Litigation Release No. 15903 / September 24, 1998
SEC SUES FLORIDA MICROCAP COMPANY AND OTHERS FOR OPERATING PONZI SCHEME
Securities and Exchange Commission v. James T. Staples, Joseph A. Monaco, Jeno K. Koch, David E. Trotter and Robert L. Heintz, Case No. 98-1061-CV-22c (M.D. Fla.)
On September 24, 1998 the Securities and Exchange Commission filed a complaint against Florida residents James T. Staples, Joseph A. Monaco, Jeno K. Koch, David E. Trotter and Robert L. Heintz. The complaint alleges that Staples, as Chief Executive Officer of Legend Sports, defrauded investors who bought Legend Sports securities by operating a Ponzi scheme and misrepresenting to investors, among other things, the financial condition of Legend Sports. According to the complaint, Legend Sports developed and operated golf entertainment facilities in Central Florida, and raised at least $18 million through the sale of the securities between 1994 and 1996. The securities are alleged to have been sold to more than 350 investors in at least 16 states through a network of salesmen supervised by Monaco and including Koch, Trotter and Heintz. More than $15 million is alleged to remain unpaid to investors.
The Commissions complaint specifically alleges that Staples violated the antifraud provisions of the federal securities laws, by operating the Ponzi scheme., specifically, 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. At Staples direction, a portion of the money raised was used to make interest and dividend payments to investors. Monaco is charged with violating the same provisions for allegedly failing to disclose to investors commissions and overrides he received from Legend Sports in connection with the sale of the notes and preferred stock. Staples, Monaco, Koch, Trotter and Heintz are alleged to have sold the promissory notes while no registration statement was in effect as to those securities, in violation of Sections 5(a) and 5(c) of the Securities Act of 1933. Monaco, Koch and Trotter are also alleged to have failed to register as brokers or, if associated with a broker-dealer, selling the notes or preferred stock outside the scope of their association, in violation of Section 15(a) of the Securities Exchange Act of 1934.
In September 1997 the Commission issued an order suspending trading in Legend Sports common stock. Until that time, Legend Sports common stock had been quoted on the OTC Bulletin Board. This enforcement action is one of numerous cases filed by the Commission today in an effort to address abuses in the microcap market. It is also part of the Commission's four-pronged approach to minimizing Microcap fraud: enforcement, inspections, investor education and regulation. For more information about the SECs response to microcap fraud, visit the SECs Microcap Fraud Information Center at http://www.sec.gov/news/extra/microcap.htm.
PERSON TO CONTACT:
Randall J. Fons