SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16584 / June 6, 2000
Accounting and Auditing Enforcement Release No. 1268
SEC SETTLES FRAUD CASE AGAINST RONALD MOSKOWITZ, FORMER FERROFLUIDICS CHAIRMAN AND CEO
SEC v. Ferrofluidics Corp., Ronald Moskowitz, Jerome R. Allen, Jan R. Kirk, Stephen P. Morin, Bruce S. Moody, and the 1991 RPM Irrevocable Trust (97 Civ. 7174 (RMB), S.D.N.Y.)
On May 31, 2000, the U.S. District Court for the Southern District of New York entered a final judgment against Ronald Moskowitz, the former Chairman and CEO of Ferrofluidics Corporation, in a pending case (SEC v. Ferrofluidics Corp., Ronald Moskowitz, Jerome R. Allen, Jan R. Kirk, Stephen P. Morin, Bruce S. Moody, and the 1991 RPM Irrevocable Trust). The judgment enjoins Moskowitz from future violations of the antifraud provisions and certain reporting, internal controls, and record-keeping provisions of the federal securities laws. Without admitting or denying the Commission's allegations, Moskowitz consented to the entry of the judgment, which also bars him from acting as an officer or director of a public company.
In its complaint, the Commission alleged that from early 1991 through June 1993, Moskowitz devised and, with the assistance of members of the company's senior management and others, implemented a broad-ranging scheme to defraud the investing public and enrich himself by materially inflating the company's revenues and earnings and by making numerous other materially false and misleading disclosures about the company's business. As part of the scheme, Moskowitz and other defendants prepared and disseminated a series of materially false and misleading public statements concerning, among other things, a sham private placement of stock by the company, sales of the company's products, and equity investments made by the company. Moskowitz and other defendants also disseminated favorable projections concerning Ferrofluidics' future business prospects and profitability, without having any reasonable basis for such projections. As a result of these activities, potential and actual investors were led to believe that Ferrofluidics was a profitable company with tremendous opportunities for rapid growth and earnings. In fact, Ferrofluidics was then experiencing problems in developing and manufacturing its products. During the relevant period, Moskowitz sold (through seven family trusts that he controlled), and directed to be sold, Ferrofluidics stock worth millions of dollars, in a series of private placements and open market transactions, while in the possession of material, nonpublic information about the company.
The judgment enjoins Moskowitz from violating Sections 17(a) of the Securities Act, Sections 10(b), Section 13(d), and 16(a) of the Exchange Act, and Rules 10b-5, 13b2-1, 13b2-2, 13d-2, 16a-2 and 16a-3 thereunder. The judgment also bars him from acting as an officer or director of any issuer required to file periodic reports with the Commission pursuant to Sections 12 or 15(d) of the Exchange Act; and orders him to disgorge unjust enrichment alleged in the complaint of $6,605,687, plus prejudgment interest. Based on Moskowitz's inability to pay, disgorgement was waived and no penalty was assessed.
In a related criminal proceeding (U.S. v. Ronald Moskowitz, 97 Cr. 1122 (MBM)), Moskowitz was sentenced to eight years in prison on two counts, conspiracy and securities fraud. On May 25, 2000, the U.S. Court of Appeals for the Second Circuit affirmed the criminal judgment and sentence as to Moskowitz (U.S. v. Ronald Moskowitz, Nos. 99-1745 (L), 99-1769 (CON)(MBM), 2000 U.S. LEXIS 11733).
The Commission previously instituted five related administrative proceedings: In the Matter of Paul Y. Okuda, Stephen A. Thorpe, and David J. Chester, Admin. Proc. File No. 3-9345 (July 1, 1997), In the Matter of Helen Chalut and Saleem Noorani, Admin. Proc. File No. 3-9344 (July 1, 1997); In the Matter of Sheldon S. Traube and George F. Sweeney, Admin. Proc. File No. 3-9283 (March 27, 1997); In the Matter of Kedar Gupta, Alvan Chorney, and Herbert Moskowitz, Admin. Proc. File No. 3-9435 (September 26, 1997); In the Matter of Dickinson & Co. and T. Marshall Swartwood, Admin. Proc. File No. 3-9321 (May 28, 1997). In related criminal proceedings, former Ferrofluidics CFO Jan R. Kirk was sentenced to five years in prison (U.S. v. Jan R. Kirk, 97 Cr. 1032 (MBM)), and former Ferrofluidics consultant Jerome Allen was sentenced to six months in prison (U.S. v. Robert Jerome Allen, 97 Cr. 979 & 98 Cr. 884 (MBM)).http://www.sec.gov/litigation/litreleases/lr16584.htm