U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19881 / October 25, 2006
Securities and Exchange Commission v. Uncommon Media Group, Inc., et al. and Lawrence Gallo, Case No. 04-80272-CIV-Hurley/Hopkins (S.D. Fla., filed March 23, 2004)
Timothy Rafferty Sentenced in Related Criminal Case
For further information, see Litigation Releases No. 19251 (June 8, 2005), No. 19257 (June 8, 2005) and No. 19333 (August 11, 2005). The Securities and Exchange Commission ("SEC") announced that on September 12, 2006 Timothy Rafferty, a defendant in a $1.4 million unregistered offering of Uncommon Media Group, Inc. ("UMDA") that the SEC halted in March 2004, was sentenced to incarceration for a period of 126 months, followed by three years of supervised release, based upon his conviction to charges of conspiracy to commit securities fraud, conspiracy to commit wire fraud and two substantive counts of wire fraud brought by the United States Attorney's Office for the Southern District of Florida ("USAO"). In addition, the Court also ordered Rafferty to forfeit his interest in his primary residence - a $2.2 million home in Douglaston, N.Y.; a BMW sport utility vehicle; and up to $1.4 million in cash. He was also ordered to pay restitution, and pay a $400 special assessment fee.
Rafferty's sentence was based on criminal charges arising primarily from the same misconduct that led to the SEC's action. According to a Second Superceding Indictment filed by the USAO, from approximately March 2003 to around February 2004, Rafferty, acting as a consultant to UMDA, participated in promoting and selling its stock to potential investors. According to the Second Superceding Indictment, Rafferty solicited investors to invest in UMDA through the use of material misrepresentations and omissions of material facts, some of which are described below.
According to the Second Superceding Indictment, Rafferty conspired to commit wire fraud and committed wire fraud by causing investors to wire transfer monies in furtherance of the fraudulent scheme described above.
The SEC filed its emergency action against Rafferty, Gallo, Frederick Hornick, Jr., and UMDA on March 23, 2004. On that same day, Judge Daniel T.K. Hurley, U.S. District Judge for the Southern District of Florida, issued various emergency orders against the defendants, including temporary restraining orders, asset freezes, and other emergency relief. The SEC's complaint charged UMDA, Gallo, Rafferty, and Hornick with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Hornick with violating Section 15(a)(1) of the Exchange Act. Those sections and rules prohibit certain transactions in securities not registered with the Commission, prohibit fraud in the offer and sale, and in connection with the purchase and sale, of securities, and prohibit sales of securities by unlicensed brokers or dealers.
Gallo and Hornick consented to a Judgment of Permanent Injunction and Other Relief ("Judgments") in the SEC's case, without admitting or denying the allegations of the SEC's complaint. The Judgments were entered on July 2, 2004, and June 8, 2004, respectively.
On July 13, 2004, the USAO filed an indictment charging Gallo with securities fraud, wire fraud, and mail fraud, and charging Gallo and Rafferty with conspiracy to commit securities fraud. On July 26, 2004, Gallo pled guilty to one count of conspiracy to commit mail and wire fraud.
UMDA consented to a Judgment of Permanent Injunction and Other Relief ("Judgment") in the SEC's case, without admitting or denying the allegations of the SEC's complaint. The Judgment, which was entered on July 7, 2005, enjoins the company from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. Additionally, the Judgment provides for disgorgement and the imposition of a civil penalty in amounts to be determined by the Court upon the SEC's motion.
The SEC appreciates the efforts of the United States Attorney's Office for the Southern District of Florida in this matter.