U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20390 / December 7, 2007
SEC v. Vincent Cammarata, et al., Civil Action No. 07-81163-CIV-MARRA/JOHNSON (S.D.F.L.)
SEC v. William L. Haynes, et al., Civil Action No. 07-81165-CIV-MIDDLEBROOKS/JOHNSON (S.D.F.L.)
SEC v. Mark Foglia, et al., Civil Action No. 07-81162-CIV-MIDDLEBROOKS/JOHNSON (S.D.F.L.)
SEC v. Virgil G. Williams, Civil Action No. 07-81161-CIV-ZLOCH/SNOW (S.D.F.L.)
SEC v. Sean P. Sheehan, Civil Action No. 07-81164-CIV-MARRAH/JOHNSON (S.D.F.L.)
SEC Files Actions Against Ten Defendants in Fraudulent Kickback Schemes
United States Attorney's Office for the Southern District of Florida Announces Parallel Indictments Against Some of the Same Defendants and Others
The U.S. Securities and Exchange Commission announced today that it filed civil actions alleging securities fraud in five separate kickback schemes uncovered by an FBI sting operation conducted pursuant to a cooperation agreement between the FBI and the Commission. The defendants, who reside in South Florida, New York, California, and Nevada, are insiders or promoters of publicly traded companies who made stock sales to a hedge fund in exchange for illegal kickbacks to an individual whom they believed to be the hedge fund manager, but who was in reality an undercover FBI agent. The five complaints charge the following Defendants with violating Section 17(a)(1) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder: (1) Vincent Cammarata, Rex A. Morden, and Affinity Financial Group, Inc.; (2) William L. Haynes, Efrim Gjonbalaj, and Real Asset Management LLC; (3) Mark Foglia and Western Financial Services, Inc.; (4) Virgil G. Williams; and (5) Sean P. Sheehan.
In related criminal prosecutions, the United States Attorney's Office for the Southern District of Florida ("USAO") today announced the criminal indictments of defendants Morden, Haynes, Gjonbalaj, Foglia and Williams.
According to the SEC's complaints, which were filed in the United States District Court for the Southern District of Florida, the five schemes involved sales of securities in publicly traded companies to a purported hedge fund. To make the sales, the defendants agreed to pay kickbacks to the individual managing the hedge fund. In fact, there was no hedge fund and the purported manager was an FBI operative in the sting operation. The Commission's complaints allege that, in each case, the hedge fund manager told the seller or promoter that the kickback had to be kept secret, because it would violate his fiduciary obligations to the hedge fund. The manager also told the seller or promoter that he had created a phony consulting company to which the kickback could be paid pursuant to a consulting agreement. The sellers or promoters were explicitly told that the consulting entity did not exist, that no actual consulting work would be performed, and that the phony consulting arrangement was simply a means to secretly pay the kickback to the hedge fund manager. All of the defendants agreed to pay a kickback and, with one exception, the defendants paid the promised kickback to the representative after the hedge fund bought the stock defendants were promoting. Every buy transaction by the hedge fund had a material effect on the stock trading volume of the companies in question.
In its actions, the Commission is seeking permanent injunctions prohibiting Defendants from committing future violations of the foregoing federal securities laws, disgorgement of ill-gotten gains plus pre-judgment interest thereon, and civil penalties. The Commission is also seeking an officer and director bar against Williams and penny stock bars against all the individual defendants.
Haynes was previously enjoined from further violations of the antifraud and registration provisions of the federal securities laws following his participation in a $7 million offering fraud. SEC v. Global Asset Partners, Ltd., Case No. 01-8862-CIV-Middlebrooks (S.D. Fla.). In addition, Haynes was previously barred from associating with a broker-dealer based on the entry of the permanent injunction. In the Matter of William L. Haynes, Exchange Act Release No. 45820 (April 25, 2002).
The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the Southern District of Florida and the Federal Bureau of Investigation in investigating this matter. The Commission's investigation is ongoing.