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
sec.gov
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) |
