UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 8175 / January 15, 2003
SECURITIES EXCHANGE ACT OF 1934
Release No. 47187 / January 15, 2003
File No. 3-11010
SEC CHARGES FORMER BROKER IN FRAUDULENT SECURITIES OFFERING
The Securities and Exchange Commission (Commission) has charged a former broker with raising more than $500,000 through a fraudulent securities offering. In an administrative order (Order) filed today, the Commission charged that Kevin H. Goldstein falsely represented to investors that their funds would be used to capitalize an investment firm. Instead, Goldstein used the investors' funds to support his lavish lifestyle.
Named in the Commission's Order were former broker Goldstein, 34, and his company, Jackwest Corporation (Jackwest). According to the Order, from at least August 1999 through June 2000, Goldstein raised approximately $516,000 through the sale of securities in Jackwest. The sales were made to a small group of Goldstein's former friends and neighbors as well as a former client of Goldstein's when he was last associated with a broker-dealer firm. In offering the Jackwest securities, Goldstein made various verbal and written representations to potential investors. Goldstein's principal verbal representation, according to the Order, was that the investors' funds would be used to capitalize and operate Jackwest's operations as an investment-banking firm. Goldstein also told certain investors that he had an outside source of annual income, amounting to $250,000, with which to support himself personally, and therefore he would not be taking a salary from Jackwest.
The Division of Enforcement alleges that, in addition to these verbal representations, Goldstein provided certain investors with a business plan for Jackwest. The business plan falsely represented, among other things, that Jackwest was operational and growing quickly; that it was ready to train and graduate 100 or more brokers during its first year of operations; that it had a quickly growing client base of accredited investors; that it was able to achieve annual revenues in excess of $250 million after two years; that it had a current valuation of $5 million; and that it could be worth $100 million within two years, and $1 billion in two to four years.
According to the Order, Goldstein's verbal and written representations were false, and were intended to, and did, induce the purchase and sale of Jackwest securities. Rather than using the investors' funds to capitalize and operate Jackwest, as he had represented to investors, the Division of Enforcement alleges that Goldstein diverted a substantial portion of their funds for personal use and to buy luxury personal items.
The Order charges Goldstein with willfully violating and Jackwest with violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. A hearing will be scheduled before an administrative law judge to determine whether the allegations in the Order are true, to provide Goldstein and Jackwest an opportunity to dispute these allegations and to determine what sanctions if any are appropriate and in the public interest.