SEC charges Plasticon´s Turek with fraud
By Mike Verespej
PLASTICS NEWS STAFF
plasticsnews.com
WASHINGTON (Oct. 7, 3:45 p.m. EDT) -- The Securities and Exchange Commission has charged the owner of bankrupt Plasticon International Inc. with fraud for misappropriating for personal use at least $2.8 million of the $8.2 million to $11.2 million the company raised from at least 30 investors — capital that the company had said would be used to purchase equipment and acquire other companies.
The funds were raised in an unregistered, multistate securities offering between January 2005 and April 2007, according to SEC.
The complaint was filed Sept. 30 in U.S. District Court in Lexington, Ky., against James Turek, who has been chairman, chief executive officer, president and majority stockholder of the company since 1988. Plasticon filed for bankruptcy May 16, 2007, less than 18 months after it acquired injection molder and thermformer Pro-Mold Inc. of St. Louis.
Since May 2004, Plasticon, according to the SEC, has “purported to be engaged” in manufacturing concrete accessories, mostly specifically plastic rebar supports, from recycled plastics. Turek had complete control over Plasticon’s affairs until the appointment of a bankruptcy trustee last October.
The SEC complaint also said Turek and Plasticon misled investors by issuing press releases between May 2005 and April 2006 that were “false and misleading” about both its financial conditions, patent ownership and value of patents and a share buyback program that never existed.
Attempts to reach Turek and Plasticon were unsuccessful, as the company’s phone numbers are no longer in service and Plasticon no longer has a Web site.
The false statements, according to SEC, triggered dramatic increases in the company’s stock, even though it never rose higher than $0.0185, compared to an average closing price of $0.003 from Nov. 1, 2004 to April 30, 2005. It also triggered an average trading volume of more than 39.6 million shares between May 1, 2005 and April 30, 2006, compared to an average trading volume of less than 8 million shares in the previous six months. The SEC suspended trading in the stock Sept. 21, 2007, and revoked the company’s securities registration two months later.
According to the complaint, Plasticon issued four press releases that stated that the company achieved profitability in the second quarters of 2005. But its filings with SEC for that quarter — filed nearly one year late on July 27, 2006, showed a net loss of $3 million on sales of $135,244. The company then lost nearly $11 million in the following quarter on sales of $135,244.
“Plasticon did not even have a bank account until February 2006,” according to the complaint.
In addition, according to the SEC complaint, the company issued eight press releases in that same time frame about a share restructuring program that would retire 200 million shares without any dilution for shareholders. Instead, Plasticon actually increased the number of its shares from 6 billion in May 2006 to 9.4 billion in February 2007.
Further, the company issued press releases that it had four patents, with a combined value of between $16 million and $20 million, when, according to the complaint, “United States and Canadian patent records show that Plasticon has never owned a patent.”
“Plasticon did not own, or have rights to, any of the four patents for which it claimed ownership,” said the complaint filed with the court. “Turek himself had assigned three of those four patents to his sons” and to another company he controlled “before the press releases went out,” according to SEC. The fourth patent had lapsed a year before the first press release about the patents was issued.
The complaint filed with the court said Turek used “at least $800,000” of the proceeds raised from investors for matters related to his personal bankruptcy and that that he transferred “at least $1.8 million” to two other companies he owned or controlled — Promotional Containers Inc. and Telco Blue Inc.
SEC said Plasticon would issue shares to Turek or a third company he owned, LexReal Co. LLC, and that he and LexReal then would sell those shares a short time later to investors in exchange for cash. “Turek also ‘loaned’ some of the proceeds back to Plasticon with interest, and gave some of the proceeds to one or both of his sons,” the complaint charged.
SEC’s lawsuit seeks to obtain a “sworn accounting” of the proceeds from the securities offering, and have all the companies involved give back “all ill-gotten gains.” It also seeks a civil penalty against Turek and to bar him from serving as an officer or director of public company, and to impose a restraining order to prevent him or Plasticon from violating federal securities laws.
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