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Wayne M. Carlin (WC-2114)
UNITED STATES DISTRICT COURT
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against Defendants America In Line Corporation ("America In Line"), America In Line of Mount Sinai Corp. ("Mount Sinai") and Peter Riccardo ("Riccardo"), alleges as follows. PRELIMINARY STATEMENT 1. This action involves a scheme through which the Defendants raised at least $650,000 from approximately 52 investors by offering and selling stock in America In Line and its subsidiary, Mount Sinai. Between approximately March 1996 and May 2000, Riccardo, America In Line and Mount Sinai fraudulently offered and sold shares of America In Line and Mount Sinai stock in at least five unregistered offerings to investors throughout the United States. America In Line and its subsidiary Mount Sinai conducted purported private placements of over two million shares of common and preferred stock in the companies at prices ranging from $1 to $2.50 per share. The offerings were fraudulent because an excessive portion of the offering proceeds - some 29% - went to telemarketers as sales commissions for soliciting investors. 2. America In Line, Mount Sinai, and Riccardo deceived investors about the anticipated use of the offering proceeds. America In Line and Mount Sinai, directed by Riccardo, agreed to pay unlicensed sales representatives 30% of the offering proceeds as commissions for selling America In Line or Mount Sinai stock, thereby substantially reducing the amount of funds available for the issuers. These agreements rendered false and misleading the representations made to investors in the offering memoranda, which stated that offering proceeds would go to construct an in-line roller hockey rink, provide working capital, or fund other business expenses. The first two offering memoranda said nothing about the use of offering proceeds to pay sales commissions. The later three memoranda stated that America In Line did not expect to pay more than 8% in commissions. 3. Defendants America In Line, Mount Sinai, and Riccardo have engaged, and unless permanently enjoined, will continue to engage, directly or indirectly, in transactions, acts, practices and courses of business which constitute violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act'), 15 U.S.C. §§ 77e(a), 77e(c) and 77q(a), Section 10(b) of the Securities Act of 1934 ("Exchange Act"), 15 U.S.C. §78(b), and Rule 10b-5, 17 C.F.R. 240.10b-5. 4. Unless they are permanently enjoined, America In Line, Mount Sinai, and Riccardo will continue to engage in the transactions, acts, practices and courses of business set forth in this Complaint and in transactions, acts, practices and courses of business of similar type and object. JURISDICTION AND VENUE 5. The Commission brings this action under Section 20 of the Securities Act, 15 U.S.C. § 77t, and Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d), seeking a final judgment (a) permanently enjoining all of the Defendants from engaging in the wrongful conduct alleged in this Complaint; (b) ordering Riccardo to disgorge his ill-gotten gains, plus prejudgment interest; (c) ordering Riccardo to pay civil penalties; (d) barring Riccardo from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 78l, or that is required to file reports pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. § 78o(d); and (e) ordering such other relief as the court deems necessary and appropriate. 6. This Court has jurisdiction over this action pursuant to Sections 20(a) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(a) and 77v(a), and Sections 21(d), and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d) and 78aa. 7. Defendants directly and indirectly, singly and in concert, have made use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or of the mails, in connection with the transactions, acts, practices, and course of business alleged in this Complaint. 8. Venue lies with this Court pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and Section 27 of the Exchange Act, 15 U.S.C. § 78aa. Certain of the transactions, acts, practices, and courses of business alleged in this Complaint took place in the Eastern District of New York. At the time of the acts in issue, all Defendants resided in the Eastern District of New York, and the Defendants offered and sold securities to investors who reside in this District. DEFENDANTS 9. America In Line is Delaware corporation with its principal place of business in Ronkonkoma, New York. America In Line was formed for the purported purpose of developing, building, operating and maintaining roller hockey rinks. 10. Mount Sinai is a Delaware corporation with its principal place of business in Mount Sinai, New York. Mount Sinai, a subsidiary of America In Line, was formed for the purported purpose of developing, building, operating and maintaining a roller hockey rink in Mount Sinai, New York. 11. Riccardo, 56, is the CEO and President of both America In Line and Mount Sinai, and resides in Shirley, New York. THE FRAUDULENT SCHEMES 12. From approximately March 1996 through May 2000, Riccardo directed America In Line and its subsidiary Mount Sinai to conduct at least five purported private placements, ostensibly to raise capital for the development, construction and operation of in-line skating roller hockey rinks in Long Island, New York. 13. America In Line and Mount Sinai together raised approximately $655,000 from these five offerings, but paid commissions of over $191,000 - 29% of the offering proceeds - to third parties. None of these offerings was registered with the Commission. Mount Sinai Offerings 14. The first two offerings in the series were for Mount Sinai stock. The offering memoranda, dated March 18, 1996 (extending through to July 30, 1996) and January 2, 1997 (extending through to July 30, 1997), stated that the proceeds of each offering would be used to build and operate an in-line roller hockey rink in Mt. Sinai, New York. The Mount Sinai offering memoranda also stated that the anticipated net proceeds from each offering would be $1.3 million and that the anticipated legal, accounting and printing expenses for each offering would be approximately $65,000. The offering memoranda further provided that the bulk of the proceeds would be used for items such as site improvement, building expenses, rink construction, equipment, operation and licensing fees, promotional fees, advertising, consulting fees and operating capital. Neither of the two offering memoranda disclosed, however, that Riccardo and Mount Sinai had agreed to pay 30% commissions to the salespeople who were selling Mount Sinai stock to the public. 15. Riccardo, on Mount Sinai's behalf, planned and coordinated the two Mount Sinai offerings. Riccardo, on Mount Sinai's behalf, entered into agreements with salespeople to pay, and did pay, 30% sales commissions for their sale of Mount Sinai stock. Riccardo and Mount Sinai disseminated the memoranda to salespeople and investors. 16. The salespeople who sold Mount Sinai stock were telemarketers. They used telephone books, TRW reports, lead lists, and other lists to identify potential investors. The salespeople cold-called members of the general public to solicit purchases of shares of Mount Sinai stock. 17. Riccardo and Mount Sinai's agreements to pay 30% sales commissions rendered Mount Sinai's representations regarding anticipated uses of investor proceeds false and misleading. 18. The omissions and misrepresentations set forth in paragraphs 14 to 17 above were and are material. Riccardo and Mount Sinai either knew, or were reckless in not knowing, that these misrepresentations were false and misleading. America In Line Offerings 19. The next three offerings in the series were for America In Line stock. The three offering memoranda dated May 15, 1998 (extending through November 1, 1998), December 1, 1998 (extending through June 30, 1999) and November 1, 1999 (extending through May 1, 2000), stated that America In Line planned to use the proceeds of the offerings to provide for the initial working capital for the America In Line facility in Mount Sinai, New York. The offering memoranda also stated that the anticipated net proceeds from each offering would be $920,000 and that the anticipated legal, accounting and printing expenses for each offering would be approximately $35,000. According to America In Line's "plan of distribution" of shares set forth in the three offering memoranda, "[the] shares will be offered and sold through officers and employees of the company who will receive no commission and broker\dealers or `finders' who will charge [an] approximately 8% commission." The three America In Line offering memoranda also stated in the "use of proceeds" sections that "[t]he Company expects to pay an eight (8%) sales commission or finders fee on the sale of shares without any further underwriting discounts, sales commissions or other forms of remuneration." None of the three offering memoranda disclosed that Riccardo and America In Line had agreed to pay 30% commissions to the salespeople who were selling America In Line stock to the public. 20. Riccardo planned and coordinated the three offerings described in paragraph 19. Riccardo drafted the three America In Line offering memoranda. Riccardo, on America In Line's behalf, entered into agreements with salespeople to pay, and did pay, 30% sales commissions for their sale of America In Line stock. Riccardo and America In Line disseminated the memoranda to salespeople and investors. 21. The salespeople who sold America In Line stock were telemarketers. They used telephone books, TRW reports, lead lists, and other lists to identify potential investors. The salespeople cold-called members of the general public to solicit purchases of shares of America In Line stock. 22. Riccardo and America In Line's agreements to pay 30% sales commissions rendered America In Line's representations about its uses of investor proceeds false and misleading. 23. The omissions and misrepresentations set forth in paragraphs 19 to 22 above were and are material. Riccardo and America In Line either knew, or were reckless in not knowing, that those misrepresentations were false and misleading. FIRST CLAIM FOR RELIEF Violations of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 10(b) and Rule 10b-5, 17 C.F.R. § 240.10b-5 (Securities Fraud) 24. The Commission repeats and realleges the allegations contained in paragraphs 1 through 23 as if fully set forth herein. 25. America In Line, Mount Sinai, and Riccardo directly and indirectly, singly and in concert, by use of the mails, in the offer or sale and in connection with the purchase or sale, of securities: (a) employed devices, schemes or artifices to defraud; (b) obtained money by means of, and otherwise made, untrue statements of material fact, and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (c) engaged in acts, practices and courses of business, which operated as a fraud or deceit upon purchasers of securities and other persons. 26. As part of, and in furtherance of this fraudulent conduct, the Defendants, directly or indirectly, made the misrepresentations and omitted to state the facts alleged in paragraphs 14 to 17 and 19 to 22 above. 27. The false statements and omissions made by the Defendants, and more fully described in paragraphs 14 to 17 and 19 to 22 were material. 28. The Defendants knew, or were reckless in not knowing, that the material misrepresentations and omissions, more fully described in paragraphs 14 to 17 and 19 to 22 above, were false and misleading. 29. By reason of the foregoing the Defendants have violated, and unless restrained and enjoined, will continue to violate Section 17(a) of the Securities Act, U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. SECOND CLAIM FOR RELIEF Violations of Sections 5(a) and 5(c) of Securities Act,
(Unregistered Offer and Sale of Securities) 30. The Commission repeats and realleges the allegations contained in paragraphs 1 through 29 as though fully set forth herein. 31. America In Line, Mount Sinai, and Peter Riccardo directly or indirectly, singly or in concert: (a) have made use of the means or instruments of transportation or communication in interstate commerce or of the mails to sell securities through the use or medium of a prospectus or otherwise, or carried securities or caused such securities to be carried through the mails or in interstate commerce, by any means or instruments of transportation, for the purpose of sale, or delivery after sale, and (b) have made use of the means and instruments of transportation or communication in interstate commerce or of the mails to offer to sell, or offer to buy, through the use or medium of any prospectus, or otherwise, securities, when no registration statement has been filed or was in effect as to such securities and when no exemption or safe-harbor from registration was available. 32. As part of and in furtherance of this fraudulent offering scheme the Defendants offered and sold securities to the public through telephone and mail solicitations when there was no registration statement was filed or in effect as to those securities offerings. There were no registration exemptions available for any of the offerings. 33. By reason of the foregoing, America In Line, Mount Sinai, and Riccardo violated, and unless restrained and enjoined, will again violate Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c). PRAYER FOR RELIEF WHEREFORE, plaintiff Commission respectfully requests that this Court enter a Final Judgment: A. Permanently enjoining the Defendants, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, 15 U.S.C. §§ 77e(a), 77e(c), and 77q(a). B. Permanently enjoining the Defendants, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. C. Ordering Riccardo to disgorge his unjust enrichment from the fraudulent conduct alleged in this Complaint and to pay prejudgment interest thereon. D. Ordering Riccardo to pay civil penalties pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d), for the securities violations alleged in this Complaint. E. Barring Riccardo from serving as an officer or director of any issuer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 78l, or that is required to file reports pursuant to Section 15(d) of the Exchange Act, 15 U.S.C. § 78o(d), pursuant to Section 20(e) of the Securities Act, 15 U.S.C. § 77t(e) and Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d). F. Granting such other and further relief as the Court may deem just and proper. Dated: New York, New York
Edwin H. Nordlinger
Of Counsel http://www.sec.gov/litigation/complaints/comp17661.htm
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