U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20369 / November 26, 2007
Accounting and Auditing Enforcement No. 2751 / November 26, 2007
Securities and Exchange Commission v. Michael J. Pietrzak and Maurice W. Furlong, Civil Action File No. 1:03-CV-1507-Judge Grady (N.D. Il.)
Federal Court Enters Final Judgment Against Michael J. Pietrzak and Maurice W. Furlong, Officers and Directors of Hexagon Consolidated Companies Of America, Inc.
The Securities and Exchange Commission ("Commission") announced today that on November 19, 2007, the Honorable John F. Grady, United States District Judge for the Northern District of Illinois, entered Final Judgment against Michael J. Pietrzak and Maurice W. Furlong, for their role in defrauding the shareholders of Hexagon Consolidated Companies of America, Inc. ("HCCA"), by fraudulently inflating the value of claimed company assets, while at the same time selling their own HCCA stock into the marketplace. The final judgment against Pietrzak and Furlong includes permanent injunctions, disgorgement, prejudgment interest, civil penalties, officer and director bars and penny stock bars. Pietrzak is the former CFO and general counsel to HCCA. Furlong is the former CEO and President of the company. The final judgment follows a lengthy jury trial which resulted in an August 3, 2007 verdict against the defendants, and in favor of the Commission on every count in the Commission's complaint.
The final judgment permanently enjoins Pietrzak and Furlong from: (i) future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (ii) future violations of aiding and abetting in the filing of false periodic reports with the Commission in violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13 thereunder; (iii) future aiding and abetting violations involving internal accounting controls and books and records in violation of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act; and (iv) future violations involving failure to implement internal accounting controls in violation of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder. The final judgment also permanently enjoins Furlong from future violations of stock ownership reporting provisions of Sections 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder.
As to other relief, the final judgment also orders Pietrzak to pay disgorgement in the amount of $1,282,205, representing gross proceeds he received from sales of his HCCA stock, during the period that the accounting fraud was ongoing, along with pre-judgment interest thereon in the amount of $884,317 for a total of $2,166,522. The judgment orders Furlong to pay disgorgement in the amount of $3,375,662, representing gross proceeds he received from sales of his HCCA stock, during the period that the accounting fraud was ongoing, along with pre-judgment interest thereon in the amount of $2,612,888 for a total of $5,988,550. Civil penalties were imposed against the defendants in the amounts of the respective ordered disgorgement against them, however the judgment provides that the civil penalties shall be deemed paid to the extent that disgorgement is paid. All payments in the final judgment are due within 30 days of the entry of the judgment. Finally the judgment bars Pietrzak and Furlong from ever again serving as an officer or director of a public company, and bars them from offering or selling penny stocks.
The jury verdict, upon which the final judgment is based, included findings on a wide-range of securities law violations, including that material misrepresentations were made by HCCA in filings with the Commission, and that Pietrzak and Furlong engaged in protracted efforts to fraudulently increase the stock price and value of the company by, among other means, filing false and misleading registration statements and periodic and current reports, and by issuing false press releases and a letter to shareholders. During the same time, Pietrzak and Furlong sold millions of their own shares of HCCA stock, fraudulently receiving the amounts that the judgment ordered them to disgorge. The verdict also concluded that from 1996 through 2000, HCCA, through the efforts of Pietrzak and Furlong, reported to the public that it was an entity with substantial assets when, in fact, it was virtually worthless. A former codefendant, assayer Donald E. Jordan passed away during the litigation, and has now been dismissed from the case.