UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
INVESTMENT ADVISERS ACT OF 1940
On February 22, 2001, the Securities and Exchange Commission ("Commission") issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Todd J. LaScola ("LaScola").
LaScola has submitted an Offer of Settlement ("Offer") 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 contained in this order, except as to the jurisdiction of the Commission over him and over the subject matter of these proceedings and the entry of the injunction set forth in paragraph 6 in Section III, which he admits, LaScola consents to the entry of this Order Making Findings and Imposing Remedial Sanctions.
On the basis of this Order and the Offer submitted by LaScola, the Commission finds that:
(1) From August 1994 through June 1999, LaScola was the president, sole owner, control person and an associated person of CPI Investment Management, Inc. ("CPI"), a registered investment adviser (File No. 801-46615). From October 1997 to 1998, LaScola also was a 50% owner, one of two control persons and an associated person of CPA Advisors Network, Inc. ("CPA"), a registered broker-dealer (File No. 8-25294).
(2) On December 29, 1998, the Commission filed a complaint alleging that LaScola, CPI and CPA violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Advisers Act.
(3) On December 29, 1998, the Commission filed a Complaint alleging that LaScola, CPI and CPA violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Advisers Act.
(4) Specially, the Complaint alleged that from approximately October 1997 through July 1998, LaScola invested approximately $6 million of a pension fund account owned by the International Brotherhood of Electrical Workers, Local 99 ("IBEW"), in speculative and illiquid promissory notes issue by RBG Management Services, Inc. ("RBG"), a real estate development company. The Complaint further alleged that the investments in the RBG notes violated the written investment guidelines for the IBEW account, which was managed by CPI. The Complaint alleged that on November 13, 1998, the IBEW's custodian bank notified the IBEW that certain of the RBG notes were in default. The IBEW threatened to initiate legal action against LaScola unless he reversed all purchases of the RBG notes in the IBEW's account. The Complaint alleged that on November 17 and 20, 1998, LaScola diverted approximately $6 million from 41 accounts belonging to CPI clients and CPA customers, without their knowledge or authorization, to the IBEW account. Some of the RBG notes held by the IBEW were reissued in the names of 18 of the CPA customers. The other CPA customers and CPI advisory clients did not receive anything in exchange for the funds LaScola diverted to the IBEW account. Additionally, the Complaint alleged that LaScola had received commissions on unauthorized investments purchased for the IBEW account. Finally, the Complaint alleged that in January 1998, LaScola altered a customer check in the amount of$600,000 payable to CPA's clearing firm by adding CPI as a payee, deposited the check in the account of CPI, and misappropriated $200,000 of the customer's funds.
(5) On May 1, 2000, the Commission filed a Motion for Summary Judgement which set forth evidence demonstrating that LaScola had engaged in the conduct alleged in the Complaint. On June 23, 2000, the Court granted the Commission's motion.
(6) On June 23, 2000, the Court entered a final judgement against LaScola which: (1) permanently enjoined LaScola from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act; (2) directed LaScola to disgorge all ill-gotten gains in the amount of $6,329,825 plus prejudgment interest thereon; and (3) ordered LaScola to pay a civil monetary penalty of $100,000. On July 7, 2000, the Court also granted the Commission's Motion to Dismiss its Complaint against CPI, whose corporate charter had lapsed, and CPA, which is currently controlled by a Securities Investors Protection Corporation trustee.
In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer of Settlement submitted by LaScola and to impose the sanction specified in the Offer.
Accordingly, IT IS ORDERED that Todd J. LaScola be, and hereby is, barred from association with any broker or dealer or investment adviser.
By the Commission.