UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 17080 / July 30, 2001
SEC Charges Four Individuals in IPO Offering Fraud.
SEC v. William E. Kraemer, et al. (United States District Court for the District of Rhode Island, C.A. No. 01-358 ML, filed July 30, 2001)
Today, the Commission announced the filing of a complaint in the United States District Court for the District of Rhode Island against William E. Kraemer, Donald E. McCourt, George T. Helm, Jr. and Robin L. Sampson alleging that, between January 1997 and March 2000, they engaged in a $240,000 fraudulent offering scheme.
According to the Commission's complaint, Kraemer, McCourt, Helm and Sampson defrauded 14 investors out of approximately $240,000 by inducing them to invest in Prexomet Corp., a now defunct Smithfield, Rhode Island-based corporation. Beginning in January 1997, the defendants told prospective investors that Prexomet owned a valuable Arizona mine and offered them an opportunity to purchase Prexomet stock at $1 per share. They told the investors that Prexomet would soon go public through an initial public offering ("IPO") and that they would earn a 500% return on their investments within several months. The defendants also told certain of the investors that their invested funds would be used to cover either mine development expenses or IPO costs. These statements were false because neither Prexomet, nor any of the defendants, ever owned a mine. Moreover, the Commission alleges that the defendants never had any intention of taking Prexomet public because none of them ever filed any document with the Commission or expended any funds to this end. Instead, the Commission alleges that the defendants diverted most of the funds for their personal benefit. Once some of the investors began raising questions about their investments, the defendants began making false "lulling statements" as early as April 1997 and continuing through at least March 2000, about how Prexomet was about to receive an infusion of capital and how the investors would receive their promised 500% returns. In reality, the investors never received back any portion of either their original investments or of their promised returns.
According to the complaint, Kraemer, of Bethlehem, Pennsylvania, was Prexomet's founder, owner, chairman and CEO. Kraemer fled to Europe shortly after the commencement of the Commission's investigation in this matter. McCourt, of Foxboro, Massachusetts, was the company's president, and Helm, of North Smithfield, Rhode Island, was its secretary and treasurer. During the time period at issue, Helm, a former C.P.A., did business as Helm Financial Services. Sampson, of Saunderstown, Rhode Island, was a manager of a Rhode Island water treatment corporation that subleased space to Helm Financial Services and Prexomet. Although he was not officially affiliated with Prexomet, Sampson did solicit investors on its behalf.
As a result of the conduct described in the complaint, the Commission charged Kraemer, McCourt, Helm and Sampson with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder (the antifraud provisions of the securities laws). The Commission is seeking permanent injunctions, disgorgement of fraudulently-obtained investor funds, prejudgment interest and monetary penalties in the civil action. One of the defendants, Helm, has agreed to settle the civil action by consenting, without admitting or denying the Commission's allegations, to the entry of an order permanently enjoining him from future violations of the above-mentioned provisions and ordering him to pay a civil penalty of $20,000. Helm, who was a registered representative of Royal Alliance Associates, Inc., a New-York based broker-dealer during the period at issue, has also agreed to the institution and settlement of a public administrative proceeding against him, pursuant to Section 15(b)(6) of the Exchange Act, based upon the anticipated entry of the civil injunction against him. Without admitting or denying the Commission's findings, Helm has consented to the settlement of the administrative proceeding by agreeing to be barred from: (1) participating in any offering of penny stock and (2) association with any broker or dealer, with the right to reapply for association after three years.