UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
On June 1, 2000, the Securities and Exchange Commission ("Commission") entered an Order Instituting Administrative Proceedings Pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") against Joseph A. Monaco ("Monaco" or "Respondent").
Monaco has submitted an Offer of Settlement ("Offer") for the purpose of resolving these proceedings, which Offer 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 to which the Commission is a party, Respondent, by his Offer, consents to the entry of this Order Making Findings and Imposing Remedial Sanctions ("Order"), admits the jurisdiction of the Commission and, without admitting or denying the findings set forth herein, except with respect to paragraph III.A., below, and except as to the entry of the injunction set forth in paragraph III.H., below, which are admitted, consents to the entry of the findings and remedial sanctions set forth below.
On the basis of this Order and Respondent's Offer, the Commission finds that:
A. At various times between 1994 and 1996, Monaco was a registered representative of at least three broker-dealers.
B. From at least 1994 through 1996, Monaco induced or effected transactions in the sales of securities by offering to sell and selling unregistered promissory notes and preferred stock issued by LSI Holdings, Inc. f/k/a Legend Sports, Inc. and Legend Sports, Inc. f/k/a Sirrine & Associates, Inc. (hereinafter collectively referred to as "Legend Sports").
C. From at least 1994 through 1996, Monaco recruited, directed and supervised the salesmen that sold the promissory notes and preferred stock issued by Legend Sports.
D. At all relevant times, the Legend Sports preferred stock constituted a penny stock as defined by the Exchange Act and Rules promulgated thereunder.
E. On September 23, 1998, the Commission commenced an action, SEC v. James T. Staples, et al., Case No. 98-1061-CV-22-C (M.D. Fla.), in the United States District Court for the Middle District of Florida. The Commission's complaint sought, among other things, the entry of a permanent injunction, disgorgement and civil money penalties against Monaco based on Monaco's willful violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.
F. The Commission's complaint alleged, among other things, that from at least 1994 to 1996, Monaco and others sold approximately $18 million in promissory notes and preferred stock issued by Legend Sports to more than 325 investors and that Legend Sports operated a Ponzi scheme by using the proceeds from the sale of these securities to pay interest and dividends to investors, commissions to salesmen and the personal expenses of its officers and other related parties.
G. The Commission's complaint also alleged that Monaco and others misrepresented or omitted material facts in connection with the sale of the promissory notes and preferred stock, including omitting to disclose to investors that Legend Sports paid Monaco and the other salesmen a 15% commission for each security they sold, and that Monaco was paid a 5% override on every security sold by Legend Sports.
H. On October 21, 1999, the United States District Court for the Middle District of Florida entered a final judgment of permanent injunction against Monaco, by default, permanently enjoining him, directly and indirectly, from violations Sections 5(a), 5(c) and 17(a) of the Securities Act, and Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. SEC v James T. Staples et al., Case No. 98-1061-CV-22-C (M.D. Fla. Sept. 23, 1998).
In view of the foregoing, the Commission deems it appropriate, in the public interest, and for the protection of investors to impose the sanctions specified in Respondent's Offer.
ACCORDINGLY, IT IS ORDERED that:
A. Monaco be, and hereby is, barred from association with any broker or dealer.
B. Monaco be, and hereby is, barred from participation in any offering of a penny stock.
For the Commission, by its Secretary, pursuant to delegated authority.Jonathan G. Katz