SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17066 / July 13, 2001
SEC OBTAINS FINAL JUDGMENT AGAINST PAUL J. MONTLE INCLUDING A FIVE-YEAR BAR ON MONTLE SERVING AS AN OFFICER OR DIRECTOR OF ANY PUBLIC COMPANY, OVER $360,000 IN DISGORGEMENT AND INTEREST, AND A $50,000 CIVIL PENALTY.
Securities and Exchange Commission v. Paul J. Montle, et al., 98 Civ. 3446 (MP), U.S.D.C., S.D.N.Y.
The Securities and Exchange Commission ("Commission") announced that on Thursday, July 12, 2001, the Honorable Milton Pollack of the United States District Court for the Southern District of New York entered a final judgment against Paul J. Montle ("Montle"). Following a four-day bench trial in May of this year, the Court entered a judgment against Montle on all of the Commission's claims against him.
- Permanently enjoins Montle from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"); Section 13(b)(5) of the Exchange Act; and Section 13(b)(2) of the Exchange Act;
- Bars Montle for five years from serving as an officer or director of any public company;
- Bars Montle for five years from participating in the sale of securities under Regulations S and D of the Securities Act;
- Orders Montle to disgorge his ill-gotten gains of $187,459.25 and prejudgment interest of $177,633; and
- Orders Montle to pay a $50,000 civil penalty.
The Court found that Montle's "violations involving fraud and deceit were numerous and ongoing," and that his "actions were knowing departures from the securities laws." The Court further found that Montle's testimony in his own defense "was without even the semblance of credibility" and "was infected by the same variety of distortion and outright falsehood that accompanied his deceptions in the arena of publicly held companies," and concluded that "there is strong evidence that [Montle] is likely to violate the securities laws in the future."
The Court further found that:
- Montle violated the federal securities laws regarding three public companies: Viral Testing Systems Corporation ("VTS"), which marketed an HIV diagnostic test called "Fluorognost"; Lone Star Casino Corporation ("Lone Star"), which sought to own and operate gambling casinos; and RMS Titanic, Inc. ("Titanic"), which attempted to salvage artifacts from the sunken Titanic ocean liner.
- As CEO and a director of VTS, Montle made material misrepresentations in two trade publications and a VTS press release regarding VTS's revenues and projected revenues and related matters. For example, in an article that appeared in Today's Investor, Montle overstated VTS Fluorognost revenues by more than double, projected grossly overstated future revenues, and falsely claimed that the American Red Cross had "endorsed" Fluorognost.
- As Chairman and CEO of Lone Star, Montle intentionally omitted from numerous public SEC filings that Lone Star had sold more than a million shares of its stock to foreign investors, thus concealing significant dilution. Montle also attempted to cover up this fraud by falsely altering Lone Star's Board of Director's minutes, omitting the stock sales from Lone Star's books and records, failing to disclose the sales to Lone Star's securities counsel, and creating sham stock purchase agreements.
- Montle also orchestrated a scheme to manipulate the stock of Titanic, causing it to open at an arbitrarily high price of $5 per share, climb to $11 within two months, and subsequently fall below $5. Through this scheme, Montle obtained ill-gotten gains totaling at least $187,459.25.
Montle, age 53, resides in Massachusetts.