U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20558 / May 7, 2008
Securities and Exchange Commission v. Intracom Corporation, et al., Civil Action No. 02 Civ. 4367 (E.D.N.Y.) (LDW))
Final Judgments Entered Against Chief Executive Officers of Three Medical Technology Companies, the Companies' Lawyer and the Companies' Stock Promoter
The United States Securities and Exchange Commission today announced that in March and April 2008, the Honorable Leonard D. Wexler of the U.S. District Court for the Eastern District of New York entered final consent judgments against defendants Alfred Braunberger, Harry Masuda, Louis Matson, Hyperbaric Systems, Inc., Larry Bryant, Comco, Inc. and Paul Marotta. The judgments enjoin these defendants from future violations of the federal securities laws and require Masuda and Matson each to pay a $25,000 civil penalty, and Marotta to pay $50,328.12 in disgorgement and post-judgment interest.
The Commission's complaint, filed on August 6, 2002, alleges that issuers Intracom, Hyperbaric and Surgica; Braunberger, Masuda and Matson, the CEOs of Intracom, Hyperbaric, and Surgica, respectively; Marotta, the three issuers' lawyer; and Bryant and Comco, the issuers' stock promoter and his company, made material misrepresentations and omissions to investors about the anticipated use of offering proceeds. According to the complaint, each issuer provided offering materials to investors that stated it would pay approximately 12% in sales commissions to brokers selling the securities and that the remaining funds will be used for corporate purposes. The complaint further alleges that the issuers, with the knowledge of the CEOs and the issuers' lawyer, paid Bryant, who acted as an unregistered securities broker, undisclosed commissions of 25% to 30%, thereby substantially reducing the amount of funds available for business purposes.
Without admitting or denying the Commission's allegations, the settling defendants consented to final judgments that: (1) permanently enjoin Braunberger, Masuda, Matson, Hyperbaric, Bryant, and Comco from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; (2) permanently enjoin Marotta from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (3) permanently enjoin Bryant from future violations of Section 15(a) of the Exchange Act; (4) bar Bryant from participating in any future offering of penny stocks; (5) order Masuda to pay a $25,000 civil penalty; (6) order Matson to pay a $25,000 civil penalty; and (7) find Marotta liable for $264,000 in disgorgement and prejudgment interest of $163,379; however, based on the representations in Marotta's sworn financial statements the judgment waives payment of disgorgement except for $50,000 and $328.12 in post-judgment interest and does not impose a civil penalty. The judgment against Braunberger does not impose a civil penalty based on the representations in his sworn financial statements. The judgment against Bryant finds him liable for $1,302,040 in disgorgement plus prejudgment interest of $819,831.76, but waives payment of the disgorgement and of a civil penalty based on the representations in Bryant's sworn financial statements. The judgment against Comco does not impose a penalty due to the representations in Comco's sworn financial statement.
Previously, in January 2007, defendant Surgica Corporation consented to a final judgment enjoining it from future violations of the federal securities laws and, in March 2007, a default judgment was entered against defendant Intracom Corporation enjoining it from future violations of the federal securities laws.
For more information see Litigation Release No. 17659.