U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18968 / November 15, 2004
Securities and Exchange Commission v. Paul Simmons, Rodney Gilbert, John Zankowski, Esq., Kerry Kennedy, Stanley Siciliano and Eric Littman, Esq., 8:04-CV-2477-T-17MAP (Middle District of Florida, filed November 15, 2004)
SEC SUES ST. PETERSBURG, FLORIDA-BASED COMPANY'S FORMER OFFICERS, ATTORNEY AND PROMOTERS IN MARKET MANIPULATION SCHEME; SEC ALSO SUES SHELL COMPANY OWNER AND THE OTHER DEFENDANTS FOR REGISTRATION VIOLATIONS
he Securities and Exchange Commission ("Commission") today charged five individuals with securities fraud for their participation in an alleged "pump and dump" stock manipulation scheme involving St. Petersburg-based Nutraceutical Clinical Laboratories International, Inc. ("Nutraceutical"). The five individuals are Paul Simmons, former Chief Executive Officer ("CEO") of Nutraceutical, Rodney Gilbert, former Chief Financial Officer ("CFO") of Nutraceutical, John Zankowski, former outside securities counsel for Nutraceutical, and two stock promoters, Kerry Kennedy and Stanley Siciliano. The Commission also charged the five individuals, and a sixth individual, Eric Littman, with selling unregistered securities.
The Commission's complaint, filed in United States District Court for the Middle District of Florida, alleges the following: In June 2000, defendants Simmons, Gilbert, Zankowski and Kennedy conducted a reverse merger of Nutraceutical into a publicly traded shell company named October Project II Corp. (which then was renamed Nutraceutical). At the same time, they secretly purchased from defendant Littman and another individual, who together owned the shell company, nearly all of the shares issued by the shell company. Three months after the merger, in September 2000, securities lawyer Zankowski and the shell owner Littman deceived the company's stock transfer agent into removing legends from the shares' stock certificates identifying certain resale restrictions on the shares. Once the legends were removed from the stock certificates, defendants Simmons, Kennedy and Siciliano pumped up the stock price and trading volume of Nutraceutical common stock in October and November 2000. Specifically, then-CEO Simmons disseminated false and misleading publicity about the company, while, at the same time, stock promoters Kennedy and Siciliano falsely touted Nutraceutical stock on an Internet message board and manipulated the market for the company's stock through fraudulent stock trading. During the course of the manipulation, all of the defendants, except Littman, sold shares of Nutraceutical. In addition, stock promoters Kennedy and Siciliano failed to disclose, as required by the federal securities laws, compensation they had received to tout Nutraceutical. As a result of their violations, the Defendants reaped ill-gotten gains of approximately $1.8 million.
The Commission's complaint further alleges that as a result of the conduct described above, all of the defendants violated the registration provisions of the federal securities laws (Sections 5(a) and 5(c) of the Securities Act of 1933), and all, except Littman, violated the antifraud provisions of the federal securities laws (Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder). The complaint also alleges that Kennedy and Siciliano violated the anti-touting provisions of the federal securities laws (Section 17(b) of the Securities Act). The Commission seeks against each of the defendants permanent injunctions, civil money penalties, penny stock bars, and disgorgement of ill-gotten gains plus prejudgment interest. The Commission also seeks officer and director bars against former CEO Simmons and former CFO Gilbert.
