U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20263 / August 31, 2007
SEC v. Leonard L. Zanello, Sr., Ihor A. "Gary" Humesky, Steven B. Rodd, and Robert F. Broege, Jr., Civil Action Number 1:02-CV-3308 (N.D. Ga.)
The Securities and Exchange Commission (Commission) announced that on August 30, 2007, the Honorable Willis B. Hunt, Jr., United States District Court for the Northern District of Georgia, entered a Final Judgment establishing disgorgement amounts and civil penalties for Leonard L. Zanello, Sr. (Zanello), Ihor A."Gary" Humesky (Humesky), Steven B. Rodd (Rodd), and Robert F. Broege, Jr. (Broege). The Court ordered Zanello to pay $80,971 in disgorgement and prejudgment interest, and ordered Humesky, Rodd and Broege to pay disgorgement in the amounts of $156,366, $156,366, and $73,000, respectively. The disgorgement amounts represent the defendants' ill-gotten gains (sales commissions) from their participation in a fraudulent investment scheme. The Court further ordered each defendant to pay a civil penalty of $50,000. In early 2003, the Court entered orders against Zanello, Humesky, Rodd and Broege, enjoining them from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The defendants consented to the orders without without admitting or denying the allegations of the Commission's complaint, which it filed on December 10, 2002. In consenting to the judgments, the defendants agreed to defer the Court's determination of disgorgement and penalty amounts to a later date.
The litigation relates to the investments that the defendants sold on behalf of LinkTel Communications, Inc. (LinkTel), an Atlanta, Georgia company that sold and operated pay telephones. Many of the investments were marketed and sold to senior citizens as a means of generating income to pay for the seniors' long-term care health insurance policies. The complaint alleged that the defendants made material misrepresentations and omissions in connection with the sale of the investments. For example, the defendants falsely represented to potential investors that they had investigated LinkTel and that it was a profitable company. In addition, they told the investors that LinkTel was a safe investment and that the investment was fully insured. In fact, LinkTel was a fraudulent Ponzi scheme. The complaint alleged that the defendants made the material misrepresentations about the investments without conducting a reasonable investigation of LinkTel's financial status. The defendants also significantly understated their commissions in sales materials that they distributed in connection with their sales of the LinkTel investments.