SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16636 / July 27, 2000
Securities and Exchange Commission v. Phillip Herman, Marc Wein, Millennium Services Corp., and Branin Investments, Inc., 00 Civ. 5575 (BSJ) (S.D.N.Y.)
The Securities and Exchange Commission ("Commission") filed a complaint today in the United States District Court for the Southern District of New York against Phillip Herman ("Herman"), Marc Wein ("M. Wein"), Millennium Services Corp. ("Millennium"), and Branin Investments, Inc. ("Branin"). The complaint charges the defendants with making false and misleading statements in offering and selling unregistered securities of Millennium, a start-up company formed by Branin purportedly to acquire and operate funeral homes. The Commission alleges that the defendants raised $4.8 million from fifty-six individual investors and one institutional investor and misappropriated at least half of those funds.
The Commission's complaint names the following defendants:
1. Millennium was incorporated in Delaware on May 20, 1997 and has its principal offices in New York, New York. Millennium was formed purportedly to acquire, own, and operate primarily minority-owned funeral homes throughout the United States. In November 1997, Millennium merged with MSC Development Corp., an entity formed to conduct the securities offering at issue in the complaint. Neither Millennium nor its securities are registered with the Commission.
2. Branin was incorporated in Delaware on May 22, 1994 and shares its principal offices with Millennium in New York, New York. Branin is not registered with the Commission. Branin describes itself as a merchant banker that creates, acquires and manages companies as a service to other companies in exchange for an advisory fee.
3. Herman, age 53, resides in Medford, New Jersey. Herman has been Millennium's chairman since the company's inception and sole shareholder of Branin since 1994.
4. M. Wein, age 41, resides in New York, New York. M. Wein was a registered representative with FAB Securities of America, Inc. ("FAB"), a registered broker-dealer f/k/a RAS Securities, Inc., until he resigned in June 1999.
The complaint alleges that:
Herman, M. Wein, Millennium, and Branin conducted a purported Regulation D offering of Millennium preferred stock between April 1997 and August 1997, raising more than $4.3 million from fifty-six investors. M. Wein sold much of the preferred stock to individual unaccredited investors and received more than $430,000 for his role in the offering. Herman, the chairman of Millennium and the sole shareholder of Branin, solicited several individual investors as well as a $500,000 investment from an institutional investor.
The proposed defendants, either directly or through others, made material misrepresentations and omissions to Millennium investors. First, the proposed defendants falsely represented that investor proceeds would fund Millennium's purchase of funeral homes when at least half of the proceeds went to other Branin-related businesses, commissions for M. Wein, and other improper uses. Second, the proposed defendants falsely represented that Millennium already had acquired several funeral homes prior to completion of the offering, even though it had not acquired any homes by that point. Third, the proposed defendants falsely represented the identity and sophistication of other Millennium investors. Specifically, Herman falsely told an institutional investor that the other investors were members of either the management team or the Bacardi rum family and M. Wein told potential investors that he had invested his own money in Millennium. Fourth, M. Wein falsely represented the investment in Millennium as "risk-free." M. Wein failed to disclose that Millennium stock was not appropriate for unaccredited investors and forged at least fifteen investor signatures on subscription agreements that were supposed to establish that the investors were accredited.
As a result of the foregoing, the Commission alleges that Herman, M. Wein, Millennium, and Branin violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission seeks a Final Judgment against the defendants, among other things: (i) enjoining them from future violations of the above-cited provisions; (ii) requiring the disgorgement of all of their ill-gotten gains, plus pre-judgment interest; and (iii) assessing civil penalties against them. The Commission's suit remains pending.