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U.S. Securities and Exchange Commission

Litigation Release No. 22170 / November 28, 2011

SEC v. The Regency Group, LLC; Scott F. Gelbard; Jeffrey S. Koslosky; Aaron S. Lamkin; John J. Coutris; Michael J. Coutris; J. Coutris Partners, LP; Joseph S. Fernando; Wellington Capital Enterprises, Inc.; James J. Coutris; and Dimitrios I. Gountis, Civil Action No. 09-CV-497 (D. Colo.)

Court Enters Judgments as to Final Defendants in SEC Litigation against Denver Stock Promotion Firm and other Alleged Participants in Back-to-Back Pump-and-Dump Schemes

The Securities and Exchange Commission today announced that on November 9, 2011, the U.S. District Court for the District of Colorado entered final judgments, in U.S. Securities and Exchange Commission v. The Regency Group, et al., Civil Action No. 09-CV-497 (D. Colo. filed Mar. 9, 2009), as to defendants John J. Coutris; Michael J. Coutris; J. Coutris Partners, LP (JC Partners); Joseph S. Fernando; and Wellington Capital Enterprises, Inc. In conjunction with settled final judgments entered previously by the court against defendants Scott F. Gelbard; Jeffrey S. Koslosky; Aaron S. Lamkin; The Regency Group, LLC; James J. Coutris; and Dimitrios I. Gountis, these judgments bring to a close the Commission’s litigation against alleged participants in back-to-back pump-and-dump schemes involving the stocks of biotech startup Xpention Genetics, Inc. and surveillance startup HS3 Technologies, Inc.

The SEC’s Complaint, filed March 9, 2009, alleged that Gelbard, Lamkin, Koslosky, and their limited-liability company, Regency, arranged “reverse mergers” between Xpention and HS3 and two shell companies, followed by unregistered distributions of Xpention and HS3 stock undertaken by Gelbard, Lamkin, Koslosky, Regency, John Coutris, Michael Coutris, and John and Michael Coutris’s limited partnership, JC Partners. The Complaint further alleged that Gelbard, Lamkin, Regency, Canadian Joseph S. Fernando, and Fernando’s U.S. corporation, Wellington, subsequently orchestrated fraudulent promotional campaigns for Xpention and HS3 stock, and that these defendants sold shares into the promotions.

The November 9, 2011 judgment against John Coutris, Michael Coutris, and JC Partners: (1) orders John Coutris to disgorge his ill-gotten gains of $63,061, plus prejudgment interest of $27,313.72, and pay a civil penalty of $15,000; (2) orders Michael Coutris to disgorge his ill-gotten gains of $26,855, plus prejudgment interest of $11,631.69, and pay a civil penalty of $15,000; (3) orders JC partners to disgorge its ill-gotten gains of $86,423, plus prejudgment interest of $37,432.51; and (4) incorporates prior injunctions entered by the court on July 21, 2010, pursuant to partial settlements with John Coutris, Michael Coutris, and JC Partners under which they neither admitted nor denied liability. These injunctions, as incorporated into the final judgment, prohibit John Coutris, Michael Coutris, and JC Partners from violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 15(a)(1) of the Securities Exchange Act of 1934.

The court’s judgment against Fernando and Wellington: (1) enjoins them from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder; (2) bars them from participating in an offering of a penny stock; (3) orders Fernando to disgorge his ill-gotten gains of $1,863,708, plus prejudgment interest of $655,473.32, and pay a civil penalty of $100,000; and (4) orders Wellington to disgorge its ill-gotten gains of $182,986 plus prejudgment interest of $63,934.51

Settled final judgments previously entered by the court against the other defendants in this action, pursuant to which they neither admitted nor denied liability, have provided the following relief:

  • On October 31, 2011, the court enjoined Lamkin and Regency from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections 10(b), 13(d), 15(a)(1) and 16(a) of the Exchange Act, and Rules 10b-5, 13d-1, 13d-2, and 16a-3 thereunder. The court also barred them from participating in an offering of a penny stock, ordered Lamkin to disgorge ill-gotten gains of $100,000 and pay a civil penalty of $20,000, and ordered Regency to disgorge ill-gotten gains of $54,758 plus prejudgment interest of $19,750.92.

  • On July 26, 2011, the court enjoined Gelbard and Koslosky from violating Sections 5(a) and 5(c) of the Securities Act and Sections 13(d) and 16(a) of the Exchange Act, and Rules 13d-1, 13d-2, and 16a-3 thereunder. The court also barred them both from participating in an offering of a penny stock, and further enjoined Gelbard from violating Section 17(a) of the Securities Act and Sections 10(b) and 15(a)(1) of the Exchange Act, and Rule 10b-5 thereunder. The court ordered Gelbard to disgorge ill-gotten gains of $250,000 and pay a civil penalty of $100,000, and ordered Koslosky to disgorge ill-gotten gains of $75,000 and pay a civil penalty of $25,000.

  • On April 21, 2010, the court enjoined James Coutris from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission did not seek a civil penalty from James Coutris, based upon representations of his financial condition and other documents and information submitted to the Commission.

  • On April 14, 2009, the court enjoined Dimitrios Gountis from violating Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder, and order him to pay a civil penalty of $20,000.

Additionally, the Commission has issued Orders Instituting Administrative Proceedings against Lamkin, Regency, Gelbard, John Coutris, Michael Coutris, and JC Partners barring them from association with any broker or dealer, based on the district court injunctions entered against them. Each of the respondents consented to the issuance of the Orders without admitting or denying the findings in the Orders, except as to the entry of the civil injunctions against them.

In March 2009, as announced at the time that the Commission filed the district court action, the Commission issued Orders against Xpention (then known as Cancer Detection Corp.) and HS3 requiring them to cease and desist from violating Sections 5(a) and 5(c) of the Securities Act. Cancer Detection Corp. and HS3 agreed to settle the proceedings, without admitting or denying the findings in the Commission’s Orders.

For additional information, see Litigation Release No. 20937 (March 9, 2009); In the Matter of Aaron S. Lamkin - Rel. 34-65756; File No. 3-14626; In the Matter of The Regency Group, LLC - Rel. 34-65757; File No. 3-14627; In the Matter of Scott F. Gelbard - Rel. 34-65006; File No. 3-14495; In the Matter of John J. Coutris - Rel. 34-62611; File No. 3-13987; In the Matter of Michael J. Coutris - Rel. 34-62612; File No. 3-13988; In the Matter of J. Coutris Partners, LP - Rel. 34-62613; File No. 3-13989; In the Matter of Cancer Detection Corp - Rel. 33-9015; File No. 3-13405; In the Matter of HS3 Technologies, Inc. - Rel. 33-9014; File No. 3-13404.

 

http://www.sec.gov/litigation/litreleases/2011/lr22170.htm


Modified: 11/28/2011