U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20764 / October 1, 2008
Securities and Exchange Commission v. Christopher Castaldo, Daniel James Gallagher, Frank J. Zangara, B.H.I. Group, Inc., Corporate Communications Corp., and Vision Securities Inc., 08 Civ. 8397 (JSR) (S.D.N.Y.) (September 30, 2008)
SEC Charges Registered Broker-Dealer, Three Individuals, and Related Entities With Violating Broker-Dealer Registration and Reporting Requirements
On September 30, 2008, the Commission filed a civil injunctive action charging Vision Securities, Inc., Daniel James Gallagher, Vision's de facto chief executive officer, Christopher Castaldo, Frank J. Zangara, and two entities controlled by Castaldo or Zangara with violations of the broker-dealer registration and reporting requirements. The Commission's complaint alleges that, from approximately May 2005 through February 2007, Castaldo solicited investors, and received transaction-based compensation, in connection with three offerings of securities, including one offering conducted under the auspices of Vision, and that Zangara solicited investors and received transaction-based compensation in connection with one of these offerings. According to the Complaint, this conduct was illegal because Castaldo and Zangara were not registered as brokers, and Castaldo was not a registered representative of Vision. Moreover, Zangara's brokerage activities violated the terms of a Commission order previously entered against him. In addition, the Complaint alleges that Vision filed numerous inaccurate Form BD amendments, in which it failed to disclose Gallagher's control of the firm.
The complaint names the following defendants:
The Complaint alleges that in about May 2005, Castaldo and Zangara, a former colleague of Castaldo's from Tasin, began soliciting Stock Traders Press subscribers and others for an offering of securities in an on-line comparison-shopping business. Corporate Communications received commissions on the amount Castaldo raised, and BHI received commissions on the amount that Zangara raised. The complaint further alleges that in about September 2005, Castaldo's former colleague at the Stratton Oakmont firm, Gallagher, enlisted Castaldo to assist Gallagher's firm, Vision, in soliciting investors for another offering, even though Gallagher knew that Castaldo and Corporate Communications were not registered and lacked the requisite licenses. Vision ultimately paid Corporate Communications approximately seventy percent of the commissions it received on the money Castaldo raised for that offering. In addition, Vision Securities, with the knowledge and substantial assistance of Gallagher, filed numerous Form BD amendments with the Commission, in which it failed to disclose Gallagher's true relationship to, and control of, Vision. The complaint also alleges that from October 2006 to February 2007, independent of Vision and Zangara, Castaldo solicited investors for a third offering, for which Corporate Communications also received commissions.
As a result of this conduct, the Complaint alleges that defendants BHI, Corporate Communications, Castaldo and Zangara violated Section 15(a) of the Securities and Exchange Act of 1934 (Exchange Act), Zangara violated Section 15(b)(6)(B)(i) of the Exchange Act, Vision Securities violated Sections 15(b)(7) and 17(a) of the Exchange Act, Gallagher and Castaldo are liable pursuant to Section 20(e) of the Exchange Act as aiders and abettors of Vision Securities' violations of Section 15(b)(7) of the Exchange Act and Rule 15b3-1, and Gallagher is liable pursuant to Section 20(e) of the Exchange Act as an aider and abettor of Vision Securities' violations of Section 17(a) of the Exchange Act and Rule 15b7-1. In its Complaint, the Commission seeks permanent injunctions, disgorgement and prejudgment interest and civil penalties against all defendants.