U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
LITIGATION RELEASE NO. 16645 \ August 8, 2000
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1292
Securities and Exchange Commission v. Stefan M. Palatin, Civil Action No. 1:00CV01909, USDC DC.
SECURITIES AND EXCHANGE COMMISSION SUES FORMER CHIEF EXECUTIVE OFFICER OF THE CRONOS GROUP FOR VIOLATIONS OF ANTIFRAUD, BOOKS AND RECORDS, AND INTERNAL CONTROL PROVISIONS
The Securities and Exchange Commission ("Commission") today filed a civil injunctive action in the federal district court for the District of Columbia against Stefan M. Palatin, the former chairman and CEO of The Cronos Group. The Commission alleges that Palatin caused Cronos to misrepresent or fail to disclose a series of transactions by which Palatin obtained more than $10 million from Cronos or from a customer of the company who owed the funds to Cronos. The Commission alleges that as a consequence of Palatin's misconduct the company misrepresented or failed to disclose the transactions in the company's registration statement, public statements to shareholders, and in filings with the Commission between 1995 and 1998. The complaint also alleges that Palatin caused the transactions to be recorded inaccurately in Cronos' books and records and he made and caused to be made misrepresentations to the company's auditors. Cronos, a Luxembourg holding company with its operational headquarters in Orchard Lea, England, manages and owns marine cargo containers.
According to the complaint, Palatin caused Cronos to fail to disclose that Palatin intercepted payments between Cronos and one of its major customers (which Palatin also controlled); he caused Cronos to pay him millions of dollars in the year before its initial public offering and recorded the payments as a loan to a third party; and Palatin, through another entity that he controlled, sold shares in Cronos' IPO. The Commission also alleges that, following the IPO, Palatin caused Cronos to fail to disclose that it paid additional funds to him immediately after the offering. The Commission further alleges that Palatin pledged collateral he did not won to secure a loan from the company and he caused the company to make misrepresentations concerning the collateral. The Commission also alleges that Palatin controlled the company's disclosures and was the beneficiary of the transactions that the company misrepresented in its filings and public statements.
The Commission seeks an order permanently enjoining Palatin from violating Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange Act, and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-16, 13b2-1, 13b2-2. The Commission further seeks an order permanently barring Palatin as an officer or director of a public company.
On this date, the Commission has also instituted an administrative proceeding against Axel E. Friedberg, a former director, and Rudolf J. Weissenberger, a former director, chairman and CEO of Cronos, in connection with this matter. Without admitting or denying the Commission's findings, Friedberg consented to an order compelling him to cease and desist from committing or causing violations, or any future violations, of the antifraud and reporting provisions of the federal securities laws and Weissenberger consented to an order compelling him to cease and desist from causing violations, or any future violations, of the reporting provisions of the federal securities laws. In the Matter of Axel E. Friedberg and Rudolf J. Weissenberger, Admin. Proc. No. 3-10263 (August 8, 2000); SEA Rel. No. 43129 ; AAE Rel. No.1291.
Previously, the Commission instituted an administrative proceeding against Cronos. In the Matter of the Cronos Group, Admin. Proc. No. 3-10096; SA Rel. No. 33-7771; SEA Rel. No. 34-42139; AAE Rel. No. 1208 (November 15, 1999).
The Commission acknowledges the valuable assistance provided in this matter by the governmental authorities of Austria, Switzerland and the United Kingdom.