U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21702 / October 21, 2010

Securities and Exchange Commission v. Online-Registries, Inc. and David G. Stern, as Defendants, and Michele Ritter, as Relief Defendant, Civil Action No. 10-CV-00433-S (D.R.I. filed October 19, 2010)

SEC OBTAINS TEMPORARY RESTRAINING ORDER AND ASSET FREEZE IN CONNECTION WITH RHODE ISLAND-BASED OFFERING FRAUD

The Securities and Exchange Commission today announced that it filed an emergency enforcement action on October 19, 2010 in federal district court in Rhode Island against David G. Stern, a resident of Newport, Rhode Island, and Online-Medical Registries, Inc. (d/b/a Online Medical Registries or “OMR”), his Rhode Island-based company.   The Commission’s complaint alleges that Stern and OMR defrauded at least 10 investors, who invested approximately $170,000 in the company.  On October 20, the court granted the Commission’s ex parte request for a temporary restraining order, asset freeze, and other relief.

The Commission’s complaint alleges that since at least 2006, Stern offered and sold securities to investors in the form of stock in OMR.  According to the complaint, Stern told investors that OMR had developed a technology that would help patients share their medical information with healthcare professionals in emergencies and at other crucial times.  The complaint alleges that Stern falsely told investors that OMR had thousands of subscribers (when it only had approximately a dozen), that it had successfully tested its technology with a large hospital, that it would be partnering with a major technology company, and that as a result of the partnership, OMR shares would be worth multiple times their initial value.  According to the complaint, Stern, who is a convicted felon and was disbarred from the practice of law, also lied to investors about his criminal background and disbarment.  The complaint further alleges that Stern depleted virtually all of the investor funds he had received, largely by writing checks payable to himself and one of his affiliates.  

The Commission’s complaint alleges that Stern and OMR violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  The Honorable William E. Smith issued a temporary restraining order against further violations of the securities laws, an order freezing the assets of Stern and OMR, an order freezing all proceeds of the misconduct held by others, an order prohibiting the acceptance of additional investor funds, an accounting of assets, and an order prohibiting the alteration or destruction of relevant documents, as well as other relief.  The Commission also seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest against Stern, OMR, and Michele Ritter (a relief defendant alleged to have received investor proceeds), as well as the imposition of civil monetary penalties against Stern and OMR. 

See Also: SEC Complaint

 
http://www.sec.gov/litigation/litreleases/2010/lr21702.htm

Last modified: 10/21/2010