U.S. Securities and Exchange Commission
LITIGATION RELEASE NO. 18643 / MARCH 29, 2004
SECURITIES AND EXCHANGE COMMISSION V. SYNDICATED FOOD SERVICE INTERNATIONAL, INC., ET AL., 04 CV. 1303 (E.D.N.Y.) (J. Garaufis) (March 29, 2004)
SEC SUES 16 INDIVIDUALS AND 3 ENTITIES IN CONNECTION WITH $26 MILLION BROKER BRIBERY SCHEME INVOLVING NINE PUBLIC COMPANIES
The Securities and Exchange Commission announced today that it filed a complaint in the federal District Court for the Eastern District of New York against Syndicated Food Service International, Inc. ("Syndicated"), Nick Pirgousis ("Pirgousis"), Frank Dolney ("Dolney"), William Brown, Gary Todd, Mario Casias, Delta Asset Management Company, LLC, William Keeler, William Scott, Iain H.T. Brown, Iain Brown, Fidra Holdings Ltd., Jeffrey Richardson, Peter Moulinos, Michelle Kramish Kain, Joseph Ferragamo, Adam Klein, Christopher Quintana, and Thomas Tanis.
The Commission's complaint alleges that from at least June 1997 through February 2003, Pirgousis and Dolney, both former officers and directors of Syndicated, orchestrated a massive broker bribery scheme involving the stock of nine public companies, including Syndicated. The complaint further alleges that through the use of domestic and offshore nominee brokerage accounts, Pirgousis and Dolney sold stock surreptitiously into the public market for personal gain and paid undisclosed kickbacks (often in the form of stock and cash) to boiler rooms responsible for selling the stock to the public. The complaint alleges that Pirgousis and Dolney, in order to conceal their control over large blocks of Syndicated stock, also filed false and misleading periodic reports with the Commission on Syndicated's behalf, and Pirgousis and Dolney failed to file beneficial ownership disclosures with the Commission identifying the stock under their control. The complaint further alleges that Pirgousis and Dolney principally used the Staten Island, New York branch office of Delta Asset Management Company, LLC ("Delta"), a registered broker-dealer, to sell their stock to the public during the period 2001 through the beginning of 2003, and a New York, New York branch office of LH Ross & Company, Inc. ("LH Ross"), a registered broker-dealer, during 1999 and 2000.
Principals of the Staten Island branch of Delta, Billy Brown and Gary Todd, and a principal of the LH Ross branch, Christopher Quintana, received undisclosed kickbacks from Pirgousis and Dolney as compensation for selling the stocks to brokerage clients through their branch offices. Mario Casias, a registered representative at the Staten Island Delta branch, Joseph Ferragamo, a registered representative of the LH Ross branch office, and Adam Klein, a registered representative at the LH Ross branch office, also received undisclosed kickbacks for selling the stocks to their brokerage clients.
The complaint further alleges that Pirgousis, Dolney, William Keeler, the former CEO of Syndicated, and William Scott, a former director of Syndicated, signed periodic filings with the Commission that contained material misrepresentations and omitted material facts. Peter Moulinos and Michelle Kramish Kain, both attorneys, prepared those periodic filings. The complaint also alleges that Thomas Tanis, Syndicated's current CEO, signed and certified a periodic report by Syndicated that contains false statements.
The complaint alleges Iain, Sr. and Iain, Jr. controlled the operations of Fidra Holdings Ltd., an offshore entity used by Pirgousis and Dolney to further the kickback scheme and to manipulate the trading in Syndicated's stock. The complaint also alleges that Jeffery Richardson, a former stock trader, among other things, executed manipulative stock trades at the direction of Pirgousis and others.
The Commission's complaint charges all defendants, except for Tanis, with violations of the antifraud provisions of the federal securities laws, specifically Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. In addition, the complaint charges Nick Pirgousis, Frank Dolney, Iain Brown, and Iain H.T. Brown with violations of the beneficial stock ownership disclosure provisions of the federal securities laws, specifically Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 13d-2 and 16a-3 thereunder. The complaint also charges Syndicated and Pirgousis, Keeler, and Tanis, as control persons of Syndicated, with violations of the corporate reporting requirements of the Exchange Act, specifically Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Additionally, the complaint alleges that Tanis violated Rule 13a-14 of the Exchange Act by falsely certifying Syndicated's corporate reports in 2003.
In its action, the Commission is seeking injunctions, disgorgement from all defendants who received ill-gotten gains, and civil penalties. The Commission also seeks officer and director bars and penny stock bars against certain defendants.