Joseph L. Lents Carol Fox Foelak, Administrative Law Judge
Securities Exchange Act of 1934
Release No. 50757 / November 30, 2004
Admin. Proc. File No. 3-11693
In the Matter of JOSEPH L. LENTS BRIAN E. BAGINSKI, and ANTHONY V. YONADI, |
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ORDER MAKING FINDINGS AND IMPOSING SANCTION BY DEFAULT AGAINST BRIAN E. BAGINSKI |
SUMMARY
This Order bars Brian E. Baginski (Baginski) from participating in an offering of penny stock. He was previously enjoined from violating the antifraud and registration provisions of the securities laws, based on his involvement in a fraudulent "pump and dump" scheme.
I. BACKGROUND
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) against Baginski on September 30, 2004, pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act). The OIP alleges that he was enjoined in 2004 from violating the antifraud and registration provisions of the federal securities laws, based on his wrongdoing while participating in an offering of stock of Investco, Inc. (Investco), a penny stock. Baginski was served with the OIP on October 29, 2004. He failed to file an answer, due twenty days after service of the OIP, that is, by November 18, 2004. See 17 C.F.R. § 201.220(b); OIP at 3. A respondent who fails to file an answer to the OIP may be deemed to be in default, and the administrative law judge may determine the proceeding against him.1 See 17 C.F.R. §§ 201.155(a), .220(f); OIP at 3-4. Thus, Baginski is in default, and the undersigned finds the following allegations in the OIP are true as to Baginski. The findings of fact and conclusions of law made in this order are not binding on any other person in this proceeding.
II. FINDINGS OF FACT
Baginski, of Boynton Beach, Florida, has been permanently enjoined from violating the registration and antifraud provisions of the federal securities laws - Section 5 of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. SEC v. Investco, Inc., No. 02-80466-Civ. (S.D. Fla. Aug. 14, 2004). The wrongdoing that underlies Baginski's injunction occurred from November 2001 through April 2002 when he participated in an offering of Investco stock, a penny stock. He and others carried out a fraudulent "pump and dump" scheme to manipulate the price of Investco stock. Investco stock was distributed to Baginski, and he and others coordinated buy and sell orders to liquidate his position and to stimulate increased demand for the stock. Further, he and others sold shares of Investco stock that were not registered and for which no exemption applied.
III. CONCLUSIONS OF LAW
Baginski has been permanently enjoined "from engaging in or continuing any conduct or practice in connection . . . with the purchase or sale of any security" within the meaning of Sections 15(b)(4)(C) and 15(b)(6)(A)(iii) of the Exchange Act. Further, Investco stock was a penny stock within the meaning of Exchange Act Section 3(a)(51) and Rule 3a51-1, and in the wrongdoing that underlay his injunction, Baginski was a "person participating in an offering of penny stock" within the meaning of Exchange Act Section 15(b)(6)(C).
IV. SANCTION
Baginski will be barred from participating in an offering of penny stock. Thus, he will be barred from acting as a promoter, finder, consultant, or agent; or otherwise engaging 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. This sanction will serve the public interest and the protection of investors, pursuant to Section 15(b) of the Exchange Act. It accords with Commission precedent and the sanction considerations set forth in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). Baginski's unlawful conduct was recurring and egregious, extending over a period of many months. There are no mitigating circumstances.
V. ORDER
IT IS ORDERED that, pursuant to Section 15(b) of the Securities Exchange Act of 1934, BRIAN E. BAGINSKI IS BARRED from participating in an offering of penny stock.
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Carol Fox Foelak
Administrative Law Judge