Securities Exchange Act of 1934
Release No. 48826 / November 24, 2003
Administrative Proceeding File No. 3-11343
Administrative Proceedings Instituted Against Bruce Follick, Salvatore Tavolacci, Karl Donovan, Aaron Sandstrom, Derek Shapiro, and Donald Brooks
On November 24, 2003, the Commission instituted administrative proceedings against Bruce Follick, Salvatore Tavolacci, Karl Donovan, Aaron Sandstrom, Derek Shapiro, and Donald Brooks.
On April 11, 2002, Follick, Tavolacci, Shapiro, and Sandstrom were permanently enjoined by the United States District Court for the Southern District of New York from violating the securities registration and antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Donovan and Brooks were similarly enjoined on May 31, 2002. The complaint in the civil injunctive action alleged that, at various times from at least April 1997 through July 1999, Follick, Tavolacci, Donovan, Sandtrom, Shapiro, and Brooks directed a sales force which solicited purchases in fraudulent offerings of at least five securities. The sales force sold the stock to retail customers by means of a high pressure sales pitch that included numerous material misrepresentations and omissions.
Follick, Tavolacci, Donovan, Sandstrom, Shapiro, and Brooks all pled guilty to criminal charges arising out of the same conduct that gave rise to the civil injunctive action. Follick was convicted on August 20, 2002, and the other defendants were convicted on various dates between February and May 2001. In particular, they were convicted of securities fraud and conspiracy to commit securities fraud and wire fraud. They received sentences ranging from 18 to 51 months in federal prison.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide the respondents an opportunity to dispute these allegations, and to determine what remedial sanctions, if any, are appropriate and in the public interest. (Rel. 34-48826; AP No. 3-11343) The Commission directed that the Administrative Law Judge issue an initial decision no later than 210 days from the date of service of the Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice.
For further information about the related civil and criminal proceedings, see Litigation Release No. 16588 (June 14, 2000).