Steven Hanna, Angelo John Bosco, Thomas Fede, Scott Follett, Paul Karkenny, Robert Palumbo, Stephen Palumbo, Raymond Saulon, Brian Scanlon and Joseph Tuozzo
SECURITIES EXCHANGE ACT OF 1934
Release No. 48705 / October 27, 2003
ADMINISTRATIVE PROCEEDING
File No. 3-11316
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ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS |
I.
The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Steven Hanna ("Hanna"), Angelo John Bosco ("Bosco"), Thomas Fede ("Fede"), Scott Follett ("Follett"), Paul Karkenny ("Karkenny"), Robert Palumbo ("R. Palumbo"), Stephen Palumbo ("S. Palumbo"), Raymond Saulon ("Saulon"), Brian Scanlon ("Scanlon") and Joseph Tuozzo ("Tuozzo") (collectively "the Respondents").
II.
In anticipation of the institution of these proceedings, the Respondents 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 the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, and the findings contained in Section III. A. 2 and 4, B. 2 and 4, C. 2 and 4, D. 2 and 4, E. 2 and 4, F. 2 and 4, G. 2 and 4, H. 2 and 4, I. 2 and 4, and J. 2 and 4, which are admitted, Respondents consent to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions ("Order"), as set forth below.
III.
On the basis of this Order and Respondents' Offer, the Commission finds that:
A. Steven Hanna
1. Hanna was a registered representative employed by HGI, Inc. ("HGI") from 1992 through March 1996 and from January 1997 until HGI ceased doing business in June 1997. HGI was registered with the Commission as a broker-dealer. Hanna, 41 years old, is a resident of Brooklyn, New York.
2. On October 20, a Final Judgment and Order on Consent was entered against Hanna, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. HGI, Inc., et. al, 99 Civ. 3866 (DLC), in the United States District Court for the Southern District of New York ("SEC v. HGI").
3. The Commission's complaint alleged that while registered with HGI, Hanna committed numerous sales practice violations in the accounts of his customers including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; and (d) making baseless price predictions and other material misrepresentations to customers.
4. On May 17, 2002, Hanna pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, before the United States District Court for the Eastern District of New York, in United States v. Steven Hanna, 01 CR 0076. On August 2, 2002, Hanna was sentenced to 24 months in prison and ordered to pay $140,083 in restitution.
5. The felony count of the indictment to which Hanna pled guilty alleged, inter alia, that Hanna artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions.
B. Angelo John Bosco
1. Bosco was a registered representative employed by HGI from February 1993 until HGI ceased doing business in June 1997. Bosco owned 2% of HGI's stock. In July 1997, Bosco pled guilty to attempted forgery for having someone else take the National Association of Securities Dealers, Inc., Series 7 examination for him. Bosco, 32 years old, is a resident of Huntington, New York.
2. On May 13, 2003, a Partial Judgment and Order on Consent was entered against Bosco, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 and Regulation M thereunder, and from aiding and abetting future violations of Section 15(b)(7) of the Exchange Act and Rule 15b7-1 thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Bosco committed numerous sales practice violations in the accounts of his customers and trained HGI registered representatives to commit sales practice violations, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On May 30, 2002, Bosco pled guilty to one count of unlawful monetary transactions, in connection with his conduct while at HGI, in violation of Title 18 United States Code, Section 1957, before the United States District Court for the Eastern District of New York, in United States v. Angelo John Bosco, 01 CR 0076.
5. The felony count of the indictment to which Bosco pled guilty alleged, inter alia, that Bosco knowingly and intentionally engaged in a monetary transaction in and affecting interstate commerce in criminally derived property that had a value of more than $10,000 and which was derived from securities fraud and caused those monies to be deposited into a bank account.
C. Thomas Fede
1. Fede was a registered representative employed by HGI from 1992 until HGI ceased doing business in June 1997. Fede was HGI's president in May and June 1997. Fede, 35 years old, is a resident of Huntington, New York.
2. On April 14, 2003, a Partial Judgment and Order on Consent was entered against Fede, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Fede committed numerous sales practice violations in the accounts of his customers and trained HGI registered representatives to commit sales practice violations, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On January 24, 2002, Fede pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, before the United States District Court for the Eastern District of New York, in United States v. Thomas Fede, 01 CR 0076.
5. The felony count of the indictment to which Fede pled guilty alleged, inter alia, that Fede artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions.
D. Scott Follett
1. Follett was a registered representative employed by HGI from 1992 until HGI ceased doing business in June 1997. Follett owned 2% of HGI's stock. Follett, 37 years old, is a resident of Bayville, New York.
2. On May 6, 2003, a Partial Judgment and Order on Consent was entered against Follett, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Follett committed numerous sales practice violations in the accounts of his customers and trained HGI registered representatives to commit sales practice violations, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On February 21, 2002, Follett pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, one count of unlawful monetary transactions in violation of 18 United States Code, Sections 1957, 2 and 3551, and one count of structuring in violation of 31 United States Code, Sections 5324(a)(3) and 5324(c)(2) and 18 United States Code, Sections 2 and 3551, before the United States District Court for the Eastern District of New York, in United States v. Scott Follett, 01 CR 0076.
5. The felony counts of the indictment to which Follett pled guilty alleged, inter alia, that Follett (a) artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions; (b) knowingly and intentionally engaged in a monetary transaction in criminally derived property that had a value of more than $10,000 and which was derived from securities fraud and caused the transfer of those monies from HGI's account to Follett's personal bank account; and (c) knowingly and intentionally structured currency transactions by causing sums of money to be withdrawn in several amounts less than $10,000 for the purpose of evading the reporting requirements while also violating another law of the United States.
E. Paul Karkenny
1. Karkenny was a registered representative employed by HGI from 1993 through March 1996 and from December 1996 until HGI ceased doing business in June 1997. In June 1997, Karkenny pled guilty to attempted forgery for having someone else take his National Association of Securities Dealers Inc., Series 7 examination for him. Karkenny, 42 years old, is a resident of Brooklyn, New York.
2. On April 14, 2003, a Partial Judgment and Order on Consent was entered against Karkenny, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and from aiding and abetting future violations of Section 15(b)(7) of the Exchange Act and Rule 15b7-1 thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Karkenny committed numerous sales practice violations in the account of his customers, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers. The complaint further alleges that Karkenny acted as an HGI registered representative without being validly registered to act as such.
4. On May 1, 2002, Karkenny pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, before the United States District Court for the Eastern District of New York, in United States v. Paul Karkenny, 01 CR 0076.
5. The felony count of the indictment to which Karkenny pled guilty alleged, inter alia, that Karkenny artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions.
F. Robert Palumbo
1. R. Palumbo was a registered representative employed by HGI from 1993 until HGI ceased doing business in June 1997. R. Palumbo, 31 years old, is a resident of Great Neck, New York.
2. On July 24, 2003, a Partial Judgment and Order on Consent was entered against R. Palumbo, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Palumbo committed numerous sales practice violations in the accounts of his customers including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On May 29, 2001, R. Palumbo pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, before the United States District Court for the Eastern District of New York, in United States v. Robert Palumbo, 01 CR 0076.
5. The felony count of the indictment to which Palumbo pled guilty alleged, inter alia, that Palumbo artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions.
G. Stephen Palumbo
1. S. Palumbo was an executive vice president and managing director of HGI from 1992 until HGI ceased doing business in June 1997. S. Palumbo owned 2.5% of HGI's stock. S. Palumbo, 35 years old, is a resident of Cold Spring Harbor, New York.
2. On August 12, 2003, a Partial Judgment and Order on Consent was entered against S. Palumbo, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 and Regulation M thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that S. Palumbo committed numerous sales practice violations in the accounts of his customers and trained HGI registered representatives to commit sales practice violations, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On October 22, 1999, S. Palumbo pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, before the United States District Court for the Eastern District of New York, in United States v. Stephen Palumbo, 99 CR 0878.
5. The felony counts of the indictment to which S. Palumbo pled guilty alleged, inter alia, that S. Palumbo artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions.
H. Raymond Saulon
1. Saulon was a registered representative employed by HGI from 1993 until February, 1997. Saulon, 35 years old, is a resident of Las Vegas, Nevada.
2. On August 4, 2003, a Partial Judgment and Order on Consent was entered against Saulon, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Saulon committed numerous sales practice violations in the accounts of his customers including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On October 11, 2001, Saulon pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, before the United States District Court for the Eastern District of New York, in United States v. Raymond Saulon, 01 CR 0076.
5. The felony count of the indictment to which Saulon pled guilty alleged, inter alia, that Saulon artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions.
I. Brian Scanlon
1. Scanlon was a registered representative employed by HGI from 1992 until February 1997. Scanlon, who was the vice president of HGI during that period, owned 39.75% of HGI's stock. Scanlon, 36 years old, is a resident of Boca Raton, Florida.
2. On April 15, 2003, a Partial Judgment and Order on Consent was entered against Scanlon, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 and Regulation M thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Scanlon trained HGI registered representatives to commit numerous sales practice violations, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On June 30, 2000, Scanlon pled guilty, to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, and one count of unlawful monetary transaction in violation of 18 United States Code, Sections 1957, 2 and 3551. Scanlon also pled guilty to one count of perjury in violation of 18 United States Code, Section 1621, before the United States District Court for the Eastern District of New York in United States v. Brian Scanlon, 00 CR 0112.
5. The felony counts of the information to which Scanlon pled guilty alleged, inter alia, that Scanlon (a) artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions; (b) knowingly and intentionally engaged in a monetary transaction in criminally derived property that had a value of more than $10,000 and which was derived from securities fraud and caused those monies to be deposited into a bank account; and (c) gave material misstatements in testimony before officers of the Commission.
J. Joseph Tuozzo
1. Tuozzo was a registered representative employed by HGI from 1992 until HGI ceased doing business in June 1997 and he owned 2% of HGI's stock. Tuozzo, 35 years old, is a resident of East Norwich, New York.
2. On July 24, 2003, a Partial Judgment and Order on Consent was entered against Tuozzo, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 and Regulation M thereunder, in the civil action entitled SEC v. HGI.
3. The Commission's complaint alleged that Tuozzo committed numerous sales practice violations in the accounts of his customers and trained HGI registered representatives to commit sales practice violations, including: (a) executing unauthorized trades; (b) failing to execute customer sell orders; (c) failing to execute stop-loss orders; (d) soliciting customers to purchase HGI House Stocks in the aftermarket prior to the completion of the initial public offerings for those securities; and (e) making baseless price predictions and other material misrepresentations to customers.
4. On January 6, 2000, Tuozzo pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18 United States Code, Section 371, and one count of perjury, in violation of 18 United States Code, Section 1621, before the United States District Court for the Eastern District of New York, in United States v. Joseph Tuozzo, 99 CR 0906.
5. The felony counts of the indictment to which Tuozzo pled guilty alleged, inter alia, that Tuozzo (a) artificially inflated the demand for certain securities and defrauded customers in connection with securities transactions; and (b) gave material misstatements in testimony before officers of the Commission.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Respondents' Offers.
Accordingly, it is hereby ORDERED:
Pursuant to Section 15(b)(6) of the Exchange Act, that the Respondents be, and hereby are barred from association with any broker or dealer.
Any reapplication for association by the Respondents 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 the Respondents, 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.
By the Commission.Jonathan G. Katz
Secretary