U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19923 / November 22, 2006
SEC v. U.S. Gas & Electric, Inc., et al., (U.S. District Court for the Southern District of Florida, Civil Action No. C-06-22440-CIV-LENARD (S.D. FL))
Federal Judge Permanently Enjoins Larry Webman and Melvin Webman
The Securities and Exchange Commission ("Commission") announced that the Honorable Joan A. Lenard, United States District Judge for the Southern District of Florida entered judgments as to two of the Defendants in this case. On November 16, 2006, Judge Lenard entered an Amended Order of Default Judgment of Permanent Injunction and Other Relief as to Defendants Larry Webman and his brother Melvin Webman. Both defendants were enjoined from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. The Court ordered civil money penalties, disgorgement, and prejudgment interest against each of the Webmans in amounts to be determined later by the Court. The Court also ordered penny stock bars against each Defendant.
The complaint in this matter alleged that between March 2002 and August 2003 U.S. Gas, acting through Larry Webman, Melvin Webman, and the other co-defendants, raised more than $6.8 million from investors in a series of unregistered offerings of securities. The Defendants used a boiler room of telemarketers to offer and sell securities to approximately 180 investors throughout the United States, many of whom were senior citizens. The complaint alleged that U.S. Gas, Larry Webman, Melvin Webman, and others misrepresented to investors in two of the offerings that U.S. Gas would register an initial public offering and that its stock would trade publicly, which would result in generous returns for investors. In addition, they falsely represented to investors in three of the securities offerings that investors should expect to receive annual returns ranging from 25% to 50% for decades. Moreover, U.S. Gas, through the Webmans and others, failed to disclose to investors that excessive commissions were being paid to the boiler room telemarketers out of the offering proceeds, and made misrepresentations to investors in one of the offerings regarding the amount of management fees that would be paid out. According to the complaint, Melvin Webman, with the help of Larry Webman, also misappropriated monies raised in one of the offerings.
In addition to alleging antifraud charges, the Commission's complaint also alleged that Larry and Melvin Webman violated the registration provisions of the federal securities laws by failing to file registration statements in connection with the offerings. The complaint further alleged that both Webmans violated the broker registration provisions of the federal securities laws.