U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21138 / July 17, 2009
SEC v. Excellency Investment Realty Trust, Inc. and David Mladen, , U.S. District Court for the District of Connecticut, 3:08 CV 1583 (JBA)
Connecticut Company, Excellency Investment Realty Trust, Inc, and CEO, David D. Mladen, Settle SEC Fraud Charges
The Securities and Exchange Commission announced today that on July 16, 2009, a final judgment by consent was entered by the United States District Court for the District of Connecticut against Excellency Investment Realty Trust, Inc., a publicly-traded real estate investment trust located in Hartford, Connecticut, and its chief executive officer, David D. Mladen, age 55, of Scarsdale, New York. The Commission initially filed this case in October 2008 alleging a fraudulent market manipulation scheme. The Commission filed an amended complaint on July 13, 2009, alleging additional charges that Excellency and Mladen made a false or misleading material statement in a public filing relating to the contemplation of legal proceedings against them and that Mladen failed to file required reports relating to his beneficial ownership of Excellency. The defendants agreed to settle both the original charges and the additional charges. The final judgments against Excellency and Mladen permanently enjoin them from violating the antifraud and other provisions of the federal securities laws. In addition, Mladen was ordered to pay a $50,000 civil penalty and $5,254 in disgorgement and prejudgment interest relating to his sales of Excellency stock during the period of his alleged fraud, and is prohibited for a period of five years from acting as an officer and director of any public company.
The Commission's original complaint, filed on October 16, 2008, alleges that during at least July 2006 through September 2006, Mladen and Excellency engaged in a market manipulation scheme to defraud Excellency investors. According to the complaint, Mladen, acting in his capacity of CEO of Excellency and acting through a brokerage account that was owned and controlled in part by Excellency and Mladen, traded in Excellency stock in such a way as to artificially increase the price of Excellency stock. The complaint alleges that Mladen purchased Excellency stock in small quantities at progressively higher prices and executed wash or match trades in order to create the appearance of an active market for Excellency shares. According to the complaint, Mladen's trading activity systematically manipulated the stock price of Excellency, causing it to increase from $8 per share to $24.35 per share.
The amended complaint filed on July 13, 2009 alleges, in addition to the alleged fraudulent market manipulation scheme, that Excellency filed a periodic report with the Commission on August 14, 2008, which Mladen signed as CEO, in which it falsely stated that no government agency was contemplating any proceeding against it, even though the company had been notified by the Commission staff on June 27, 2008 that the staff intended to recommend enforcement action against the company concerning the market manipulation scheme. Moreover, the amended complaint alleges that Mladen was trading in Excellency stock at the same time the false or misleading statement was made and during other times. The amended complaint alleges that, as an insider of Excellency, Mladen's trading caused a change in his beneficial ownership of Excellency stock and that Mladen almost never disclosed his change in ownership in required Commission filings. According to the amended complaint, Excellency violated Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-13 and Rule 12b-20 thereunder and that Mladen violated Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5 and 16a-3 thereunder and aided and abetted violations of Section 13(a) of the Exchange Act and Rules 13a-13 and Rule 12b-20 thereunder.
The final judgments against Excellency and Mladen, to which each consented without admitting or denying the Commission's allegations, enjoins Excellency from violating Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 13a-13 and Rule 12b-20 thereunder and enjoins Mladen from violating Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5 and 16a-3 thereunder and from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 13a-13 and Rule 12b-20 thereunder. Additionally, Mladen agreed to pay a $50,000 civil penalty, $5,000 in disgorgement and $254 in prejudgment interest, and to a five year bar from serving as an officer or director of any public company.
For more information, please see Litigation Release No. 20781 (October 16, 2008).