U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19677 / April 28, 2006
SEC v. Kimberly J. Carrella, et al., Civil Action No. 04-CV-3754 (E.D.N.Y.)
SEC Obtains Final Judgments Against Four Former Registered Representatives at Kimberly Securities, Inc.
The Securities and Exchange Commission announced today that on April 10, 2006, the United States District Court for the Eastern District of New York entered final judgments against Kevin J. Barton, Noel J. Belmonte, Philip J. Hourican, and James R. Mancuso. The defendants were registered representatives, or brokers, at former broker-dealer Kimberly Securities, Inc. The final judgments permanently enjoin defendants from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder. In addition, the final judgment as to Mancuso finds him liable for disgorgement of $244,646 plus prejudgment interest of $41,220, and orders him to pay a civil monetary penalty of $120,000. The final judgments as to Barton, Belmonte, and Hourican find them liable for disgorgement plus prejudgment interest, but waive the payment of disgorgement, and do not impose civil monetary penalties, based on these defendants' sworn representations in statements of financial condition and other documents and information submitted to the Commission. The defendants consented to the final judgments without admitting or denying the allegations in the Commission's complaint.
The Commission's complaint alleged that from early 2000 until September 2002, defendants Kimberly J. Carrella and Vincent M. Carrella directed a scheme to defraud Kimberly Securities' customers. Kimberly Carrella and other Kimberly Securities brokers, including Barton, Belmonte, Hourican, and Mancuso, misrepresented, and failed to disclose, material information to investors to persuade them to open brokerage accounts at Kimberly Securities and to invest significant amounts of money. The complaint further alleged that Kimberly Carrella and the other brokers, including Barton, Belmonte, Hourican, and Mancuso, then repeatedly executed unauthorized, unsuitable trades in customer accounts, and churned accounts. This frequent trading typically depleted customers' capital investments through trading losses and commission charges. Once there were no funds remaining in the customers' accounts, or the customers closed their accounts, Kimberly Securities brokers lured new, unsuspecting customers into opening accounts at Kimberly Securities, and repeated the same conduct. The complaint further alleged that, through this scheme, defendants enriched themselves at their customers' expense. For example, from January 2000 to September 2002, Kimberly Securities charged customers approximately $4.5 million in commissions. During the same time period, customers lost in excess of $4 million through trading losses and commission charges.
The Commission also announced today that it simultaneously instituted and settled administrative proceedings against Barton, Belmonte, Hourican, and Mancuso. Barton, Belmonte, Hourican, and Mancuso each consented to the entry of an Order, without admitting or denying its findings, pursuant to Section 15(b) of the Exchange Act, barring them from association with any broker or dealer.
For information about earlier developments in this matter, see Litigation Release No. 18860 (Aug. 30, 2004), Litigation Release No. 19381 (Sept. 16, 2005), and Litigation Release No. 19529 (Jan. 13, 2006).