U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20231 / August 8, 2007
Accounting and Auditing Enforcement Release No. 2665 / August 8, 2007
SEC v. Gershon Tannenbaum and Jay M. Vermonty, Civ. Action No. 1:99-CV-06050 (E.D.N.Y.) (ARR) (JMA).
Court Enters Final Judgments Against Gershon Tannenbaum and Jay Vermonty For Securities Fraud Imposing Civil Penalties and Disgorgement
On July 25, 2007, the United States District Court for the Eastern District of New York entered final judgments against Gershon Tannenbaum ("Tannenbaum") and Jay M. Vermonty ("Vermonty") for securities fraud, imposing civil penalties totaling $200,000 and disgorgement in excess of $155,000. The Commission alleged in its action that Tannenbaum and Vermonty were part of a fraudulent scheme from 1995 through 1997 to falsify and inflate the financial condition of Power Phone Inc. and its successor TMC Agroworld Corporation. The Commission alleged in its action that Tannenbaum and Vermonty fraudulently promoted Power Phone and TMC Agroworld stock.
The Commission's complaint alleged that Power Phone's audited financial statements for the fiscal year ended June 30, 1995 improperly included two assets that Power Phone did not own: (i) artwork with a purported value of $2 million; and (ii) a commercial grade application software program also with a purported value of $2 million. Collectively, these assets accounted for 95% of Power Phone's total assets. The Commission's complaint alleged that Tannenbaum and Vermonty actively and fraudulently touted the stock of Power Phone and TMC Agroworld to the investing public and then sold their stock in those entities at artificially inflated prices.
Under the terms of the final judgments, Tannenbaum and Vermonty were each permanently enjoined from further violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5. The court also ordered Tannenbaum to pay disgorgement in the amount of $95,026, plus prejudgment interest, and $100,000 in civil penalties. The court ordered Vermonty to pay disgorgement in the amount of $63,880, plus prejudgment interest, and $100,000 in civil penalties. The court also ordered both Tannenbaum and Vermonty to provide a verified, sworn accounting.
For additional information regarding this action, see Litigation Release No. 1173 (Sept. 28, 1999) (describing the initial filing). Also see In the Matter of Michael, Adest & Blumenkrantz, P.C., et al., Admin. Proc. File No. 3-9873 (Apr. 14, 1999); In the Matter of Joseph Salamon, Admin. Proc. File No. 3-10095 (Nov. 10, 1999); In the Matter of Isaac Hager, Admin. Proc. File No. 3-10317 (Feb. 7, 2001).