SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16218 / July 22, 1999
Securities and Exchange Commission v. Robert E. Cohen, Victor M. Caron and James B. Yates, Jr., Civ. Action No. 99- CIV 5822 (S.D.N.Y.)
SEC CHARGES THREE IN SCHEME TO SELL UNREGISTERED MICROCAP STOCK THROUGH SHAM SALES TO LIBERIANS
The Securities and Exchange Commission announced today that it filed a complaint on July 22, 1999 charging three New York area men in a scheme to sell unregistered microcap stock into the United States market through a series of intermediate sham sales to purported residents of Liberia. The defendants are Robert E. Cohen, of New York, New York; Victor M. Caron, of Massapequa, New York; and James B. Yates, Jr., of Staten Island, New York. The Commission previously had barred Cohen from the securities industry in In the Matter of Robert E. Cohen, Admin. Proc. File No. 3-7700, Rel. No. 34-30543 (April 1, 1992).
The Commission's complaint charges that Cohen, Caron, and Yates used two nominees to orchestrate the fraudulent sale of 2.5 million shares of stock in a now defunct New York computer retailer named Blue Chip Computerware, Inc. The Commission charges that from 1993 through 1995 Cohen, Caron, and Yates received more than $1.7 million in illegal profits from their scheme.
According to the Commission's complaint, Caron, who was the president of Blue Chip, and Cohen, who was a paid consultant to the company, arranged 18 transactions in which millions of shares of unregistered Blue Chip stock were sold to two purported residents of Liberia. The shares were later all sold into the United States market. Yates assisted in the sales to the Liberians, who are his father and sister. Caron and Cohen claimed that because the sales were to foreign residents, they were exempt from registration pursuant to Regulation S under the Securities Act of 1933. The Commission charges that Cohen and Caron concealed from Blue Chip and its other managers that the purported Liberian purchasers were merely nominees being used by Cohen, Caron and Yates. Cohen and Caron also concealed that they were arranging for the nominee sales at steeply discounted prices, and that all three defendants were profiting when the stock was sold to domestic broker-dealers at higher prices. According to the Commission's complaint, no money to pay for any of the shares came from overseas, or from the nominees. At least six of the purchases were not paid in full at the time of the sales to the nominees, and virtually all of the stock was paid for with the proceeds of the sale of the stock into the United States market. Neither of the nominees used an overseas brokerage account, and certificates for the Blue Chip shares were never sent overseas. In virtually every instance the stock was resold to a domestic broker-dealer within months after it had been issued.
The nominees received no money from their purported investments. Cohen, Caron, and Yates, however, received more than $1.7 million from the scheme.
The Commission charges Cohen and Caron with violating the antifraud provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Specifically, the Commission charges Cohen and Caron with violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 15(b)(6)(B), and 15(c)(1) of the Securities Exchange Act of 1934, and Rules 10b-5 and 15c1-2 thereunder. The Commission also charges all three defendants with violating certain registration provisions of Section 5 of the Securities Act of 1933.
In addition, the Commission charges that by arranging stock sales for Blue Chip, Cohen acted as a broker and a dealer in violation of the prior Commission order barring him from associating with any broker or dealer.
The Commission's complaint seeks permanent injunctions, penalties, and disgorgement with prejudgment interest from all three defendants, and an order commanding Cohen to comply with the prior Commission order against him.http://www.sec.gov/litigation/litreleases/lr16218.htm