UNITED STATES OF AMERICA
In the Matter of
JAMES "GENNEDY" GABERKORN,
| ORDER INSTITUTING PUBLIC
PURSUANT TO SECTION 15(b)
OF THE SECURITIES
EXCHANGE ACT OF 1934,
MAKING FINDINGS, AND
IMPOSING REMEDIAL SANCTIONS
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against respondent James "Gennedy" Gaberkorn ("Gaberkorn").
In anticipation of the institution of these proceedings, Gaberkorn 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 to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Section III.F and III.H below, which are admitted, Gaberkorn consents to the entry of this Order Instituting Public Administrative Proceeding Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.
On the basis of this Order and Gaberkorn's Offer, the Commission finds that:
A. Gaberkorn, 32, is currently incarcerated at Federal Correctional Institution Otisville, in Otisville, New York. He previously resided in Brooklyn, New York. From March through June 1998, Gaberkorn was employed by Hornblower & Weeks, Inc., ("H&W") a registered broker-dealer, as a registered representative.
B. While he was employed at H&W, Gaberkorn solicited individuals to invest in Diagnostic Professional Imaging Services, Inc. ("Diagnostic") from H&W's offices located at 110 Wall Street in New York, New York. The Diagnostic offering, purportedly made pursuant to Rule 504 of Regulation D, raised more than $580,000 from at least fifty investors.
C. In connection with the Diagnostic offering, Gaberkorn represented to investors that (1) the proceeds of the offering would be raised for Diagnostic's legitimate business purposes and (2) that Diagnostic was going to launch an initial public offering in the near future. These representations were false. In fact, Diagnostic promoters diverted a substantial portion of the offering proceeds to their own personal benefit and, consequently, those proceeds were never used for Diagnostic's business. In addition, Diagnostic never had any plan to conduct an initial public offering. Gaberkorn knew or was reckless in not knowing that his representations to investors about Diagnostic were false. These misrepresentations were material.
D. Gaberkorn participated in the offering of the common stock of Diagnostic, a "penny stock" as that term is used in Section 15(b)(6) and as defined by Section 3(a)(51) of the Exchange Act and Rule 3a51-1 thereunder.
E. On June 14, 2000, the Commission filed a Complaint in the United States District Court for the Southern District of New York against Gaberkorn alleging that he engaged in the conduct described above. SEC v. Diagnostic Professional Imaging Services, Inc., 00 Civ. 4386 (NRB) (S.D.N.Y.) (the "Civil Action").
F. On February 25, 2003, a Final Judgment of Permanent Injunction and Other Relief ("Final Judgment") was entered by consent against Gaberkorn in the Civil Action, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
G. By reason of the foregoing, Gaberkorn willfully violated and has been permanently enjoined from violating Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
H. On March 13, 2001, Gaberkorn pled guilty to conspiracy to commit securities fraud in violation of Title 18 United States Code, Section 371, securities fraud in violation of Title 15 United States Code, Sections 78j(b) and 78ff before the United States District Court for the Southern District of New York, in United States v. James Gaberkorn, 00 CR 247-006 (LAP). On June 12, 2001, a judgment in the criminal case was entered against Gaberkorn. He was sentenced to a prison term of 18 months followed by three years of supervised release.
I. The counts to which Gaberkorn pled guilty alleged, among other things, that Gaberkorn defrauded investors and obtained money and property by means of materially false and misleading statements, and that he caused commercial carriers to deliver investor funds to Diagnostic.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Respondent Gaberkorn's Offer.
ACCORDINGLY, IT IS HEREBY ORDERED:
A. Pursuant to Section 15(b)(6) of the Exchange Act, Gaberkorn be, and hereby is, barred from association with any broker or dealer; and
B. Pursuant to Section 15(b)(6) of the Exchange Act, Gaberkorn be, and hereby is, barred from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent, or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock; or inducing or attempting to induce the purchase or sale of any penny stock.
By the Commission.
Jonathan G. Katz
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