UNITED STATES DISTRICT COURT
Securities and Exchange Commission,
Plaintiff, Securities and Exchange Commission ("SEC" or the "Commission") alleges that:
1. The Commission brings this action to restrain and permanently enjoin Defendant Enrico Cortesano ("Cortesano" or "Defendant") from continuing to violate the federal securities laws through the fraudulent offer of unregistered and fictitious "prime bank" investment contracts offered by Cortesano through his website, www.europeancontact.com. From at least November 2001 through January 2003, Cortesano -- a recidivist securities law violator who was previously ordered by the Commission to cease-and-desist from committing virtually identical conduct -- offered prospective investors interests in purported trading programs called "Bank Debenture Forfaiting [sic] Programs" (hereinafter, the "Trading Programs"). The Trading Programs were described by his website as the buying and selling of bank debentures within the international money markets by the "top 100 world banks" Through his website, Cortesano falsely stated, among other things, that the investments generated exorbitant returns ranging from 60% to 200% per month with little or no risk to principal, that the investments financed "humanitarian projects," and that they were not regulated by the Commission. In reality, the Trading Programs offered by Cortesano are fictitious and were offered by him for fraudulent purposes. Unless permanently enjoined, Cortesano will continue to violate the federal securities laws.
2. Defendant Cortesano, age 50, resides in Hollywood, Florida. Cortesano is the sole officer and director of European Contact, Inc. ("European Contact"), a Florida corporation, which operates the website, www.europeancontact.com, through which Cortesano solicited investors for his prime bank scheme.
3. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(c), 20(d), and 22(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. §§ 77t(b), 77t(d) and 77v(a)].
4. Personal jurisdiction over the Defendant and venue are proper in the Southern District of Florida, as almost all of the actions and transactions alleged and stated herein constituting violations of the Securities Act have occurred within the Southern District of Florida. In addition, Defendant resides within the Southern District of Florida.
5. Defendant, directly and indirectly, has made use of the means and instrumentalities of interstate commerce, the means and instruments of transportation and communication in interstate commerce, and the mails, in connection with the acts, practices, and courses of business complained of herein.
6. The interests in the Trading Programs offered by Defendant are "securities" as that term is defined in Section 2(a)(1) of the Securities Act [15 U.S.C. §77b(1)].
7. Fraudulent schemes that purport to offer investments in fictitious securities and financial instruments, sometimes referred to as "prime bank instruments," that are allegedly sold by the world's leading banks or "prime banks" have proliferated during the past decade. Prime bank investment schemes are fraudulent as such instruments do not exist.
8. From at least September 2000 through March 2001, Cortesano had engaged in virtually the same fraudulent conduct by soliciting investments in a bank debenture "trading program" through the same website. Cortesano promised investors returns ranging from 60% to 200%, stating that there was no investment risk in the trading program.
9. As a result of his prior prime bank scheme, on September 28, 2001, the Commission issued an Order Instituting Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings and Imposing a Cease-and-Desist Order ("the 2001 Order"). In the 2001 Order, the Commission found that Cortesano had engaged in a prime bank scheme by offering investments in the form of interests in a bank debenture trading program, in violation of Sections 5(c), 17(a)(1) and 17(a)(3) of the Securities Act, and ordered Cortesano to cease and desist from committing or causing any future violations of those provisions. At all relevant times, the 2001 Order has been in effect.
10. Less than two months after the September 28, 2001 Order was issued by the Commission, Cortesano began offering prime bank investments on his website again. In November 2001, Cortesano commenced the fraudulent offering of the investments in the fictitious Trading Programs through the European Contact website to prospective investors worldwide.
11. Although Cortesano did not use the term "prime bank" to describe the Trading Programs, this purported investment was nothing more than a traditional prime bank scheme organized and directed by Cortesano for the purpose of fraudulently misappropriating the funds of misinformed investors. The website described the Trading Programs as the buying and selling of bank debentures within the international money markets by the "top 100 world banks."
12. The website informed potential investors that the Trading Programs required a minimum investment of $1 million (depending on the specific trading program) and generated significant returns, depending on the amount invested. According to the website, the investments would be pooled together to create $100 to $500 million "transactable units," generating returns of 60% to 100 % per month for investments of $10 million and 150% to 200% for investments of $100 million.
13. The website described European Contact as a five year old company responsible for "screen[ing] the documentation of potential investors, identify[ing] the right program for their particular characteristics and needs, and put[ting] them in contact with the trading group." The website further explained that investors would never have direct contact with the traders, but rather, would be "presented" to the appropriate Trading Program through European Contact.
14. To actively participate in the Trading Programs, Cortesano told prospective investors that they must sign a letter of intent expressing the investor's willingness to participate in the program and provide proof that the investor is in possession of the required minimum investment amount of $1 million. In addition, the website instructed investors to provide confidential personal and business information including social security, bank account, and passport number. Investors were also required to execute a non-disclosure/non-solicitation agreement, which provided that the prospective investor not reveal any information about the Trading Programs to the general public. All of the required documentation was to be forwarded to Cortesano, who was the prospective investor's sole contact.
15. In addition to promising "guaranteed" exorbitant returns ranging from 60% to 200%, Cortesano made other material misrepresentations and omissions in connection with his fraudulent offer of investments in the Trading Programs. Specifically, through his website, Cortesano falsely assured investors that there was little or no risk to their principal. The website explained that investors never lose control of their investment funds because the funds are never moved from the investor's account.
16. The website further falsely represented that the investments were solicited "by invitation only" and were "concealed" from the general public. The website also told prospective investors that the investments were used to fund "humanitarian projects." Additionally, the website falsely told prospective investors that the investments were not regulated by the Commission.
17. Cortesano did not tell prospective investors that there is no market for the international trading of medium-term notes or "prime bank" instruments among the world's top 100 banks. These trading programs are fictional.
18. Cortesano did not disclose to prospective investors the fact that he was the subject of the 2001 Order that ordered him to cease and desist from engaging in essentially the identical conduct.
19. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 18 of this Complaint.
20. No registration statement was filed or in effect with the Commission pursuant to the Securities Act and no exemption from registration exists with respect to the securities and transactions described herein.
21. Since a date unknown, but since at least November 2001 through January 2003, Defendant, directly and indirectly, made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise, as described herein, without a registration statement having been filed or in effect with the Commission as to such securities.
22. By reason of the foregoing, Defendant, directly and indirectly, has violated, and unless enjoined, will continue to violate Section 5(c) of the Securities Act [15 U.S.C. § 77e(c)].
23. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 18 of this Complaint.
24. Since a date unknown, but since at least November 2001 through January 2003, Defendant, directly and indirectly, by use of the means or instruments of transportation or communication in interstate commerce and by use of the mails, in the offer or sale of securities, as described herein, knowingly, willfully, or recklessly employed devices, schemes or artifices to defraud.
25. By reason of the foregoing, Defendant has violated and unless enjoined will continue to violate Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1)].
26. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 18 of this Complaint.
27. Since a date unknown, but since at least November 2001 through January 2003, Defendant, directly and indirectly, by use of the means or instruments of transportation or communication in interstate commerce and by use of the mails, in the offer or sale of securities, as described herein, engaged in transactions, practices and courses of business which are now operating and will operate as a fraud or deceit upon purchasers and prospective purchasers of such securities.
28. By reason of the foregoing, Defendant, directly and indirectly, has violated and, unless enjoined, will continue to violate Section 17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(3)].
WHEREFORE, the Commission respectfully requests that the Court:
Declare, determine and find that Defendant committed the violations of the federal securities laws alleged herein.
Issue a Permanent Injunction, restraining and enjoining Defendant, his officers, agents, servants, employees, attorneys, and all persons in active concert or participation with him, and each of them, from violating: Sections 5(c), 17(a)(1) and 17(a)(3) of the Securities Act [15 U.S.C. §§ 77e(c), 77q(a)(1) and 77q(a)(3)].
Issue an Order directing Defendant to pay civil fines and/or penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)].
Grant such other and further relief as may be necessary and appropriate.
Further, the Commission respectfully requests that the Court retain jurisdiction over this action in order to implement and carry out the terms of all orders and decrees that may hereby be entered, or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.
Dated: November __, 2003
Teresa J. Verges
Regional Trial Counsel
Florida Bar No. 0997651
Direct Dial No.: (305) 982-6384
Ivan P. Harris
Assistant Regional Director
Florida Bar No. 0085405
New York Bar No. GK-4939
Nancy B. Goldstein
New York Bar No. NG-3806
Attorneys for Plaintiff
THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
Telephone: (305) 982-6300
Facsimile: (305) 536-4146
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