UNITED STATES OF AMERICA
|In the Matter of
Morton B. Lempel
|ORDER INSTITUTING PROCEEDINGS,
MAKING FINDINGS, AND IMPOSING
REMEDIAL SANCTIONS AND A
The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Respondent Morton B. Lempel ("Lempel").
In anticipation of the institution of these administrative proceedings, Lempel has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings herein, except that Lempel admits the Commission's jurisdiction over him and over the subject matter of these proceedings and the findings in Sections II.A. and II.B. below, Lempel has consented to the entry of the findings and the imposition of the remedial sanctions and cease-and-desist order as set forth below.
On the basis of this Order and the Offer submitted by Lempel, the Commission finds1 that:
A. First Entertainment, Inc., n/k/a First Entertainment Holding Corp. ("First Entertainment"), a Nevada corporation headquartered in Denver, Colorado, operates businesses related to the entertainment industry. First Entertainment securities are registered with the Commission pursuant to Section 12(g) of the Exchange Act. In 1995, the company's common stock traded on the Nasdaq SmallCap Market. In February of 1997, First Entertainment was delisted from Nasdaq and its stock currently trades on the Bulletin Board (a service of the NASDAQ Stock Market, Inc.).
B. Lempel, age 49, a resident of Spring Valley, New York, in 1995 contracted with First Entertainment to promote the company and its securities to the brokerage community. Lempel is not registered with the Commission in any capacity and not associated with any registered broker-dealer.
C. Between March 30 and May 8, 1995, pursuant to Lempel's consulting agreement with First Entertainment, First Entertainment issued 200,000 shares of its stock to Lempel as compensation for promoting First Entertainment stock. Lempel sold 75,000 shares of the stock for proceeds of $89,138 that he used for his personal benefit.
D. To promote First Entertainment stock, Lempel transferred some of the First Entertainment stock he received from the company to two registered representatives associated with different brokerage firms. The stock transfers served as undisclosed compensation to the registered representatives to induce them to have their customers purchase First Entertainment stock. Specifically, between April and June 1995, Lempel transferred 60,500 shares of First Entertainment stock, worth approximately $87,000, for the benefit of the registered representatives. Lempel knew, or was reckless in not knowing, that the registered representatives would not disclose to their customers that the registered representatives received First Entertainment stock from Lempel. In an effort to conceal the stock payments, and as evidence of his intent to deceive, manipulate or defraud, Lempel transferred the stock to accounts, as designated by the registered representatives, that were in the names of relatives of each registered representative.
E. By virtue of the conduct described above, Lempel committed and caused violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, which prohibit persons from directly or indirectly, in connection with the offer, purchase or sale of securities by use of the means or instrumentalities of transportation or communication in interstate commerce or by use of the mails, employing devices, schemes or artifices to defraud; obtaining money or property by means of untrue statements of material facts or omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or engaging in transactions, practices, or courses of business which would or did operate as a fraud or deceit upon purchasers and sellers of First Entertainment securities.
F. Lempel has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement plus prejudgment interest. The Commission has reviewed the sworn financial statement and other evidence provided by Lempel and has determined that Lempel does not have the financial ability to pay disgorgement of $89,138 plus prejudgment interest.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Lempel and to impose the sanctions specified therein.
Accordingly, IT IS ORDERED that:
A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Lempel cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;
B. Lempel shall pay disgorgement of $89,138 plus prejudgment interest, but that payment of such amount be waived based upon Lempel's demonstrated financial inability to pay; and
C. The Division of Enforcement may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Lempel provided accurate and complete financial information at the time such representations were made; and (2) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Lempel's offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Lempel was fraudulent, misleading, inaccurate or incomplete in any material respect and whether any additional remedies should be imposed. Lempel may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
|1||The findings herein are made pursuant to Lempel's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.|
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