UNITED STATES OF AMERICA
| ORDER GRANTING THE DIVISION OF ENFORCEMENT'S MOTION TO MODIFY THE ORDER INSTITUTING PROCEEDINGS TO WITHDRAW DISGORGEMENT AND CIVIL PENALTIES CLAIMS AGAINST ALL RESPONDENTS|
On June 24, 2000, the Commission instituted proceedings against the Respondents set forth in the caption above. 1 The Order Instituting Proceedings ("OIP") alleged that, in connection with the manipulation of the securities of certain issuers and the payment of bribes to securities salespersons to sell these securities to their retail customers, Respondents willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The OIP sought disgorgement, prejudgment interest, and civil penalties, among other sanctions, against the Respondents.
All the Respondents were also indicted. On July 27, 2000, the administrative law judge stayed this proceeding at the request of the Office of the United States Attorney. Since then, all of the Respondents have pleaded guilty.
To date, twenty-eight of the Respondents in this proceeding have been sentenced. With one exception, 2 each Respondent who has been sentenced has been ordered to pay restitution and, in some instances, a criminal fine. The criminal courts have ordered that any restitution paid by the Respondents be distributed to injured investors.
In November 2002 and May 2003, the law judge lifted the stay of proceedings as to the Respondents, except William F. Palla. Simultaneously with this motion, filed on August 19, 2003, the Division filed with the law judge a motion for default or summary disposition against all the Respondents, except Palla. The motion seeks cease-and-desist orders and broker-dealer and penny stock bars against Respondents.
In this motion, the Division seeks to modify the OIP to withdraw claims for disgorgement, prejudgment interest, and civil money penalties. None of the Respondents have responded to the Division's motion.
The Division states that it seeks disgorgement and civil penalties even where there are parallel criminal proceedings to preserve monetary claims in the event the criminal sanctions are insufficient. The Division believes that the withdrawal of the claims for disgorgement and civil penalties is appropriate in this proceeding. The Division notes that, in most instances here, the criminal court ordered the Respondents to pay restitution that exceeded the alleged ill-gotten gains sought by the OIP. 3 While the court ordered seven Respondents to pay less restitution than the disgorgement amount sought by the OIP, 4 the Division believes that these seven Respondents will be unable to pay that restitution. The Division further believes that the Commission would be unlikely to be able to collect the balance of the disgorgement amounts or civil penalties from these seven Respondents. 5
The Division believes that withdrawal of the monetary claims will conserve the Division's resources and expedite the issuance of non-monetary relief against Respondents in this proceeding.
Under these circumstances, we believe it is appropriate to grant the Division's motion.
Accordingly, IT IS ORDERED that the Division of Enforcement's Motion to Modify the Order Instituting Proceedings to Withdraw the Disgorgement and Civil Penalties Claims against all Respondents be, and it hereby is, GRANTED.
By the Commission.
Jonathan G. Katz
1 The motion excludes Facundo Ponce since Ponce previously settled with the Commission. Facundo Ponce, Securities Act Rel No. 8068 (Mar. 7, 2002), 77 SEC Docket 80 (barring Ponce from association with a broker or dealer and from participation in a penny stock offering and imposing a cease-and-desist order).
2 The court declined to order restitution against Kevin P. Radigan on the basis that there was insufficient evidence to support a restitution order and the court determined that Radigan was unable to pay restitution.
3 For example, the OIP sought $5 million from James S. Labate. In the criminal proceeding Labate was ordered to pay restitution in the amount of $22.2 million and sentenced to 87 months in prison and 36 months supervised release.
4 The seven are William P. Burke, Mark I. Burton, Chester L. Chicosky, Lawrence M. Choiniere, Patrick Giglio, Irving Stitsky, and Marc L. Weissman. According to the Division, the difference between the disgorgement amounts sought by the OIP and the restitution amounts ordered in the criminal courts ranges from $542 for Giglio to $135,000 for Burke.
5 The Division further states that five Respondents "do not appear to have been sentenced yet." Salvatore Piazza, Paul L. Burton, and Palla have pleaded guilty. Todd M. Nejaime and Kenneth J. Fuina have sealed criminal records that do not disclose their pleas. The Division anticipates that these five will receive comparable sentences to the remaining Respondents, and asks that they be included in this motion to avoid piecemeal litigation.
|Home | Previous Page||