Huttoe, Radcliffe and Diversified. The complaint alleges that Rosen earned $112,468 in compensation from his fraudulent SOE market-making activities at J. Alexander, and that Rosen also received ill-gotten gains of $503,496 from the unregistered resale of the SOE stock he received as bribes from Huttoe. The complaint further alleges that Radcliffe, Diversified and Calvo also resold SOE stock through unregistered, non-exempt transactions for unlawful profits of at least $2,457,118.
Without admitting or denying the Commission's allegations, defendant Radcliffe consented to the entry of an order permanently enjoining him from future violations of the antifraud and securities registration provisions of the federal securities laws, and requiring him to: (i) disgorge $383,586 plus prejudgment interest thereon of $156,133, (ii) surrender various worthless securities, (iii) disgorge the appraised fair market value of a limousine currently in his possession, and (iv) pay a $75,000 civil penalty.
The Complaint Against WSMG, Ciofalo, Moore, Clines, DeConde, and Connell
The Commission's second complaint, filed in the United States District Court for the Southern District of New York, alleges that Defendants Wall Street Management Group (WSMG), Robert Ciofalo (Ciofalo), Calvin Moore (Moore), Thomas Clines (Clines), Heidi DeConde Clines (DeConde), and Kathleen Connell (Connell) unlawfully resold SOE securities in violation of the registration provisions of the federal securities laws. The complaint alleges that, collectively, defendants reaped approximately $860,077 in ill-gotten gains (i.e., net trading profits) when they resold these securities into an artificially inflated market that was being manipulated by others.
The Commission's complaint alleges that in multiple transactions from January through March 1996, defendants WSMG, Ciofalo, Moore, Clines, DeConde, and Connell acquired a total of 920,000 newly-issued, facially-unrestricted shares of SOE common stock by allegedly exchanging services for the shares. In addition, defendant Connell also acquired another 209,484 newly-issued shares of SOE common stock in a so-called "private placement" in early 1996.
Because none of the shares acquired in these various transactions were registered or exempt from registration, defendants violated the strict liability registration provisions of the federal securities laws when they resold their shares or, in the case of Moore, when he directed the resale of shares held by a nominee. In its complaint, the Commission seeks a permanent injunction against future violations of the securities registration provisions, disgorgement with prejudgment interest, and a civil penalty against each defendant. [SEC v. Jerome E. Rosen, Diversified Corporate Consulting Group, Joseph D. Radcliffe, and William A. Calvo III, Civil Action No. 01-0369-CIV-Middlebrooks, S.D. Fla.]; [SEC v. Wall Street Management Group, Robert Ciofalo, Calvin Moore, Thomas Clines, Heidi DeConde Clines, and Kathleen Connell, Civil Action No. 01-Civ-0726, GD, SDNY] (LR-16881)
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