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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 49686 / May 11, 2004

Admin. Proc. File No. 3-11343


In the Matter of

Bruce Follick, Salvatore Tavolacci,Donald Brooks, Karl Donovan,Aaron Sandstrom, and Derek Shapiro,

Respondents.



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ORDER MAKING FINDINGSAND IMPOSING REMEDIAL SANCTIONS AS TO RESPONDENTS TAVOLACCI, BROOKS, DONOVAN, SANDSTROM, AND SHAPIRO

I.

On November 24, 2003, the Securities and Exchange Commission ("Commission") instituted public administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Salvatore Tavolacci ("Tavolacci"), Donald Brooks ("Brooks"), Karl Donovan ("Donovan"), Aaron Sandstrom ("Sandstrom"), and Derek Shapiro ("Shapiro") (collectively "Respondents").

II.

Pursuant to Rule 240(a) of the Rules of Practice of the Commission, 17 C.F.R. 201.240(a), for the purpose of settlement of these proceedings, each Respondent has submitted an Offer of Settlement (the "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 herein, except as to the Commission's jurisdiction over him and the subject matter of these proceedings, and the findings contained in Paragraphs 2 and 4 in each of Sections III.A through III.F below, which are admitted, Respondents consent to the entry of this Order Making Findings and Imposing Remedial Sanctions as to Respondents Tavolacci, Brooks, Donovan, Sandstrom, and Shapiro ("Order"), as set forth below.

III.

On the basis of this Order and Respondents' Offers, the Commission finds that:

A. Salvatore Tavolacci

1. At various times between April 1997 and March 1999, Tavolacci acted as an unregistered broker-dealer. Tavolacci solicited investors to purchase shares in private offerings of First Fidelity Financial Corp., Exchange Online, Inc., and First Fidelity Equities, Inc. Tavolacci, 29 years old, currently resides in Miramar, Florida.

2. On April 11, 2002, final judgment was entered by default against Tavolacci, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. This judgment was entered in a civil action entitled SEC v. Follick, et al. , 1:00-CV-4385, in the United States District Court for the Southern District of New York.

3. The Commission's complaint alleged that Tavolacci and others directed a sales force that carried out these offerings of unregistered securities utilizing high pressure sales tactics that included numerous material misrepresentations and omissions. Among other things, the sales force falsely represented that they were calling from First Fidelity Investment Management, a Wall Street investment firm. False statements to investors included claims that Exchange Online was an internet brokerage firm targeted for takeover by America Online, Inc.; that a large Japanese bank had purchase Exchange Online; and that First Fidelity Equities was an "internet company" poised to experience a dramatic rise in stock price. They untruthfully told investors that each issuer planned IPOs in the immediate future. They failed to disclose that the proceeds of these offerings went to the salespeople and the directors of the issuers.

4. On December 19, 2000, Tavolacci pled guilty to one count of securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff and Title 17, Code of Federal Regulations, Section 240.10b-5, before the United States District Court for the Southern District of New York, in United States v. Salvatore Tavolacci, et al., 1:00-CR-554. On March 26, 2001, a judgment in a criminal case was entered against Tavolacci. He was sentenced to a prison term of 51 months followed by three years of supervised release and ordered to make restitution in the amount of $2,819,387.

5. The counts of the criminal information to which Tavolacci pled guilty alleged, inter alia, that Tavolacci defrauded investors and obtained money and property by means of materially false and misleading statements, that he used the United States mails to send false account statements, and that he caused commercial interstate carriers to deliver investors' checks to him.

B. Donald Brooks

1. At various times between January 1999 and July 1999, Brooks acted as an unregistered broker-dealer. Brooks solicited investors to purchase shares in private offerings of First Commerce Corp. and Amerivest Online, Inc. Brooks, 37 years old, currently resides in Bronx, NY.

2. On May 31, 2002, final judgment was entered by consent against Brooks, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. This judgment was entered in a civil action entitled SEC v. Follick, et al. , 1:00-CV-4385, in the United States District Court for the Southern District of New York.

3. The Commission's complaint alleged that Brooks and others directed a sales force that carried out these offerings of unregistered securities utilizing high pressure sales tactics that included numerous material misrepresentations and omissions. Among other things, the sales force falsely represented that they were calling from First Fidelity Investment Management, a Wall Street investment firm. False statements to investors included claims that Exchange Online was an internet brokerage firm targeted for takeover by America Online, Inc.; that a large Japanese bank had purchased Exchange Online and renamed it Amerivest; and that First Commerce was an internet broker. They untruthfully told investors that each issuer planned IPOs in the immediate future. They failed to disclose that the proceeds of these offerings went to the salespeople and the directors of the issuers.

4. On December 12, 2000, Brooks pled guilty to six counts of securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff and Title 17, Code of Federal Regulations, Section 240.10b-5, before the United States District Court for the Southern District of New York, in United States v. Salvatore Tavolacci, et al. , 1:00-CR-554. On March 26, 2001, a judgment in a criminal case was entered against Brooks. He was sentenced to a prison term of 18 months followed by three years of supervised release and ordered to make restitution in the amount of $67,000.

5. The counts of the criminal information to which Brooks pled guilty alleged, inter alia, that Brooks defrauded investors and obtained money and property by means of materially false and misleading statements, that he used the United States mails to send false account statements, and that he caused commercial interstate carriers to deliver investors' checks to him.

C. Karl Donovan

1. At various times between April 1997 and March 1999, Donovan acted as an unregistered broker-dealer. Donovan solicited investors to purchase shares in private offerings of First Fidelity Financial , Exchange Online, and First Commerce. Donovan, 31 years old, is currently serving time in a community correctional program in the Eastern District of New York.

2. On May 31, 2002, final judgment was entered by consent against Donovan, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. This judgment was entered in a civil action entitled SEC v. Follick, et al. , 1:00-CV-4385, in the United States District Court for the Southern District of New York.

3. The Commission's complaint alleged that Donovan and others directed a sales force that carried out these offerings of unregistered securities utilizing high pressure sales tactics that included numerous material misrepresentations and omissions. Among other things, the sales force falsely represented that they were calling from First Fidelity Investment Management, Inc., a Wall Street investment firm. False statements to investors included claims that First Fidelity Financial was a large, well-established investment bank; that Exchange Online, Inc. was an internet brokerage firm targeted for takeover by America Online, Inc.; that a large Japanese bank had purchased Exchange Online and renamed it Amerivest Online, Inc.; and that First Commerce Corp. was an internet broker. They untruthfully told investors that each issuer planned IPOs in the immediate future. They failed to disclose that the proceeds of these offerings went to the salespeople and the directors of the issuers.

4. On December 12, 2000, Donovan pled guilty to two counts of securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff and Title 17, Code of Federal Regulations, Section 240.10b-5, before the United States District Court for the Southern District of New York, in United States v. Salvatore Tavolacci, et al. , 1:00-CR-554. On May 7, 2001, a judgment in a criminal case was entered against Donovan. He was sentenced to a prison term of 33 months followed by three years of supervised release and ordered to make restitution in the amount of $1,221,476.

5. The counts of the criminal information to which Donovan pled guilty alleged, inter alia, that Donovan defrauded investors and obtained money and property by means of materially false and misleading statements, that he used the United States mails to send false account statements, and that he caused commercial interstate carriers to deliver investors' checks to him.

D. Aaron Sandstrom

1. At various times between January 1999 and July 1999, Sandstrom acted as an unregistered broker-dealer. Sandstrom solicited investors to purchase shares in a private offering of Amerivest. Sandstrom, now known as Aaron Stancadi, is 31 years old and a resident of Middle Village, New York.

2. On April 11, 2002, final judgment was entered by consent against Sandstrom, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. This judgment was entered in a civil action entitled SEC v. Follick, et al. , 1:00-CV-4385, in the United States District Court for the Southern District of New York.

3. The Commission's complaint alleged that Sandstrom and others directed a sales force that carried out these offerings of unregistered securities utilizing high pressure sales tactics that included numerous material misrepresentations and omissions. Among other things, the sales force falsely represented that they were calling from First Fidelity Investment Management, Inc., a Wall Street investment firm. False statements to investors included statements that a company named Exchange Online, Inc. was an internet brokerage firm targeted for takeover by America Online, Inc., and that a large Japanese bank had purchased Exchange Online and renamed it Amerivest Online, Inc. They untruthfully told investors that the issuer planned IPOs in the immediate future. They failed to disclose that the proceeds of the offering went to the salespeople and the directors of the issuers.

4. On November 29, 2000, Sandstrom pled guilty to five counts of securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff and Title 17, Code of Federal Regulations, Section 240.10b-5, before the United States District Court for the Southern District of New York, in United States v. Salvatore Tavolacci, et al. , 1:00-CR-554. On February 1, 2001, a judgment in a criminal case was entered against Sandstrom. He was sentenced to a prison term of 27 months followed by three years of supervised release and ordered to make restitution in the amount of $325,000.

5. The counts of the criminal information to which Sandstrom pled guilty alleged, inter alia, that Sandstrom defrauded investors and obtained money and property by means of materially false and misleading statements, that he used the United States mails to send false account statements, and that he caused commercial interstate carriers to deliver investors' checks to him.

E. Derek Shapiro

1. At various times between January 1999 and July 1999, Shapiro acted as an unregistered broker-dealer. Shapiro solicited investors to purchase shares in a private offering of Amerivest and First Fidelity Equities. Shapiro, 25 years old, is currently incarcerated in a state prison in New York for an unrelated offense.

2. On April 11, 2002, final judgment was entered by consent against Shapiro, permanently enjoining him from future violations of Section 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5 thereunder. This judgment was entered in a civil action entitled SEC v. Follick, et al. , 1:00-CV-4385, in the United States District Court for the Southern District of New York.

3. The Commission's complaint alleged that Shapiro and others directed a sales force that carried out these offerings of unregistered securities utilizing high pressure sales tactics that included numerous material misrepresentations and omissions. Among other things, the sales force falsely represented that they were calling from First Fidelity Investment Management, Inc., a Wall Street investment firm. False statements to investors included statements that a company named Exchange Online, Inc. was an internet brokerage firm targeted for takeover by America Online, Inc.; that a large Japanese bank had purchased Exchange Online and renamed it Amerivest Online, Inc.; and that First Fidelity Equities, Inc. was an "internet company" poised to experience a dramatic rise in stock price. They untruthfully told investors that the issuers planned IPOs in the immediate future. They failed to disclose that the proceeds of the offering went to the salespeople and the directors of the issuers.

4. On December 12, 2000, Shapiro pled guilty to four counts of securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff and Title 17, Code of Federal Regulations, Section 240.10b-5, before the United States District Court for the Southern District of New York, in United States v. Salvatore Tavolacci, et al. , 1:00-CR-554. On March 26, 2001, a judgment in a criminal case was entered against Shapiro. He was sentenced to a prison term of 24 months followed by three years of supervised release and ordered to make restitution in the amount of $207,000.

5. The counts of the criminal information to which Shapiro pled guilty alleged, inter alia, that Shapiro defrauded investors and obtained money and property by means of materially false and misleading statements, that he used the United States mails to send false account statements, and that he caused commercial interstate carriers to deliver investors' checks to him.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Offers made by Tavolacci, Brooks, Donovan, Sandstrom, and Shapiro.

Accordingly, it is hereby ORDERED:

Pursuant to Section 15(b)(6) of the Exchange Act that Respondents Tavolacci, Brooks, Donovan, Sandstrom, and Shapiro 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.

For the Commission, by its Secretary, pursuant to delegated authority.

By the Commission.

Jonathan G. Katz
Secretary


http://www.sec.gov/litigation/admin/34-49686.htm


Modified: 05/11/2004