U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21735 / November 10, 2010
Accounting and Auditing Enforcement Release No. 3213 / November 10, 2010
Securities and Exchange Commission v. LocatePlus Holdings Corporation, 1:10-CV-11751 (D. Mass. October 14, 2010)
SEC CHARGES FORMER CEO AND CFO OF MASSACHUSETTS INFORMATION TECHNOLOGY COMPANY WITH SECURITIES FRAUD
The Securities and Exchange Commission today charged Jon Latorella of Marblehead, Massachusetts, and James Fields of Brookline, Massachusetts, the former CEO and CFO respectively of LocatePlus Holdings Corporation (“LocatePlus”), with securities fraud concerning a scheme to fraudulently inflate revenue at LocatePlus as well as a scheme to manipulate the stock of another company. LocatePlus is a Massachusetts-based information technology company that sells on-line access to public record databases for investigative searches. The Commission previously charged LocatePlus for its role in this case in a complaint filed on October 14, 2010. Today’s action amends that complaint to add Latorella and Fields as defendants to the case.
According to the amended complaint, filed in federal court in Boston, Latorella and Fields orchestrated two separate schemes to commit securities fraud. In the first scheme, the Commission alleges that all three defendants engaged in securities fraud by misleading LocatePlus’ investors about the company’s funding and revenue. The amended complaint charges that Latorella and Fields fraudulently inflated the company’s publicly-reported revenue for fiscal years 2005 and 2006 by creating a fictitious customer called “Omni Data.” LocatePlus then improperly recognized millions of dollars in payments from Omni Data as revenue. As the amended complaint alleges, Omni Data was actually funded by approximately $2 million in cash routed through entities secretly controlled by Latorella and Fields.
According to the amended complaint, beginning in 2005, Latorella and Fields also masterminded another fraudulent scheme to manipulate the market for stock in Paradigm Tactical Products, Inc., a Massachusetts-based company that sold hand-held metal detectors. The amended complaint charges that Latorella and Fields, who were a founder and a Director of Paradigm respectively, caused Paradigm to issue shares to brokerage accounts that appeared to be owned by independent investors, but were secretly controlled by Latorella. According to the amended complaint, Latorella and Fields failed to register the sale of these shares as the securities laws require and made misrepresentations to get these shares quoted on a public market. Then, after causing the publication of false press releases in an attempt to increase Paradigm’s stock price, Latorella sold the shares he secretly controlled into the public market at an artificially inflated price, again in unregistered transactions. Some of the proceeds of these sales were transferred to Omni Data, and used to fund payments to LocatePlus.
The SEC’s amended complaint charges Latorella, Fields and LocatePlus, variously, with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a),13(b)(2)(A), 13(b)(2)(B), 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1 and 13b2-2 thereunder, and seeks, against all defendants, civil injunctions, disgorgement and civil penalties and, against Fields and Latorella, bars against serving as an officer or director of any public company and against participating in an offering of penny stock.
Separately, the U.S. Attorney’s Office for the District of Massachusetts today filed an indictment charging Latorella and Fields with criminal violations based on the same misconduct. The SEC also acknowledges the assistance of the New England Field Division of the Federal Bureau of Investigation, the Boston Field Division of the Internal Revenue Service and the Massachusetts Securities Division.
The Commission’s investigation is continuing.
In April 2010, the SEC filed a settled civil injunctive action against Paradigm’s former president Daniel O’Riordan, alleging violations of the anti-fraud and registration provisions of the federal securities laws in connection with the scheme involving Paradigm outlined above. O’Riordan consented to the entry of a permanent injunction as well as a permanent officer-director bar and a permanent penny stock bar. In addition, O’Riordan pled guilty to committing criminal securities fraud relating to his conduct relating to Paradigm, and is scheduled to be sentenced on December 2, 2010 by the Honorable Mark L. Wolf in the District of Massachusetts.
For further information, see Litigation Release No. 21474 (April 2, 2010); Litigation Release No. 21692 (October 14, 2010)
See Also: SEC Complaint