U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19044 / January 21, 2005
SEC v. William E. Kraemer, et al., (United States District Court for the District of Rhode Island, C. A. No. 01-CV-358 ML).
FEDERAL COURT ISSUES JUDGMENT IN MANGANESE MINE STOCK FRAUD CASE
The Securities and Exchange Commission announced today that, on December 1, 2004, the Honorable Mary M. Lisi of the United States District Court for the District of Rhode Island entered a Final Judgment of Permanent Injunction and Other Relief ("final judgment") against Donald E. McCourt. The final judgment, entered by consent, enjoins McCourt from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the final judgment requires McCourt to pay $9,430 in disgorgement, $5,272 in prejudgment interest and a $25,000 civil penalty.
On July 30, 2001, the Commission filed a complaint alleging that, between January 1997 and March 2000, McCourt, along with William E. Kraemer, George T. Helm, Jr. and Robin L. Sampson, engaged in a $240,000 fraudulent offering scheme. According to the Commission's complaint, Kraemer, McCourt, Helm and Sampson defrauded 14 investors out of approximately $240,000 by inducing them to invest in Prexomet Corp., a now defunct Smithfield, Rhode Island-based corporation. The complaint alleged that, beginning in January 1997, the defendants told prospective investors that Prexomet owned a valuable Arizona manganese mine and offered them an opportunity to purchase Prexomet stock at $1 per share. The complaint further alleged that the defendants also told the investors that Prexomet would soon go public through an initial public offering ("IPO") and that they would earn a 400% return on their investments within several months. According to the complaint, these statements were false because neither Prexomet, nor any of the defendants, ever owned a mine and none of the defendants ever took any step to conduct an IPO or expended any funds for that purpose. Instead, the complaint asserted, the defendants diverted most of the funds they raised for their personal benefit. The Commission further alleged that, once some of the investors began raising questions about their investments, the defendants began making false "lulling statements," from as early as April 1997 and continuing through at least March 2000, about how the investors would soon receive their promised 400% returns. According to the complaint, none of the investors ever received back any portion of the funds raised by the defendants.
The Commission's case against defendant Kraemer was resolved through the September 18, 2002 entry of a default judgment that enjoined him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that required him to pay $192,163 in disgorgement, $87,082 in prejudgment interest and a $192,163 civil penalty. In a related administrative proceeding, on April 10, 2003, ALJ Brenda P. Murray issued an order, by default, barring Kraemer from participating in any offering of penny stock.
The Commission's case against defendant Helm was resolved through the August 1, 2001 entry of a judgment, by consent, that enjoined him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that required him to pay a $20,000 civil penalty. In a related administrative proceeding, on September 28, 2001, the Commission issued an order, by consent, barring Helm from participation in any offering of penny stock and barring him from association with any broker or dealer with the right to reapply for association after three years.
The Commission's case against defendant Sampson is proceeding.
For further information, see Lit. Rel. No. 17080.