U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20116 / May 14, 2007
SEC v. NJ Affordable Homes Corp., Wayne Puff and Kenneth Lagonia, Civil Action No. 2:05-CV-04403 (JLL) (D.N.J.)
SEC Adds Defendant to Ponzi Scheme Case, Charging Former Consultant to NJ Affordable Homes for Role in Defrauding Investors
The Securities and Exchange Commission announced today that on May 10, 2007, the Commission filed an Amended Complaint in SEC v. NJ Affordable Homes, a case pending in the United States District Court for the District of New Jersey. The Amended Complaint adds Kenneth Lagonia as a defendant in the Commission's previously filed offering fraud case against NJ Affordable Homes and its president, Wayne Puff. The Amended Complaint alleges that Lagonia, a resident of Manorville, New York, played an integral role in the final years of a Ponzi scheme that defrauded hundreds of NJ Affordable Homes' investors, and made numerous fraudulent misrepresentations and omissions regarding NJ Affordable Home's business and the nature of the securities it was offering.
The Amended Complaint further alleges that from at least 1999 to September 12, 2005, the day the Commission obtained a temporary restraining order against NJ Affordable Homes and Puff, NJ Affordable Homes sold more than $90 million worth of securities in unregistered offerings to hundreds of investors in New Jersey and other parts of the United States. In selling those securities, NJ Affordable guaranteed investors high rates of return, of 15% and more, based on promises that their money would be used to fund the purchase, renovation, and resale of real property. However, the Defendants failed to disclose to investors that, among other things, the companies' properties were over-valued; that NJ Affordable Homes had a negative net worth and ever-worsening cash flow problems; that money from new investors was being used to fund payments to existing investors; that NJ Affordable Homes' books and records were in disarray and the company could not prepare audited financial statements; and that many of the company's property sales were to straw buyers at inflated prices, generating fictitious revenue and resulting in increased and undisclosed debt obligations to NJ Affordable Homes.
Specifically, the Amended Complaint alleges that NJ Affordable Homes, Puff, and Lagonia violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.