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UNITED STATES DISTRICT COURT
Case No. __________________________
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF Plaintiff, United States Securities and Exchange Commission ("Commission"), alleges and states as follows: NATURE OF THE COMPLAINT 1. From at least November 2001 through the present, Joseph L. Lents ("Lents"), chief executive officer of Investco, Inc. ("Investco"), carefully devised and, along with the other defendants to this action, carried out a "pump-and-dump" scheme involving Investco's common stock. On April 29, 2002, the Commission temporarily suspended trading in Investco's stock on the OTC Bulletin Board based on the conduct that forms the basis of this Complaint. 2. Lents' scheme operated on two levels. Publicly, Lents caused Investco to issue frequent press releases to create the illusion that Investco owned millions in assets and was the subject of a lucrative cash tender offer. The alleged tender offer bidder, First International Finance Corporation ("FIFC"), and its chairman, Michael E. Zapetis ("Zapetis"), were integral parts of the scheme as they provided the source of the fictitious financial deals and assets that Investco touted in its press releases. Behind the scenes, Lents and Zapetis knew that Investco was in dire financial straights, that it had never acquired the assets it claimed to own, and that there was no tender offer. In addition, Lents was actively selling Investco's stock himself and distributing shares of Investco's stock to a network of associates, primarily through Brian Baginski ("Baginski") and his company, Electronic Commerce Consultants, Inc. ("ECC"). Baginski and Anthony V. Yonadi ("Yonadi") coordinated their buy and sell orders through Yonadi's company, Southeast Capital Partners, Inc. ("Southeast Capital"), to liquidate Baginski's position and simulate increased demand for Investco's stock. 3. The Commission brings this action to put an immediate stop to this fraudulent scheme. An immediate risk exists that defendants will continue manipulating Investco's stock. As recently as last Thursday, Lents reconstituted the fraudulent scheme by causing Investco to issue a false and misleading press release announcing Investco's merger with another company. Lents, Baginski, and Yonadi's company, Southeast Capital, still own Investco's stock, and Lents and Zapetis continue trying to arrange a "tender offer." The Commission's trading suspension expired on May 10, 2002. Investco's stock currently is delisted by the NASDAQ, however, Investco is actively seeking to be relisted, which would create a market in which defendants could revive their manipulative scheme. Moreover, although market makers are not currently making quotes in Investco stock, they can post customer orders and execute trades based on such orders. Between May 13, 2002 and May 17, 2002, daily trading volume in Investco's stock ranged from 16,500 shares to 60,800 shares with a low price of $0.75 per share and a high price of $1 per share. 4. Accordingly, the Commission seeks (a) a temporary restraining order and preliminary and permanent relief enjoining defendants from future violations of the federal securities laws, (b) an asset freeze against Lents, Baginski, ECC, Yonadi, and Southeast Capital, and, if appropriate, against Investco, FIFC and Zapetis, to avoid dissipation of assets pending the resolution of this action, (c) disgorgement of all ill-gotten gains, (d) an accounting from all defendants, (e) expedited discovery, (f) repatriation of assets, and (g) civil penalties against Investco, Lents, FIFC, Zapetis, Baginski, ECC, Yonadi, and Southeast Capital, and for such other ancillary and equitable relief as is sought herein and may be appropriate. DEFENDANTS 5. Investco, Inc. is a Nevada corporation headquartered in Boca Raton, Florida. Investco formerly purported to be a provider of voice recognition technology and now claims to be a provider of financial services. Prior to the Commission's trading suspension, Investco's common stock was quoted on the OTC Electronic Bulletin Board under the symbol IVSOE. 6. Joseph L. Lents is 57 years old and lives in Boca Raton, Florida. Lents is the Chief Executive Officer of Investco and also a certified public accountant. Lents has an interest in at least one Bahamian bank accounts. 7. First International Finance Corporation is a Nevada corporation headquartered in Miami, Florida. FIFC purports to be a provider of financial services. 8. Michael E. Zapetis, Sr. is 73 years old and lives in Miami, Florida. Zapetis is the Chief Executive Officer of FIFC. In 1988, in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida, Zapetis consented to entry of an order enjoining him from future violations of, among other things, the anti-fraud provisions of the Florida securities laws. 9. Brian E. Baginski is 34 years old and lives in Boca Raton, Florida. Baginski was a registered representative at various brokerage firms from 1991 until 1996. In 1998, the National Association of Securities Dealers ("NASD") barred Baginski from association with any member firm. In 1991, Baginski was convicted of retail theft. 10. Electronic Commerce Consultants, Inc. is a Florida corporation headquartered in Boca Raton, Florida. Baginski is ECC's president and chief executive officer. 11. Anthony V. Yonadi is 47 years old and lives in Boca Raton, Florida. Yonadi is a former registered representative of various brokerage firms. Yonadi is a day-trader and private investor. 12. Southeast Capital Partners, Inc. is a Florida corporation with offices in Yonadi's home. Yonadi is Southeast Capital's Chief Executive Officer. JURISDICTION 13. The Commission brings this action pursuant to the authority conferred on it by Section 20(b) of the Securities Act of 1933 (the "Securities Act") [15 U.S.C. § 77t(b)] and Sections 21(d) and (e) of the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. §§ 78u(d) and 78u(e)]. 14. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa]. 15. Defendants, directly and indirectly, have made, and continue to make, 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. FACTS Lents' Outline and Implementation of His Scheme 16. Lents devised a scheme to defraud investors and he then chose Investco as the company to apply it. In an e-mail to Zapetis dated November 12, 2001, Lents outlined his scheme, which he called "the program." According to Lents, he and Zapetis could make money by taking control of public companies and manipulating the price of their stock. 17. Lents' November 12, 2001 e-mail to Zapetis said, in part: In my opinion, for the program to work and reduce our exposure, we need to design the program to maximize our return and minimize our exposure. To do this we find public companies that will follow our suggestions and our plan for their turn around. Specifically, the companies must agree to let us use our legal and accounting firms, and be willing to approve the Board resolutions that will require the companies to restructure their capital/equity base. This would be done through a reverse stock split. 18. Lents and Zapetis implemented "the program" with Investco. In an e-mail dated November 20, 2001 to Zapetis, Lents suggested that he should take over as chief executive officer of Investco (then named Intraco Systems, Inc.), which "would ensure that we could get everything done as needed." Lents went on to blueprint this case by saying, "I think we should do the asset infusion, do a large reverse stock split, and put another company into Intraco ASAP. I can raise money and get the market going if we make these changes." By November 14, 2001, Lents claimed to have established influence on the market for Investco's stock, as he admitted in an e-mail sent to Zapetis that day which said, "I have the stock very active (over 250,000 shares and the ask is $0.85)." 19. On November 30, 2001, Lents took over as Chief Executive Officer of Investco. 20. From December 3, 2001 through April 5, 2002, as detailed below, Lents caused Investco to issue 14 press releases hyping Investco's assets, operations, and business combinations. The AAUK Stock Press Releases 21. From December 3, 2001 through April 5, 2002, Investco made statements in press releases concerning a $15 million agreement with FIFC. Investco announced a letter of intent regarding the transaction on December 3, 2001 and the closing of the transaction on December 27, 2001. In press releases after December 27, 2001, Investco stated that FIFC had exchanged $15 million of stock in AAUK, a NASDAQ-listed security, for convertible preferred stock of Investco. Investco also stated that, with FIFC's assistance, it was using the AAUK stock to offer financial guarantees and other financial services to companies and accredited investors. 22. These statements were false. Investco never closed the acquisition of any AAUK stock, never obtained any AAUK stock, and never issued any convertible preferred stock to FIFC. 23. Lents knew, or was severely reckless in not knowing, that Investco never closed the acquisition of any AAUK stock, never obtained any AAUK stock, and never issued any convertible preferred stock to FIFC. 24. Moreover, FIFC did not have a legitimate interest in any AAUK stock. The stock certificate FIFC claimed to own was a counterfeit certificate. Further, FIFC paid nothing for the certificate, claiming it was acquired in an "investment program." Zapetis knew, or was severely reckless in not knowing, that FIFC did not own $15 million worth of AAUK stock. The Mercury Press Releases 25. From January 31, 2002 through April 5, 2002, Investco made statements in press releases claiming a lucrative acquisition of a Costa Rican company named Mercury Insurance and Surety Company, Ltd. ("Mercury"). Zapetis brokered Investco's supposed acquisition of Mercury. 26. On January 31, 2002, Investco issued a press release touting its "$50 million acquisition" of Mercury in exchange for promissory notes and restricted stock. On March 7, 2002, Investco issued a press release announcing that it had modified its letter of intent for the Mercury acquisition to be a "$100 million acquisition." Investco then issued a press release on March 14, 2002 announcing that it had closed the acquisition of Mercury, which supposedly had $100 million in certificates of deposit on its audited financial statements. 27. These statements were false. Investco's acquisition of Mercury never closed, Investco never issued stock as part of the exchange, and Investco never took control of $100 million in certificates of deposit. 28. Lents knew, or was severely reckless in not knowing, that Investco's acquisition of Mercury never closed, that Investco never issued stock as part of the exchange, and that Investco never took control of $100 million in certificates of deposit. Further, Investco and Lents failed to obtain Mercury's audited financial statements or any documents substantiating that Mercury owned $100 million in certificates of deposit. 29. Lents' motive to issue false press releases is apparent from e-mails sent from Lents to Zapetis days prior to the issuance of the March 14, 2002 press release announcing the closure of the Mercury deal. In a March 6, 2002 e-mail Lents states that, "{t}he longer we go without doing Mercury the harder it is for me to keep the stock up" and continues, "I keep telling them to relax but even my guys are going to start selling unless I get it done soon." On March 8, 2002 Lents sent another e-mail to Zapetis stating that, "we owe the current landlord $2,500 and he went to court and got an eviction notice," that "... $750 must be paid today or FP&L shuts us off today: and that "I know the stock will begin to drop once the word starts to leak out about our financial situation." The FIFC Tender Offer Press Release 30. On April 4, 2002, Investco issued a press release claiming that it had received a $10 million cash tender offer from FIFC for the remaining outstanding shares of Investco at a price of $10 per share, more than triple Investco's closing price of the preceding day. Investco's press release said that FIFC had deposited $10 million in cash in BNP Paribas Bank, S.A. to be used exclusively for the tender offer. 31. The April 4, 2002 press release appears to have caused an appreciable market effect. On April 4, 2002, the volume of trading in Investco's stock rose over 1,400% to 1,542,000 shares from the average daily volume for 2002 of 100,000 shares. 32. The tender offer press release was false. FIFC never made a tender offer for Investco's stock, but instead wrote a letter of intent indicating its intention to make a tender offer. Additionally, Investco's supposed confirmation of FIFC's ability to consummate such a tender offer consisted of a one-paragraph letter from an entity known as CHCG, which purported to maintain an account for FIFC that had available more than $10 million in funds, and a copy of a directory of BNP Paribas' locations worldwide. 33. Lents knew that Investco had never received an actual tender offer from FIFC because he received, prior to issuing the press release, FIFC's letter expressing a mere intent to make a tender offer. Moreover, Lents never expected FIFC to consummate the announced tender offer. In an e-mail dated April 8, 2002, Lents told Zapetis that he expected the news about Investco would drive Investco's share price above $10 and "eliminate the tender." Lents further stated in the e-mail that "[r]ight now all we need to do is file the required documents to show the market that it is valid and then let it be dragged out until it just goes away." The American Leisure Merger Press Release 34. On April 5, 2002, Investco issued a press release announcing it had signed an initial contract to merge with American Leisure, a private corporation which purported to be a holding company for travel and resort real estate development companies. The press release said the merger would allow Investco to "begin recording revenue and earnings immediately" and that American Leisure had revenues in fiscal year 2001 of approximately $17 million, with a net income of $1 million. 35. American Leisure withdrew from the merger in a letter to Lents dated April 12, 2002 because Investco had been unable to confirm its claimed assets. Yet, Investco did not issue a press release announcing the termination of the American Leisure merger until May 16, 2002. Investco and Lents knew, or were reckless in not knowing, that Investco should have issued a corrective press release upon receiving American Leisure's termination letter. The Press Releases Announcing the Termination of Agreements,
36. In a press release issued by Investco on the evening of May 16, 2002, the company conceded that Investco never acquired $15 million in AAUK stock, that Investco had never acquired Mercury, that the American Leisure merger was called off and that Invesetco did not believe anymore that FIFC would consummate the announced tender offer. Lents was quoted in the May 16th press release as saying, "there have been many mistakes and inappropriate reliance on the commitments of various parties which we thought had the potential to turn around the operations of Investco and provide benefits to our stockholders." 37. Later on Thursday evening, before Investco's shareholders could absorb the above revelations, Investco announced that it had signed a "letter of intent" to acquire a company known as Bio Defense Corporation ("Bio Defense"), which purportedly has developed products that protect against the biological infection of mail and food. The press release states that "Investco will issue Convertible Preferred Stock that will convert into 20 million shares of restricted common stock at $4.00 per share." 38. The press release announcing the Bio Defense acquisition is misleading. Bio Defense's CEO informed the Commission staff that Bio Defense would not have to pay $4.00 per share to convert its preferred stock into common stock. Rather, Bio Defense would be able to convert without paying any cash whatsoever. As a result, the Bio Defense press release is materially misleading, because it does not state the critical fact that Bio Defense can convert its preferred stock into 20 million shares of Investco, 80% of Investco's equity if the deal is consummated, without paying any cash. Trading in Investco's Stock by Lents and Others 39. On January 29, 2002, Investco declared a one for one hundred shares (1:100) reverse stock split. The same day, Lents and Investco entered into a service agreement under which Investco would issue 500,000 shares of Investco's common stock as compensation for Lents' services. On February 13, 2001, Investco filed a Form S-8 with the Commission that said Lents' 500,000 shares were compensation to Lents for services rendered before and after his employment began on November 30, 2001. The Form S-8 also said that Investco was authorized to issue 1,000,000 shares of common stock. Lents received half of Investco's authorized stock as a result of the reverse stock split and his service agreement. 40. Lents used the 500,000 shares he received from Investco as part of the manipulative scheme. From March 6, 2002 until April 24, 2002, Lents sold at least 26,150 shares in accounts he directly controlled, generating proceeds of $64,265. Between February 26, 2002 and April 4, 2002, Lents also transferred 200,000 shares to Baginski and ECC, a company controlled by Baginski. 41. Baginski, in turn, sold some of the stock he received from Lents and transferred the remaining stock to other parties, including Yonadi. From direct sales, Baginski earned approximately $53,874 in proceeds while ECC made $13,929 in proceeds. 42. Yonadi and Baginski entered into an arrangement whereby Yonadi would help Baginski "get out of" his Investco stock. Under this arrangement, Baginski was supposed to give Yonadi one free trading share of Investco's stock for every $1 of Investco's stock he helped Baginski "get out of." Yonadi helped Baginski "get out of" his Investco stock by using his Southeast Capital account to place orders at a price a little higher than the quoted bid for Investco's stock. Yonadi placed these orders at Baginski's request and informed Baginski of at least some of them. Yonadi and Baginski's actions simulated increased demand for Investco's stock. 43. As a payment for helping Baginski unload his Investco stock, Yonadi received 80,000 shares of Investco's stock in his personal account. Yonadi sold these shares between March 19, 2002 and April 18, 2002, generating proceeds of approximately $184,247. 44. The steady flow of press releases by Investco, coupled with the manipulative trading, caused the price and volume of Investco's stock to increase. From February 1, 2002 until the end of March 2002, Investco's stock's average daily trading volume was 18,005 shares and the closing prices fluctuated between $.85 and $5.75 per share. The volume increased dramatically with the April 4th press release announcing FIFC's tender offer. From April 4th until the trading suspension, the closing price of Investco's stock fluctuated between $2.75 and $1.26 per share, on an average daily trading volume of 274,682 shares. COUNT I Violations of Section 5(a) and (c) of the Securities Act [15 U.S.C. § 77e(a) and (c)]
45. Paragraphs 1 through 44 above are realleged and incorporated herein by reference. 46. By their conduct, Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital, directly and indirectly, and notwithstanding that there was no applicable exemption: (i) made use of means or instruments of transportation or communication in interstate commerce or of the mails to sell, through the use or medium of a prospectus or otherwise, securities as to which no registration statement was in effect; (ii) for the purpose of sale or delivery after sale, carried and/or caused to be carried through the mails or in interstate commerce, by means or instruments of transportation, securities as to which no registration statement was in effect; and (iii) made use of means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell, through the use or medium of a prospectus or otherwise, securities as to which no registration statement had been filed. 47. No valid registration statement was filed with the Commission in connection with Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital's sales of, and offers to sell, Investco's stock. 48. By reason of the foregoing, Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital have violated and are violating Sections 5(a) and (c) of the Securities Act [15 U.S.C. § 77e(a) and (c)]. COUNT II Violations of Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1)]
49. Paragraphs 1 through 44 above are realleged and incorporated herein by reference. 50. By their conduct, Investco and Lents in the offer and sale of securities, by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, has employed devices, schemes and artifices to defraud, as more fully described above. 51. Investco and Lents knew, or were severely reckless in not knowing, the facts and circumstances described in this Complaint 52. By reason of the foregoing, Investco and Lents violated and are violating Section 17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1)]. COUNT III Violations of Section 17(a)(2) and 17(a)(3) of the Securities Act
53. Paragraphs 1 through 44 above are realleged and incorporated herein by reference. 54. By their conduct, Investco and Lents, in the offer and sale of securities, by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, has obtained property by means of untrue statements of material fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or have engaged in transactions, practices or courses of business which have operated as a fraud and deceit upon purchasers of securities. 55. By reason of the foregoing, Investco and Lents violated and are violating Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §§ 77q(a)(2) and 77q(a)(3)]. COUNT IV Violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)]
56. Paragraphs 1 through 44 above are realleged and incorporated herein by reference. 57. By their conduct, Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital, in connection with the purchase or sale of securities of Investco, by the use of means or instrumentalities of interstate commerce or of the mails, or of any facility of any national securities exchange, directly and indirectly: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaged in acts, practices, and courses of business which operated as a fraud or deceit upon other persons, including purchasers and sellers of such securities. 58. Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital knew or were severely reckless in not knowing the facts and circumstances described in this Complaint. 59. FIFC and Zapetis knowingly provided substantial assistance to the scheme to defraud described in this Complaint. 60. By reason of the foregoing, Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital have violated and are violating Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. §240.10b-5]. Further, FIFC and Zapetis have aided and aided and abetted and are aiding and abetting Investco's violations within the meaning Section 20(e) of the Exchange Act [15 U.S.C. §78t(e)]. RELIEF REQUESTED WHEREFORE, the Commission respectfully requests that the Court: 1. Grant a Temporary Restraining Order, Order of Preliminary Injunction, and Order of Permanent Injunction, in forms consistent with Rule 65(d) of the Federal Rules of Civil Procedure, restraining and enjoining: (a) Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital from violating Sections 5(a) and (c) of the Securities Act [15 U.S.C. § 77e(a) and (c)]; (b) Investco and Lents, their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice of the Temporary Restraining Order, Order of Preliminary Injunction, and Order of Permanent Injunction by personal service or otherwise from directly or indirectly engaging in acts practices or courses of business described above, or in conduct of a similar purport and object, in violation of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. (c) Investco, Lents, FIFC, Zapetis, Baginski, ECC, Yonadi, and Southeast Capital, their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice of the Temporary Restraining Order, Order of Preliminary Injunction, and Order of Permanent Injunction by personal service or otherwise from directly or indirectly engaging in acts practices or courses of business described above, or in conduct of a similar purport and object, in violation of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 [17 C.F.R. § 240.10b-5], thereunder; 2. Order defendants to disgorge any and all ill-gotten gains, plus prejudgment interest. 3. Issue orders (a) freezing the assets of Lents, Baginski, ECC, Yonadi, and Southeast Capital, and, if appropriate, Investco, FIFC, and Zapetis, their officers, agents, servants, employees, attorneys and those persons in active concert with them who receive actual notice of the Asset Freeze by personal service or otherwise, (b) requiring defendants to identify assets and to provide an accounting; (c) requiring defendants to repatriate assets; (d) granting expedited discovery; and (e) prohibiting defendants from destroying documents; 3. Impose civil penalties against Investco, Lents, FIFC, Zapetis, Baginski, ECC, Yonadi, and Southeast Capital pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]. 4. Enter an order barring Lents from serving as an officer or director of any publicly held company pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)] and pursuant to the Court's equitable power. 5. Grant such other and further relief as may be necessary and appropriate. 6. Retain jurisdiction over this action 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. Respectfully submitted, Dated: May 20, 2002 s/___________________________________
Steven L. Klawans
Carolann Gemski
Attorneys for Plaintiff
http://www.sec.gov/litigation/complaints/complr17525.htm
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