U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20077 / April 18, 2007
SEC v. Nu Star Holdings, Inc. et al., Civil Action No. 2:07-cv-00506-LDG-RJJ (D. Nev.)
SEC Sues Recidivists Gerald and Marie Levine and Others for Fraudulent Scheme Involving Sale of Shares in Nu Star Holdings, Inc., and Other "Pink Sheet" Companies
Fraudulent Sales Accomplished Through Boiler Room Operations
On April 17, 2007, the Securities and Exchange Commission filed a civil fraud action against Nu Star Holdings, Inc. ("Nu Star"), seven individuals and four relief defendants. According to the complaint, Nu Star, recidivists Gerald and Marie Levine, along with Alan Copeland, Mary Ann Metz, Darin Metz and Isaac Morley, engaged in a fraudulent scheme to sell shares of Nu Star and other "Pink Sheet" companies to innocent investors. The complaint alleges that from late 2003 through 2005, certain of the defendants established "boiler rooms" in Barcelona, Spain and Santa Ana, California to sell shares of the relevant companies primarily to overseas investors. The complaint also states that defendants Gerald and Marie Levine and Bruce Rothenberg sold Nu Star stock to several investors in western New York. The complaint alleges that the defendants' fraudulent conduct resulted in sales of securities of at least $4 million, and that four entities controlled by the Levines and the Metzes, Wire to Wire, Inc., Public Highway, Inc., the 1975 Trust and Global Environmental Systems, Inc., received proceeds from the fraudulent stock sales.
The complaint alleges that to induce investors to buy shares of Nu Star, the defendants artificially inflated its share price through numerous, small-volume purchases of its stock, and then offered Nu Star's shares to the public at a purported "discount" to the "market" price. The complaint further alleges that the defendants made false statements about Nu Star by issuing a fabricated "independent" research report recommending that investors buy Nu Star, preparing company reports that far overstated its prospects, and failing to disclose that commissions for boiler room sales of Nu Star and other companies were as high as 70 percent of the purchase price of the stocks. In addition to the anti-fraud violations charges, the Commission's complaint charges Gerald and Marie Levine, Mary Ann Metz and Isaac Morley with selling shares of Nu Star without complying with the registration provisions of the federal securities laws, and Gerald and Marie Levine and Bruce Rothenberg with acting as unregistered brokers in selling shares of Nu Star. Specifically, the complaint charges that Nu Star, Gerald Levine, Marie Levine, Alan Copeland, Isaac Morley, Mary Ann Metz and Darin Metz violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also charges that Nu Star, Gerald Levine, Marie Levine, Alan Copeland, Isaac Morley and Mary Ann Metz violated Sections 17(a)(1), (2) and (3) of the Securities Act of 1933 ("Securities Act"). The complaint also charges that Nu Star, Gerald Levine, Marie Levine, Isaac Morley and Mary Ann Metz violated Sections 5(a) and (c) of the Securities Act. Finally, the complaint charges that Gerald Levine, Marie Levine and Bruce Rothenberg violated Section 15(a) of the Exchange Act.
The Commission seeks permanent injunctions, disgorgement with prejudgment interest and civil money penalties against Nu Star and each individual defendant. The Commission also seeks penny stock bars against each individual defendant. Additionally, the Commission seeks officer and director bars against Gerald and Marie Levine, Alan Copeland, Mary Ann Metz, Darin Metz and Isaac Morley. Finally, the Commission seeks disgorgement with prejudgment interest from the four relief defendants.
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Details of the prior securities fraud verdict returned against Gerald and Marie Levine on October 16, 2003, are at http://www.sec.gov/litigation/litreleases/lr18420.htm.