SECURITIES EXCHANGE ACT OF 1934
Release No. 50167 / August 9, 2004
Admin. Proc. File No. 3-11580
In the Matter of Ralph DiFalco, Respondent. |
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ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS |
I.
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 Ralph DiFalco ("DiFalco").
II.
In anticipation of the institution of these proceedings, DiFalco 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 paragraphs III.B. and III.F. below, which are admitted, DiFalco consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.
III.
On the basis of this Order and DiFalco's Offer, the Commission finds that:
A. At all relevant times, DiFalco was an officer of Traderz Associates Holding, Inc. ("Traderz"), a Delaware corporation, and president and chairman of R.H. Roberts Holding Co. ("R.H. Roberts"), a Nevada corporation. Neither Traderz nor R.H. Roberts has ever been registered with the Commission as a broker or dealer.
B. On July 28, 2004 a final judgment was entered on consent against DiFalco by the United States District Court for the Southern District of New York in Securities and Exchange Commission v. Goldman Lender & Co. Holdings, et al., 98 Civ. 7525 (JGK) (the "injunctive action"), permanently enjoining DiFalco from violations of Section 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.
C. The Commission's complaint in the injunctive action alleged, among other things, that:
1. From May 1997 through approximately August 1998, DiFalco, Traderz, and the other defendants fraudulently raised approximately $2.1 million through six fraudulent offerings of securities. In various combinations, the defendants created phony private placements of stock of six issuers -- Traderz, Niki Taylor, R.H. Roberts, Beverly Glenn Interactive ("Beverly Glenn"), Goldman Lender & Co. Holdings ("Goldman Lender"), and Blackwell Co. ("Blackwell") -- and sold the stock through a series of boiler rooms. Directly or through unregistered salespeople acting at their direction, the defendants used high-pressure sales tactics and false and misleading representations to induce investors to buy the stock.
2. The stock in each of the offerings referenced above was offered and sold to investors for $2 per share.
3. In each of the offerings, the primary selling point was the promise of an imminent initial public offering ("IPO") that would allow investors to quickly reap significant profits from their investment in the purported private placements. In addition, in the Traderz, R.H. Roberts, Goldman Lender, and Blackwell offerings, some investors were sent offering memoranda that contained material misrepresentations about the issuer's financial condition, the experience of its officers and directors, and the use of the offering proceeds. Among other things, those offering memoranda included fabricated independent auditor's reports, which purported to show that an independent auditor had opined that the issuer's balance sheet fairly presented its financial condition in conformity with generally accepted accounting principles. Contrary to their representations to investors, the defendants took no steps to effect the promised IPOs, and most of the money raised went to the individual defendants and salespeople selling the fraudulent offerings.
4. DiFalco violated Section 17(a) of the Securities Act, and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder in connection with the offer and sale of the securities of Traderz, R.H. Roberts and Beverly Glenn.
D. From approximately May 1997 through July 1998, DiFalco participated in an offering of the stock of Traderz, R.H. Roberts and Beverly Glenn, which were "penny stocks" as that term is used in Section 15(b)(6) of the Exchange Act and defined by Section 3(a)(51) of the Exchange Act and Rule 3a51-1 thereunder.
E. From approximately May 1997 through July 1998, although not registered as such, DiFalco acted as a broker, as defined by Section 3(a)(4) of the Exchange Act, by engaging in the business of effecting transactions in securities for the accounts of others.
F. On April 24, 2003, on the basis of his guilty plea, DiFalco was convicted of one count of conspiracy to commit securities fraud, mail fraud, and wire fraud in violation of 18 U.S.C. § 371, and one count of securities fraud in violation of 15 U.S.C. §§ 77q(a) and 77x. United States v. Ralph DiFalco, 02 Cr. 282 (S.D.N.Y.) (JSM).
G. The indictment underlying DiFalco's conviction alleged, among other things, that from 1997 to 1998, DiFalco and others conducted a fraudulent private placement of R.H. Roberts common stock, and in connection therewith made misrepresentations and omissions of material facts, including those concerning the profitability and risk of such an investment and how the money raised in the purported private placement would be used.
H. On the basis of his guilty plea, DiFalco was sentenced to five months of imprisonment followed by two years of supervised release. As part of his criminal sentence, DiFalco was ordered to pay $556,300 in restitution to investors.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in DiFalco's Offer.
Accordingly, it is hereby ORDERED:
A. Pursuant to Section 15(b)(6) of the Exchange Act, DiFalco be, and hereby is barred from association with any broker or dealer.
Any reapplication for association by DiFalco will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against DiFalco, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order.
B. Pursuant to Section 15(b)(6) of the Exchange Act, DiFalco 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.
For the Commission, by its Secretary, pursuant to delegated authority.
Jonathan G. Katz
Secretary