U.S. Securities and Exchange Commission
Litigation Release No. 18833 / August 16, 2004
Securities and Exhange Commission v. Larry Grabarnick, Marc David Shiner, Donald LaBarre and Sara Jane Peck, Case No. 02 Civ. 20875 (Lenard, J.) (S.D. Fla., filed March 21, 2002)
Three Florida Individuals Settle SEC Charges For Selling Over $10 Million Of Bogus Limited Liability Partnership Interests Over The Internet
The Securities and Exchange Commission today announced that on August 5, 2004 the Honorable Joan A. Lenard of the United States District Court for the Southern District of Florida entered final judgments against Larry Grabarnick ("Grabarnick"), Marc David Shiner ("Shiner") and Donald LaBarre ("LaBarre"), requiring them to collectively pay over $7 million in disgorgement, prejudgment interest and civil penalties. The case against the fourth defendant, Sara Jane Peck ("Peck"), remains pending.
The Commission's complaint alleges that Grabarnick and 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 LaBarre and Peck. The complaint alleged 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, 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 complaint, 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 lef with worthless partnership units and delisted penny stock.
Grabarnick, Shiner and LaBarre, without admitting or denying the allegations, settled the action by consenting to entry of court orders that: (i) permanently enjoin them from violating 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; (ii) require Shiner to pay $5,000,000 in disgorgement, plus $1,615,760 prejudgment interest, and $480,000 in civil penalties; (iii) require Grabarnick to pay $543,170 in disgorgement, with a waiver of all but $100,000 of disgorgement, prejudgment interest, and civil penalties, based upon a demonstrated inability to pay; and (iv) requires LaBarre to pay $337,109 in disgorgement plus post-judgment interest, with a waiver of all but $100,000 of disgorgement, prejudgment interest and civil penalties, based upon a demonstrated inability to pay.
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.