Securities and Exchange Commission
Litigation Release No. 17430 / March 22, 2002
Securities and Exhange Commission v. Larry Grabarnick, Marc David Shiner, Donald LaBarre and Sara Jane Peck, Case No. 02 Civ. 20875 (Leonard, J.) (S.D. Fla., filed March 21, 2002)
SEC Sues Four Florida Individuals for Selling Over $10 Million of Bogus Limited Liability Partnership Interests over the Internet
The Securities and Exchange Commission today filed a civil action against four Florida-based individuals for offering and selling over $10 million of allegedly bogus limited liability partnership ("LLP") interests over the Internet.
The Commission's complaint, which was filed in the United States District Court for the Southern District of Florida, alleges that, from approximately June 1998 to October 1999, defendants Larry Grabarnick and Marc David Shiner promoted investments in unregistered LLP units to the public through bulk e-mails and Internet websites. Interested investors responded over the Internet by providing contact information, which Grabarnick and Shiner then sold as "leads" to defendants Donald LaBarre and Sarah Jane Peck. The complaint alleges that LaBarre and Peck used boiler room sales tactics to offer and sell the LLP units. Investors were told they would benefit from the deregulation of the electric service provider market in California. According to the complaint, Grabarnick, Shiner, LaBarre and Peck made numerous material misrepresentations and omissions to investors regarding, among other things, the profitability of the investment, its likelihood of success, the risk and safety of the investment, and the need to invest quickly. For example, one investor was allegedly told that the only risk was that Los Angeles could fall into the Pacific Ocean; others were falsely led to believe that former President Clinton and Hillary Clinton had made money in similar investments.
According to the complaint, more than 580 people nationwide invested over $10 million by purchasing units, or fractions thereof, in eight LLPs. Each LLP consisted of 80 partnership units, each valued at $19,675, for a total of $1,547,000 per fully funded partnership. Many investors were elderly; many rolled over money from IRA and 401(k) accounts. According to the compliant, after all 80 units were sold, or as many as could be, investors were told that the partnerships would not be viable and they were offered Over-the-Counter penny stock in exchange for their escrowed funds. None of the partnerships ever became operational electric companies. The complaint alleges that investors are stuck with worthless partnership units and delisted penny stock.
The Commission charges Grabarnick, Shiner, LaBarre and Peck with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest and civil penalties.
The Commission acknowledges the assistance provided by the Department of Banking and Finance of the State of Florida's Office of the Comptroller in this matter.
For tips on how to avoid Internet "pump-and-dump" stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm. For more information about Internet fraud, visit http://www.sec.gov/investor/pubs/cyberfraud.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.