U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20481 / March 6, 2008
Securities and Exchange Commission v. W. Anthony Huff, Danny L. Pixler, Anthony R. Russo, Otha Ray McCartha and Charles J. Spinelli, Case No. 08-60315-CIV-ZLOCH (S. D. Fla.) (March 6, 2008.)
SEC Charges Five Individuals in a Financial Fraud Scheme Arising From Their Involvement With Certified Services, Inc.
The United States Securities and Exchange Commission announced today that it filed a complaint against W. Anthony Huff, Danny L. Pixler, Anthony R. Russo, Otha Ray McCartha, and Charles J. Spinelli in the United States District Court for the Southern District of Florida charging them with a financial fraud conducted in violation of the federal securities laws arising from their involvement with Certified Services, Inc., ("Certified") a South Florida publicly traded company. Certified operated a professional employee leasing business providing, among other things, workers' compensation insurance services to small and medium size businesses. Since May 2006, Certified has been a Chapter 11 debtor under the control of a Chapter 11 trustee appointed by the bankruptcy court.
The Commission's complaint alleges that from approximately 2001 through 2004, the defendants siphoned approximately $30 million from Certified through an elaborate scheme. The Commission's complaint also alleges that during the same time period, the defendants participated in a scheme to inflate Certified's financial statements by reporting approximately $47 million in bogus letters of credit as assets while not recording liabilities which reached a high of about $65 million in the third quarter of 2004. In addition, the complaint alleges that Certified did not fully disclose related party relationships.
The Commission's complaint charges Pixler, Certified's chief executive officer, and Russo, Certified's chief financial officer and a licensed certified public accountant, with violating Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, 13b2-2 thereunder and aiding and abetting Certified's violations of Sections 13(a), 13(b)(2)(A),and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. The complaint also charges Pixler and Huff with violating Section 17(a) of the Securities Act of 1933 ("Securities Act").
The complaint further charges Huff with aiding and abetting Certified's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and for his role as an undisclosed control person of Certified pursuant to Section 20(a) of the Exchange Act. The complaint charges McCartha with violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and for aiding an abetting Certified's violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder. The complaint charges Spinelli with aiding and abetting Certified's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission's complaint also names Sheri Huff, Roxann Pixler, Midwest Merger Management, LLC and Brentwood Capital Corporation as relief defendants ("relief defendants") in connection with their receipt of ill-gotten gains.
The Commission seeks permanent injunctive relief against all defendants, disgorgement and a Court-ordered sworn accounting from Pixler, Russo, Huff, and the relief defendants, the imposition of civil money penalties against each of the proposed defendants except Spinelli and McCartha, an officer and director bar against Pixler, Huff, Spinelli, Russo and McCartha, and orders barring Pixler, Huff, Spinelli, Russo and McCartha from participating in any offering of a penny stock.
McCartha and Spinelli have consented to the entry of Final Judgments providing for full injunctive relief. In October 2007, the Honorable Adalberto Jordan, United States District Judge for the Southern District of Florida, sentenced Spinelli and McCartha to 21 and 24 months incarceration respectively, and ordered them to pay restitution.
In addition to the civil actions against the defendants and relief defendants, on March 6, 2008, the Commission also issued an Order of Suspension pursuant to Rule 102(e)(2) of the Commission's Rules of Practice forthwith suspending Spinelli, an attorney, from appearing or practicing before the Commission, based on the entry of a felony conviction against him. In addition, the Commission simultaneously instituted a public administrative proceeding pursuant to Section 12(j) of the Exchange Act to suspend or revoke each class of Certified's securities based on its failure to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.