SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17413 / March 14, 2002
SEC v. Jamie P. Piromalli, et al., Civil Action No. C2-00 622, (S.D. OH)
On January 22, 2002, the Honorable James L. Graham of the U.S. District Court for the Southern District of Ohio, entered an Order of Disgorgement and Civil Penalty against defendant Jamie P. Piromalli, requiring him to pay $5,218,531.61 in disgorgement and prejudgment interest as well as an $110,000 civil penalty. Piromalli masterminded a nationwide Ponzi scheme involving the offer and sale of unregistered nine-month promissory notes issued by World Vision Entertainment, Inc. ("World Vision"), a company located in Altamonte Springs, Florida. On August 27, 2001, Judge Graham had previously entered an Order of Permanent Injunction against Piromalli for his role in the World Vision scheme.
Specifically, the Commission's Complaint, filed on June 1, 2000, alleged that from June 1996 to August 1999, Piromalli, Steven Brewer, A. Michael Jaillett, Richard Mann and Seth Miller (collectively, "the Defendants"), through World Vision, raised at least $64 million from approximately 1,200 investors in 33 states from the sale of promissory notes. The Defendants offered and sold securities in the form of nine-month promissory notes without registering them with the Commission. In furtherance of the scheme, the Defendants, directly and indirectly, through a nationwide sales network, made numerous false and misleading statements to investors about the World Vision notes. For example, the Defendants misrepresented that the notes were unconditionally guaranteed and insured and that all of the proceeds of the offering would be used to develop World Vision's products. In reality, the notes were not guaranteed and the Defendants used the proceeds of the note offering to pay for the personal and business expenses of company officers and directors, to cover interest and principal payments to investors and to pay large, undisclosed commissions to the sales network. As a result, when World Vision filed for bankruptcy protection in September 1999, investors lost approximately $52 million.
On August 27, 2001, Piromalli was permanently enjoined from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Court had also previously permanently enjoined Brewer, Jaillett and Mann for the same violations by default, and ordered them to pay an $110,000 civil penalty each and disgorgement and prejudgment interest of $651,933, $346,689 and $2,116,870, respectively. On December 5, 2001, the Court permanently enjoined Miller, by consent, and on March 6, 2002, the Court entered a Final Judgment of Equitable Relief by Consent against Seth Miller, ordering him to pay disgorgement of $327,192, but waiving payment of disgorgement and not imposing a civil penalty based on Miller's demonstrated inability to pay.