UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 7750 / September 30, 1999
SECURITIES EXCHANGE ACT OF 1934
Release No. 41960 / September 30, 1999
File No. 3-10066
: ORDER INSTITUTING PUBLIC
In the Matter of : ADMINISTRATIVE AND CEASE-AND-
: DESIST PROCEEDINGS PURSUANT
HOWARD ZALKIN and : TO SECTION 8A OF THE
BARRY E. ADELSON, : SECURITIES ACT OF 1933 AND
: SECTIONS 15(b) AND 21C OF
Respondents. : THE SECURITIES EXCHANGE ACT
: OF 1934, MAKING FINDINGS AND
:IMPOSING REMEDIAL SANCTIONS
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be instituted against Howard Zalkin ("Zalkin") and Barry E. Adelson ("Adelson") pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"). II.
In anticipation of the institution of these proceedings, Zalkin and Adelson have submitted Offers of Settlement (the "Offers") 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 any of the findings contained herein, except as to the jurisdiction of the Commission over them and over the subject matter of these proceedings, and, with respect to Zalkin, as to the matters set forth in Section III.1., below, and, with respect to Adelson, as to the matters set forth in Section III.2., below, which are admitted, Zalkin and Adelson consent to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions ("Order"), by the Commission.
Accordingly, IT IS HEREBY ORDERED that proceedings pursuant to Section 8A of the Securities Act and Sections 15(b) and 21C of the Exchange Act be, and hereby are, instituted. III.
On the basis of this Order and the Offers submitted by Respondents Zalkin and Adelson, the Commission finds1 that:
1. At all relevant times, Respondent Zalkin was associated as an officer and director of Packard Energy Group, Inc. ("Packard Energy"), an unregistered broker-dealer.
2. Between approximately January 1998 and July 17, 1998, Respondent Adelson was associated as an unregistered representative of Packard Energy Group, Inc. ("Packard Energy"), an unregistered broker-dealer.
3. Between November 1997 and July 17, 1998, Friendly Power Company ("Friendly Power") offered and sold securities to the general public in the form of partnership units in various Friendly Power franchises. Friendly Power sold the securities through a network of telemarketers, including Packard Energy. Friendly Power and the telemarketers raised approximately $6 million from at least 308 investors nationwide, and intended to raise approximately $70 million from the sale of partnership units. No registration statement was ever filed or was in effect with the Commission in connection with the securities offered and sold by Friendly Power and Packard Energy.
4. With respect to Zalkin, the Commission finds that:
a. Zalkin was responsible for recruiting sales agents through newspaper advertisements. These sales agents reported to Zalkin and had to have all sales materials approved by him. Zalkin conducted training seminars for the sales agents during which he instructed them on the Friendly Power investment and provided the sales agents with offering materials. Packard Energy's sales agents marketed the Friendly Power partnership units nationwide through telephone solicitations. The sales agents made unsolicited telephone calls to prospective investors to provide them with a brief overview of the Friendly Power investment. The investor would then receive offering materials describing the Friendly Power investment from Packard Energy. After the prospective investor received the materials, the Packard Energy sales agent would place another telephone call to the prospective investor to review the offering materials and attempt to convince the investor to purchase one or more of the Friendly Power partnership units.
b. Packard Energy raised more than $500,000 from investors in the Friendly Power securities, and Zalkin received $19,000 in commission payments from Packard Energy.
5. With respect to Adelson, the Commission finds that:
a. During the time he worked for Packard Energy, Adelson offered and sold the Friendly Power partnership units nationwide, via telephone, to investors and prospective investors.
b. Adelson raised approximately $350,000 of the $542,056 worth of Friendly Power securities sold by Packard Energy. Adelson received a commission of between 10% and 13% of the total amount he raised.
6. Based upon the aforesaid conduct, Respondents Zalkin and Adelson willfully violated, and committed or caused violations of, Sections 5(a) and 5(c) of the Securities Act, in that they, directly or indirectly, made use of the means and instruments of transportation and communications in interstate commerce and of the mails, to offer to sell and to sell to members of the public certain securities, namely the Friendly Power partnership units, when no registration statement was filed or in effect as to said securities pursuant to the Securities Act.
7. Based upon the aforesaid conduct, Respondents Zalkin and Adelson willfully violated, and committed or caused violations of, Section 15(a) of the Exchange Act, in that they made use of the means and instruments of transportation and communications in interstate commerce and of the mails to effect transactions in, and to induce and attempt to induce the purchase of, certain securities, namely the Friendly Power partnership units, for the accounts of others, without being registered with the Commission as a broker or dealer.
8. Respondent Zalkin has submitted a sworn financial statement and other evidence and has asserted his sworn financial inability to pay a civil penalty. The Commission has reviewed the sworn financial statement provided by Zalkin and has determined that Zalkin does not have the financial ability to pay a civil penalty. IV.
On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offers submitted by Respondents Zalkin and Adelson.
ACCORDINGLY, IT IS ORDERED that:
1. Respondent Adelson be, and hereby is, suspended from association with any broker or dealer for a period of twelve (12) months, effective on the second Monday following the entry of the Order.
2. Respondent Adelson cease-and-desist from committing or causing any violation and any future violation of Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act.
3. Respondent Adelson shall, within 90 days of the entry of this Order, pay a civil money penalty in the amount of $5,500 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22312; and (D) submitted under cover letter that identifies Barry E. Adelson as the Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Glenn S. Gordon, Assistant Regional Director, Southeast Regional Office, Securities and Exchange Commission, 1401 Brickell Avenue, Suite 200, Miami, FL 33131.
4. Within thirty (30) days after the end of the twelve (12) month suspension period described in Section IV.1. above, Respondent Adelson shall provide to the Commission, addressed to Glenn S. Gordon, Assistant Regional Director, 1401 Brickell Avenue, Suite 200, Miami, Florida, 33131, an affidavit that he has complied fully with the sanctions described in Section IV. of the Order.
5. Respondent Zalkin be, and hereby is, suspended from association with any broker or dealer for twelve (12) months, effective on the second Monday following the entry of the Order.
6. Respondent Zalkin cease-and-desist from committing or causing any violation and any future violation of Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act.
7. Within thirty (30) days after the end of the twelve (12) month suspension period described above, Zalkin shall provide to the Commission, addressed to Glenn S. Gordon, Assistant Regional Director, 1401 Brickell Avenue, Suite 200, Miami, Florida, 33131, an affidavit that he has complied fully with the sanctions described in Section IV. of the Order.
8. 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 Respondent Zalkin provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the administrative penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Respondent's Offer had not been accepted. No other issue shall be considered in connection with this petition other than whether the financial information provided by Respondent Zalkin was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of
administrative penalty to be imposed and whether any additional remedies should be imposed. Respondent Zalkin 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
--The findings herein are made pursuant to Respondents Adelson's and Zalkin's Offers of Settlement and are not binding on any other person or entity in this or any other proceeding.