U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20572 / May 14, 2008
Securities and Exchange Commission v. Paul Simmons, Rodney Gilbert, John Zankowski, Esq., Kerry Kennedy, Stanley Siciliano and Eric Littman, Esq., 8:04-CV-2477-T-17MAP (Middle District of Florida, Complaint filed November 15, 2004)
Federal Court Grants Summary Judgment, Orders Stock Promoter Kerry Kennedy to Pay More Than $2 Million in Disgorgement and Penalties for Violations of the Anti-Fraud, Anti-Touting and Registration Provisions of the Federal Securities Laws
On April 25, 2008, the U.S. District Court for the Middle District of Florida granted the Commission's motion for summary judgment and entered an order and final judgment against Kerry P. Kennedy, a stock promoter who orchestrated the fraudulent promotion of the securities of Nutraceutical Clinical Laboratories International, Inc. ("Nutraceutical" or the "Company"), a public company based in St. Petersburg, Florida. The Court's judgment (1) enjoins Kennedy from violating the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), Exchange Act Rule 10b-5, and the registration provisions of Section 5(a) and (c) of the Securities Act of 1933 ("Securities Act"); (2) orders Kennedy to disgorge $1,685,413.71 in ill-gotten gains (including prejudgment interest) from his participation in the pump-and-dump scheme; (3) imposes a $400,000 civil money penalty; and (4) bars Kennedy from participating in any offering of penny stock.
The Commission's complaint, filed on November 15, 2004, alleges that in 2000 and 2001 Kennedy, along with fellow stock promoter Stanley Siciliano, attorney John Zankowski and Nutraceutical CEO Paul Simmons and CFO Rodney Gilbert, engaged in a multi-faceted pump-and-dump scheme involving the securities of Nutraceutical, which now, under different management, operates as Preservation Sciences, Inc. and EFUEL Network, Inc. (Litigation Release No. 18968.) As part of a reverse merger transaction Kennedy helped to arrange, and in contravention of the registration provisions of the federal securities laws, CEO Simmons, CFO Gilbert, promoter Kennedy and attorney Zankowski secretly purchased nearly all of Nutraceutical's purportedly free trading stock through their offshore nominee accounts. They did so in order to make a public market for the illegal, unregistered distribution of their stock.
To drum up interest in the Company and to facilitate their anonymous distribution, Simmons disseminated false and misleading publicity about Nutraceutical, while, at the same time, stock promoters Kennedy and Siciliano falsely touted the stock on an Internet message board and manipulated the market for the Company's stock through fraudulent stock trading via matched and washed buy and sell orders. According to the Court's order, "Kennedy's actions showed that he was aware of the true value of Nutraceutical's stock, while simultaneously deceiving potential investors to increase the profit of his stock sale." During the course of the pump, Kennedy unlawfully dumped Nutraceutical stock through nominee accounts, reaping $1,144,583.95 in profits.
Previously, the Court had entered final judgments against all five of the other defendants in the Commission's lawsuit, enjoining them from further violations of the anti-fraud, registration or anti-touting provisions of the federal securities laws, ordering disgorgement, imposing monetary penalties and barring some of them from serving as officers or directors of public companies or participating in offerings of penny stock.