U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20490 / March 13, 2008
Securities and Exchange Commission v. Paul Simmons, Rodney Gilbert, John Zankowski, Esq., Kerry Kennedy, Stanley Siciliano and Eric Littman, Esq., 8:04-CV-2477-T-17MAP (Middle District of Florida)
Former Officers of St. Petersburg, Florida Company, Paul L. Simmons and Rodney C. Gilbert, Are Ordered to Pay More than $1 million in Disgorgement and Penalties for Violations of the Anti-Fraud and Registration Provisions of the Federal Securities Laws
On February 28, 2008, the U.S. District Court for the Middle District of Florida entered final judgments against Paul L. Simmons and Rodney C. Gilbert, the former CEO and CFO of Nutraceutical Clinical Laboratories International, Inc. (“Nutraceutical” or the “Company”), a public company based in St. Petersburg, Florida. The Court’s judgment orders Simmons and Gilbert to disgorge, jointly and severally, $692,048 in ill-gotten gains from their participation in a fraudulent pump-and-dump scheme and imposes on each a $220,000 civil money penalty. The Court’s judgment also bars both Simmons and Gilbert from serving as an officer or director of a public company and from participating in any offering of penny stock.
Gilbert, against whom the Court entered a default in July 2007, also was enjoined from violating Section 5(a) and (c) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5. In June 2005, the Court entered a default against Simmons and imposed an identical injunction on him at that time. (Litigation Release No. 19541.)
The Commission’s complaint, filed on November 15, 2004, alleges that in 2000 and 2001 Simmons and Gilbert, along with stock promoters Kerry Kennedy and Stanley Siciliano and attorney John Zankowski, engaged in a multi-faceted pump-and-dump scheme involving the securities of Nutraceutical, which now, under different management, operates as Preservation Sciences, Inc and EFUEL Network, Inc. (Litigation Release No. 18968.) As part of a reverse merger transaction and in contravention of the registration provisions of the Federal securities laws, Simmons and Gilbert, along with promoter Kennedy and attorney Zankowski, secretly purchased nearly all of Nutraceutical’s purportedly free trading stock through their offshore nominee accounts. They did so in order to make a public market for the illegal distribution of their stock. To facilitate the distribution, Simmons disseminated false and misleading publicity about the Company, while, at the same time, stock promoters Kennedy and Siciliano falsely touted Nutraceutical stock on an Internet message board and manipulated the market for the Company’s stock through fraudulent stock trading. During the course of the manipulation, Simmons and Gilbert unlawfully sold Nutraceutical stock through nominee accounts, reaping $692,048 in profits.
Previously, the Court entered final judgments against three other defendants. In March 2006, the Court entered judgment against stock promoter Siciliano and attorney Zankowski and ordered each to pay more than $600,000 in disgorgement and civil money penalties and barred them from participating in penny stock offerings. (Litigation Release No. 19593.) Miami attorney Eric P. Littman, who the Commission alleged had sold Simmons, Gilbert, Kennedy and Zankowski nearly all of the outstanding shares of Nutraceutical in an unregistered sale, consented to a final judgment in January 2006 enjoining him from future violations of the registration provisions of the Securities Act and requiring him to pay $164,000 in disgorgement and civil money penalties. (Litigation Release No. 19541.) In a related administrative proceeding, the Commission suspended Zankowski from appearing or practicing before the Commission as an attorney pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice. (In the Matter of John B. Zankowski, Esq., Rel. 34-52487, File No. 3-12053.) The Commission is still pursuing its action against stock promoter Kerry Kennedy.