SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16802 / November 16, 2000
Securities and Exchange Commission v. Milan Capital Group, Inc., Investment Offices d/b/a AC Financial, Inc., Ira A. Monas, Michael Irwin Lamhut, Jason M. Cope, Rita A. Monas, Jennifer Monas, Sands Point International Corp., Douglas H. Monas, Michael's Capital Consultants, Inc., and HWK Consultants, Inc., 00 Civ. 108 (DLC) (S.D.N.Y.)
SEC OBTAINS SUMMARY JUDGMENT AGAINST THREE DEFENDANTS IN CASE INVOLVING $9 MILLION IPO STOCK FRAUD
The Securities and Exchange Commission ("Commission") announced that on November 9, 2000, the Honorable Denise Cote, United States District Court Judge for the Southern District of New York, granted the Commission's motion for partial summary judgment against three defendants in its securities fraud case involving Milan Capital Group, Inc., a company based in Melville, New York. The three defendants are Ira A. Monas, who was the president and owner of Milan, Michael Lamhut, who was Milan's operations manager, and Jason Cope, who was the branch manager of the Pittsburgh, Pennsylvania office of Investment Offices, a broker-dealer associated with Milan that did business under the name AC Financial, Inc.
The Commission filed its original complaint in this matter on January 7, 2000, charging Milan with unlawfully offering for sale, and purportedly selling, IPO securities while failing to be registered with the Commission as a broker-dealer. On that same day, on application by the Commission, the court issued a temporary restraining order freezing Milan's assets and enjoining Milan from acting as an unregistered broker-dealer. (See Litigation Release No. 16405 (January 10, 2000)). On January 21, 2000, on application by the Commission, the court appointed a receiver for Milan to, among other things, identify and secure Milan's assets and property, ascertain the disposition of investors' funds, and ensure the fair treatment of all investors who dealt with Milan. The court has since granted motions by the receiver to freeze assets of various parties alleged to have received investor funds from Milan.
In an amended complaint filed on February 29, 2000, the Commission charged Monas, Lamhut, Cope and others with violating the antifraud provisions of the federal securities laws and aiding and abetting Milan's violation of the broker-dealer registration provisions. (See Litigation Release No. 16460 (March 1, 2000)). In granting partial summary judgment against the three defendants, the court found that through Cope and his team of brokers at the AC Financial Pittsburgh office, Monas and Milan convinced approximately 200 customers to pay almost $9 million for shares in several IPOs. As the court also found, investors were told that Monas and Milan had access to these IPOs and, after sending funds to Milan, were provided with sales confirmations on Milan letterhead. In fact, the court found, Milan did not have access to IPOs, and never provided investors with any IPO shares. The court further found that Lamhut and Cope made false representations to investors in connection with this scheme, and that Monas and his wife withdrew substantial investor funds from Milan's accounts.
The court found that Monas, Lamhut, and Cope violated the antifraud provisions of the federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), Rule 10b-5 promulgated thereunder, and Section 17(a) of the Securities Act of 1933. The court also found that the defendants aided and abetted Milan's violation of the broker-dealer registration provisions of Section 15(a) of the Exchange Act. The court enjoined these defendants from further violations of these laws, and will require the defendants to pay full disgorgement and pre-judgment interest. The court further ruled that it would determine the amount of disgorgement and pre-judgment interest, and decide whether civil monetary penalties should be entered against the defendants, after the court-appointed receiver concludes his investigation.
Claims against other defendants in this case remain pending.