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Securities and Exchange Commission
Washington, D.C.
Securities Act of 1933
Release No. 8299 / October 2, 2003
Securities Exchange Act of 1934
Release No 48589 / October 2, 2003
Administrative Proceeding
File No. 3-11293
In the Matter of Rubin Investment Group, Inc., et al.
The Securities and Exchange Commission today instituted public administrative and cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against:
Rubin Investment Group, Inc. ("RIG"), a California corporation with offices in New York, NY, Los Angeles, CA, and Lake Helen, FL. RIG holds itself out as an investment bank.
Scott Halperin ("Halperin"), age 41, a resident of Manalapan, New Jersey. He is Chairman of the Board and Chief Executive Officer of The Classica Group, Inc. ("Classica"), and the former Chairman of the Board for "stereoscape.com, inc." which was the predecessor company to Marx Toys and Entertainment Corp. ("MRXT").
Daniel Rubin ("Rubin"), age 31, a resident of Lake Helen, Florida. Rubin is president of RIG.
Andrew Saksa ("Saksa"), age 37, a resident of Lake Helen, Florida. Saksa is an employee of RIG.
Robert LoMonaco ("LoMonaco"), age 56, a resident of Monmouth Beach, New Jersey. He was appointed Chief Executive Officer of MRXT on or about September 11, 2003.
In the Order Instituting Proceedings ("Order"), the Division of Enforcement alleges that RIG, Halperin, Rubin, Saksa, and LoMonaco (collectively "the Respondents") engaged in the following unlawful conduct:
From in or about August 2003 through the present, Respondents have engaged in fraudulent and manipulative practices to inflate artificially the demand for, and the share price of, Classica and MRXT, two penny stocks. The respondents have engaged in this misconduct so that they can profit by selling their own shares of Classica and MRXT stock at inflated prices.
Classica
As part of this conduct, Respondents Halperin, RIG, Rubin, and Saksa schemed to manipulate the price of Classica stock by transferring shares of purportedly free-trading Classica stock to accounts controlled by RIG in exchange for RIG's agreement to artificially inflate Classica's stock price. On August 29, 2003, Classica, through Halperin, entered into a purported "merger and acquisition advisor agreement" with RIG for the stated purpose of effecting a merger or other business combination between Classica and another corporate entity. The agreement called for Classica to give RIG an option to purchase 1.2 million shares of Classica stock at a discount. On August 27 and 29, RIG received a total of 1.8 million shares from Classica. In truth, neither Halperin, RIG, Rubin nor Saksa intended that RIG would perform services regarding Classica other than to artificially inflate the price of Classica stock.
Halperin's transfer of the 1.8 million shares from Classica to RIG was effected pursuant to a Form S-8 Registration Statement that Halperin caused Classica to file with the Commission on or about August 27, 2003. The Form S-8 purported to register shares issued pursuant to Classica's 2002 Incentive and Non-Qualified Stock Option Plan, the stated purpose of which was to provide incentive for Classica employees by providing them with an opportunity for investment.
The Division of Enforcement alleges that Classica's registration of the 1.8 million shares on Form S-8 was fraudulent and violated the registration provisions of the Securities Act because the true purpose of RIG's engagement was to inflate Classica's stock price and the purpose of Classica's issuance of the 1.8 million shares was to compensate RIG, Rubin, and Saksa for manipulating Classica stock. In stating that the Incentive and Non-Qualified Stock Option Plan had the purpose of providing an incentive for Classica employees, the Form S-8 was false and misleading. At or around the time of these transactions described above, Classica's stock price increased 100% in one day on August 27, 2003.
Moreover, on September 12, 2003, Halperin caused Classica to file a Form 8-K announcing Classica's relationship with RIG and stating that the purpose of the "merger and acquisition advisor agreement" was for RIG to effect an acquisition of or other business combination between Classica and other corporate entities. This representation was false, because the sole purpose of RIG's affiliation with Classica was to help boost Classica's stock price.
MRXT
Respondents Halperin, RIG, Rubin, Saksa, and LoMonaco schemed to manipulate the price of MRXT stock by transferring shares of purportedly free-trading stock to accounts controlled by RIG in exchange for RIG's agreement to artificially inflate MRXT's stock price. On or about August 29, 2003, MRXT, at the direction of Halperin, entered into a purported "Investment Banking Agreement" with RIG in which RIG agreed to provide "merger and acquisition advisory and consulting services" to MRXT in exchange for MRXT's transfer of 6.8 million discounted shares of MRXT stock. In truth, neither Halperin, RIG, Rubin nor Saksa intended that RIG would perform any services regarding MRXT other than to artificially inflate the price of MRXT stock.
At Halperin's direction, MRXT filed a Form S-8 Registration Statement on August 29, 2003, purportedly registering 8 million shares of common stock issuable under its 1998 Incentive and Non-Qualified Stock Option Plan, the stated purpose of which was to provide incentive for MRXT employees by providing them with an opportunity for investment. While 6.8 million shares were transferred to RIG, the additional 1.2 million shares were transferred to Halperin and two other Classica employees. At or around the time of these transactions, MRXT's stock price began to move. On September 18, 2003, MRXT's price increased 100%, from 7 to 14 cents on no news.
The Division of Enforcement alleges that MRXT's purported registration of the 8 million shares on Form S-8 was fraudulent and violated the registration provisions of the Securities Act, because the purpose of RIG's engagement and Halperin's involvement was to inflate MRXT's stock price and the sole purpose of the issuance of discounted stock to RIG and Halperin was to compensate RIG, Halperin, Rubin, and Saksa for manipulating MRXT stock. In addition, LoMonaco, MRXT's CEO, knew that Halperin engaged RIG, Rubin and Saksa to inflate MRXT's stock price and negotiated the amount of funding that they would provide to MRXT in exchange for the purportedly free-trading stock RIG received. Shortly thereafter, LoMonaco acknowledged that he would pay Halperin a kickback from MRXT for having procured RIG's investment in the company.
Violations
The Order alleges that Respondents RIG, Halperin, Rubin, Saksa and LoMonaco willfully violated, and committed or caused the violation of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The Order further alleges that Respondents RIG, Halperin, Rubin and Saksa willfully violated, and committed or caused the violation of, Sections 5(a) and 5(c) of the Securities Act,
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Respondents an opportunity to dispute these allegations, and to determine what, if any, remedial sanctions should be imposed against Respondents. The Order further provides that the administrative law judge will issue an Initial Decision no later than 300 days from the date of service of the Order.
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