UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Securities Act of 1933
Release No. 8446 / July 20, 2004
Securities Exchange Act of 1934
Release No. 50042 / July 20, 2004
File No. 3-10230
In the Matter of
Allen Z. Wolfson et al.,
|ORDER MAKING FINDINGS, IMPOSING REMEDIAL SANCTIONS, AND IMPOSING A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTIONS 15(b)(6) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AS TO SPIRO LAZARETOS|
On June 14, 2000, the Securities and Exchange Commission ("Commission") entered an Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), Sections 15(b)(6) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") ("Initial Order") against Respondent Spiro Lazaretos ("Lazaretos").
Lazaretos has submitted an Offer of Settlement of Spiro Lazaretos ("Offer") to these administrative proceedings, which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over him, the subject matter of these proceedings, and paragraph III.D, which are admitted, Lazaretos consents to the entry of this Order Making Findings, Imposing Remedial Sanctions, and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act and Sections 15(b)(6) and 21C of the Securities Exchange Act of 1934 ("Order"), as set forth below.
On the basis of this Order and Lazaretos' Offer, the Commission finds1 that:
- Lazaretos was associated as a registered representative with various broker-dealers that were registered with the Commission, including: a) from February 1989 through May 1989, J.T. Moran & Co.; b) from July 1990 through August 1990, A.S. Goldman & Co.; c) from December 1993 through December 1994, Whale Securities Co., L.P.; d) from December 1994 through August 1995, Investors Associates, Inc.; and e) from May 1998 through May 1999, Caribbean Securities L.L.C. Lazaretos, age 38, resides in Brooklyn, New York.
- Lazaretos participated in the public offering of ATR Industries, Inc. ("ATR"), Learner's World, Inc. ("Learners"), Rollerball International, Inc. ("Rollerball"), Hytk Industries, Inc. ("Hytk"), and Healthwatch Inc. ("Healthwatch") stock, which at all relevant times were penny stocks.
- From in or about February 1999 through at least March 2000, Lazaretos received bribes in exchange for causing, either directly or through brokers controlled by Lazaretos, retail demand for ATR, Learners, Rollerball, Healthwatch and Hytk by recommending those stocks to retail customers. Lazaretos did not disclose to his customers that he received additional compensation to make his penny stock recommendations.
- On December 23, 2002, Lazaretos pleaded guilty to one count of conspiracy to commit securities fraud, conspiracy to commit wire fraud, and conspiracy to commit commercial bribery in connection with the manipulation schemes concerning ATR, Learners, Rollerball, Hytk and Healthwatch stock and one count of securities fraud in connection with the manipulation scheme concerning ATR stock in U.S. v. Lazaretos, 100-Cr-628 (JGK).
- In his plea allocution, Lazaretos admitted that during 1999 and 2000, he knowingly received bribes of cash for recommending ATR, Learners, Rollerball, Hytk, and Healthwatch stock to his retail clients, and that he did not disclose those payments to the clients. Lazaretos admitted that he also arranged for other brokers to receive bribes in exchange for recommending those same manipulated securities.
- On April 29, 2003, Lazaretos was sentenced to 27 months in prison and 36 months of supervised release, and, on May 27, 2003 was ordered to pay $800,000 in restitution.
- Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] prohibits the use of "any manipulative or deceptive device or contrivance," and Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)] and Rule 10b-5 under the Exchange Act [17 C.F.R. § 240.10b-5] prohibit the use of "any device, scheme, or artifice to defraud." One of the "basic aim[s] of the anti-fraud provisions [of the federal securities laws] is to 'prevent rigging of the market and to permit operation of the natural law of supply and demand.'" SEC v. First Jersey Secs., Inc., 101 F.3d 1450, 1466 (2d Cir. 1996) (quoting United States v. Stein, 456 F.2d 844, 850 (2d Cir. 1972)). "This prohibition with respect to manipulative activity is not confined to any particular type of manipulation, but . . . is necessarily designed to outlaw every device 'used to persuade the public that activity in a security is the reflection of a genuine demand instead of a mirage.'" SEC v. Resch-Cassin & Co., Inc., 362 F. Supp. 964, 975 (S.D.N.Y. 1973) (citation omitted).
- Payment of undisclosed compensation to brokers or other securities professionals to tout stocks to others for the purpose of manipulating the public market for those stocks violates the anti-fraud provisions of the federal securities laws. See, e.g., United States v. Blitz, 533 F.2d 1329, 1338 (2d Cir. 1976) (undisclosed fees to brokers for selling stock promoted by payor violates the securities laws); United States v. Koss, 506 F.2d 1103, 1109 (2d Cir. 1974) (undisclosed kickback arrangement between representatives of group seeking to unload shares of manipulated stock and individual touting the stock violate Section 10(b) of the Exchange Act); United States v. Hayutin, 398 F.2d 944, 948-49 (2d Cir. 1968) (arranging for payment of undisclosed kickbacks to brokers held to constitute participation in market manipulation scheme); United States v. Cannistraro, 734 F. Supp. 1110, 1125 (D.N.J. 1990) (paying mutual fund managers to cause mutual funds to purchase stock promoted by payor "aptly characterize[d] as a bribery scheme" that "worked a fraud on shareholders of the Funds in violation of Rule 10b-5").
- Lazaretos willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Lazareto's Offer.
Accordingly, it is hereby ORDERED that:
Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Lazaretos cease and desist from committing or causing any violation and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder;
Pursuant to Section 15(b)(6) of the Exchange Act, Lazaretos be, and hereby is, barred from association with any broker or dealer.
Any reapplication for association by Lazaretos will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against Lazaretos, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order.
Lazaretos be, and hereby is, barred from participating in any offering of penny stock, including: acting as a promoter, finder, consultant, agent, or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock; or inducing or attempting to induce the purchase or sale of any penny stock.
By the Commission.
Jonathan G. Katz