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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22780 / August 14, 2013

SEC v. Jack Freedman, Civil Action No. 0:13-cv-61764 (U.S. District Court for the Southern District of Florida)

SEC v. Jeffrey L. Schultz and Redfin Network, Inc., Civil Action No. 0:13-cv-61763 (U.S. District Court for the Southern District of Florida)

SEC v. Richard P. Greene and Peter Santamaria, Civil Action No. 0:13-cv-61762 (U.S. District Court for the Southern District of Florida)

SEC v. Douglas P. Martin and VHGI Holdings, Inc., Civil Action No. 9:13-cv-80806 (U.S. District Court for the Southern District of Florida)

SEC v. Sheldon R. Simon, Civil Action No. 9:13-cv-80808 (U.S. District Court for the Southern District of Florida)

SEC v. Thomas Gaffney and Health Sciences Group, Inc., Civil Action No. 0:13-cv-61765 (U.S. District Court for the Southern District of Florida)

SEC v. Mark Balbirer, Civil Action No. 0:13-cv-61761 (U.S. District Court for the Southern District of Florida)

SEC v. Stephen F. Molinari and Nationwide Pharmassist Corp., Civil Action No. 9:13-cv-80807 (U.S. District Court for the Southern District of Florida)

The Securities and Exchange Commission today charged several CEOs and their companies, and five penny stock promoters with securities fraud for their roles in various illicit kickback and market manipulation schemes involving microcap stocks.

The SEC worked closely with the U.S. Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation as the separate schemes were uncovered. The U.S. Attorney’s Office today announced criminal charges against the same individuals facing SEC civil charges.

According to complaints the SEC filed in the U.S. District Court for the Southern District of Florida, defendants Thomas Gaffney, Health Sciences Group, Inc., Mark Balbirer, Stephen F. Molinari, and Nationwide Pharmassist Corp. engaged in a scheme involving the payment of an undisclosed kickback to a pension fund manager or hedge fund principal in exchange for the fund’s purchase of restricted shares of stock in a microcap company.

According to additional complaints also filed in the Southern District of Florida, defendants Jack Freedman, Jeffrey L. Schultz, Redfin Network, Inc., Richard P. Greene, Peter Santamaria, Douglas P. Martin, VHGI Holdings, Inc., and Sheldon R. Simon engaged in various schemes. Some schemes involved undisclosed inducement payments made to individuals to facilitate the manipulation of the stock of several microcap issuers. One scheme involved an undisclosed bribe that was to be paid to a stockbroker who agreed to purchase a microcap company’s stock in the open market for his customers’ discretionary accounts. 

The SEC alleges that the defendants in the schemes involving undisclosed kickbacks understood they needed to disguise the kickbacks as payments to phony companies, which they knew would perform no actual work. In the schemes involving the undisclosed inducement payments or bribe, the SEC alleges that the defendants knew their illegal activities were meant to artificially inflate the companies’ stock volume and prices.

The SEC’s complaints allege the defendants violated Section 17(a)(1) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and/or 10b-5(c) thereunder. The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and financial penalties against all the defendants; penny stock bars against all the individual defendants; and officer-and-director bars against defendants Schultz, Martin, Gaffney, and Molinari.

The SEC acknowledges the assistance and cooperation of the United States Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation, Miami Division, in these investigations.

SEC Complaints

 

http://www.sec.gov/litigation/litreleases/2013/lr22780.htm


Modified: 08/14/2013