UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 40067 / June 4, 1998 ACCOUNTING AND AUDITING ENFORCEMENT Release No. 1041 / June 4, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9619 : In the Matter of : ORDER INSTITUTING PROCEEDING : PURSUANT TO SECTION 15(b)(6) Eugene McCloskey, : OF THE SECURITIES EXCHANGE ACT : OF 1934, MAKING FINDINGS, AND Respondent. : IMPOSING REMEDIAL SANCTIONS : I. The Securities and Exchange Commission ( Commission ) deems it appropriate and in the public interest that a proceeding pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ( Exchange Act ) be instituted against Eugene McCloskey ( Respondent or McCloskey ). In anticipation of the institution of this proceeding, Respondent has submitted an Offer of Settlement ( Offer ) to the Commission which the Commission has determined to accept. Solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except as to the entry of the injunction set forth in Section II.B below and as to the jurisdiction of the Commission over him and the subject matter of the proceeding, which are admitted, Respondent consents to the issuance of this Order, the entry of the findings contained herein, and the imposition of the sanctions set forth below. Accordingly, IT IS ORDERED that a proceeding pursuant to Section 15(b)(6) of the Exchange Act be, and hereby is, instituted. II. On the basis of this Order Instituting Proceeding Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and ======END OF PAGE 1====== the Offer submitted by McCloskey, the Commission finds<(1)> that: A. From in or about March 1981, until November 1994, Respondent was associated with Gruntal & Co., Incorporated ( Gruntal ), a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act. B. On June 4, 1998, a Final Judgment of Permanent Injunction and Other Relief as to Eugene McCloskey was entered by the United States District Court for the Southern District of New York, in an action styled Securities and Exchange Commission v. Eugene McCloskey and Charles Meizoso, No. 98 Civ. 3943 (MBM) (S.D.N.Y. filed June 4, 1998), which permanently enjoins Respondent from (a) violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 promulgated thereunder, and (b) aiding and abetting violations of Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-4 promulgated thereunder. McCloskey consented to the entry of the Final Judgment of Permanent Injunction and Other Relief as to Eugene McCloskey without admitting or denying the allegations set forth in the Commission's Complaint. C. The Commission's Complaint in Securities and Exchange Commission v. Eugene McCloskey and Charles Meizoso alleges that, beginning in 1984 and continuing through late 1994, McCloskey violated the above provisions of the federal securities laws by participating in two fraudulent schemes designed to divert securities and funds totaling approximately $11 million from customer accounts, unclaimed dividends, stale and outstanding customer and vendor checks, and other sources at Gruntal. In the first scheme, which began in 1984 and continued through late 1994, McCloskey and others diverted approximately $5 million to fictitious customer accounts and then either transferred the diverted assets to Gruntal profit and loss accounts or used the diverted assets to fund off-books payments of Gruntal expenses. In the second scheme, which began in 1987 and continued through late 1994, McCloskey and others embezzled approximately $6 million in additional assets from customer accounts, unclaimed dividends, stale and outstanding customer and vendor checks, and other sources at Gruntal. McCloskey and others transferred the embezzled assets from Gruntal to bank accounts they controlled. The Complaint further alleges that in 1986 and 1987 McCloskey violated the federal securities laws by trading in the securities of Gruntal Financial Corp., Gruntal s publicly traded corporate parent, while in possession of material, nonpublic information. III. In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the following sanctions specified in Respondent's Offer. Accordingly, IT IS ORDERED that Respondent be, and he hereby is, barred from association with any broker, dealer, investment adviser, investment company, or municipal securities dealer. By the Commission. Jonathan G. Katz Secretary <(1)>/ The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding. ======END OF PAGE 2====== SERVICE LIST Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly authorized officer of the Commission, shall serve a copy of the Order Instituting Proceeding Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions on each person named as a party in the Order and their legal agent. The attached Order Instituting Proceeding Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions has been sent to the following parties and other persons entitled to notice: Chief Administrative Law Judge Brenda P. Murray Securities and Exchange Commission Mail Stop 11-6 450 Fifth Street, N.W. Washington, D.C. 20549 David Frohlich, Esq. Division of Enforcement Securities and Exchange Commission Mail Stop 7-5 450 Fifth Street, N.W. Washington, D.C. 20549 Cathy Waldor, Esq. Waldor & Carlesimo 20 Northfield Avenue West Orange, New Jersey 07052 Counsel for Eugene McCloskey Eugene McCloskey c/o Cathy Waldor, Esq. Waldor & Carlesimo 20 Northfield Avenue West Orange, New Jersey 07052 ======END OF PAGE 3====== ======END OF PAGE 4======