UNITED STATES OF AMERICA
|In the Matter of
Michael A. Perozzi,
|ORDER INSTITUTING PROCEEDINGS,
MAKING FINDINGS AND IMPOSING
REMEDIAL SANCTIONS, AND ORDER TO
CEASE AND DESIST
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act) against Michael A. Perozzi ("Perozzi").
In anticipation of the institution of these proceedings, Perozzi has submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined to accept. Solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. § 201.100 et seq., and, without admitting or denying the findings contained herein, except those contained in paragraph II.A., and the jurisdiction of the Commission over him and the subject matter of these proceedings, which are admitted, Perozzi consents to the issuance of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions and Order to Cease and Desist ("Order"), and to the entry of the findings set forth below.
On the basis of this Order and the Offer submitted by Perozzi, the Commission finds that: [ The findings herein are made pursuant to Michael A. Perozzi’s Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.]
A. Perozzi, age 31, is a resident of Addison, Texas, and was employed as a telephone sales person with Chief Exploration & Development Corporation and Chief Marketing LLC (collectively "Chief") from April 1996 through September 1996.
B. From at least April 1996 through September 1996, Perozzi willfully violated Section 17(a) of the Securities Act and Sections 10(b) and 15(a)(1) of the Exchange Act and Rule 10b-5 thereunder, as more fully described in paragraphs C and D below.
C. From April through September 1996, Perozzi engaged in the offer and sale of fractional undivided interests in Chiefs Rollins-Church ("Rollins-Church") prospect, two gas well leases located in Louisiana.
1. To sell interests in Rollins-Church, Perozzi told prospective investors that all of Chiefs prior projects had been successful, even though he knew that Chief was a start-up company with no prior projects.
2. Perozzi knew from discussions with Chiefs petroleum engineer that Rollins-Church was a high-risk, speculative investment and that it had a maximum potential return of three to one. Yet, Perozzi materially misrepresented the risks associated with this investment to prospective investors by telling them that Rollins-Church:
a. was a low-risk investment;
b. had a 80 to 90 percent chance of success;
c. would yield at least a 60 percent return; and
d. that their initial investment would be returned in 12 months.
3. Perozzi sold 13.25 ($119,250) units of Rollins-Church to 20 investors and earned commissions of $12,425. Perozzis commissions were based on approximately ten percent of his total sales.
D. From April through September 1996, Perozzi sold Chiefs unregistered securities and received commissions based on ten percent of the proceeds from investors to whom he sold these securities. Moreover, his only duty with regard to his employment with Chief was in attempting to sell its securities.
E. Perozzi has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay disgorgement plus prejudgment interest and civil penalties. The Commission has reviewed the sworn financial statement and other evidence provided by Perozzi and has determined that Perozzi does not have the financial ability to pay disgorgement of $12,425 plus prejudgment interest and civil penalties.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions that are set forth in the Offer submitted by Perozzi.
Accordingly, IT IS ORDERED that:
A. Perozzi be, and hereby is, barred from association with any broker or dealer, with the right to reapply for association after 18 months to the appropriate self-regulatory organization, or if there is none, to the Commission;
B. Perozzi cease and desist from committing or causing any violations of, and any future violations of, Section 17(a) of the Securities Act and Sections 10(b) and 15(a)(1) of the Exchange Act and Rule 10b-5 thereunder; and
C. Perozzi shall pay disgorgement in the amount of $12,425 plus prejudgment interest, but that payment of such amount be waived, and civil penalties not imposed, based upon Perozzis demonstrated financial inability to pay.
IT IS FURTHER ORDERED that the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Perozzi provided inaccurate and incomplete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Perozzis offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Perozzi was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of the civil penalty to be imposed and whether any additional remedies should be imposed. Perozzi may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
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