U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20692 / August 28, 2008
SEC v. Competitive Technologies, Inc. , et. al., Civil Action No. 3:04 CV 1331 JCH (District of Connecticut)
Court Imposes $10,000 Civil Penalty Against SEC Defendant in Market Manipulation Case
The Securities and Exchange Commission announced today that on August 27, 2008, the Honorable Janet C. Hall, United States District Court Judge for the District of Connecticut, imposed a civil penalty of $10,000 against Sheldon A. Strauss of Cleveland, Ohio, a defendant in a previously-filed civil injunctive action involving a multi-faceted scheme to manipulate the stock price of Competitive Technologies, Inc., ("CTT"), a technology development company located in Fairfield, Connecticut. In addition, Judge Hall permanently enjoined Strauss from violating the antifraud provisions of the federal securities laws. These remedial penalties follow a November 29, 2007 verdict for the Commission on all of its securities fraud charges against Strauss after a three-week jury trial in Bridgeport, Connecticut.
The Commission's complaint, filed against a total of eight defendants on August 11, 2004, alleged that the defendants participated in a scheme to manipulate and inflate the price of CTT stock from at least July 1998 to June 2001. The complaint alleged that the defendants artificially raised and maintained the price of CTT's stock and created a false or misleading appearance with respect to the market for CTT stock through manipulative practices such as placing buy orders at or near the close of the market in order to inflate the reported closing price ("marking the close"), placing successive buy orders in small amounts at increasing prices ("painting the tape"), and using accounts they controlled or serviced to place pre-arranged buy and sell orders in virtually identical amounts (placing "matched trades").
The jury found Strauss liable for violating Sections 9(a) and 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. In addition, the jury found Strauss liable for aiding and abetting defendant and former registered representative Chauncey Steele's violations of Sections 9(a) and 10(b) of the Exchange Act. Steele previously settled the Commission’s action against him in 2005. The jury was unable to reach verdicts on most of the charges against two remaining defendants: Richard A. Kwak, a registered representative formerly associated with a broker-dealer in San Diego, California and Stephen J. Wilson, a registered representative formerly associated with a broker-dealer in Media, Pennsylvania. The Commission expects to retry its case against defendant Wilson, currently scheduled to begin on September 29, 2008, and its case against defendant Kwak, which is expected to occur in early 2009.
The SEC also announced that on April 8, 2008, the Court determined that a bar from serving as an officer or director of any public company was not warranted against CTT’s former CEO, defendant Frank R. McPike of Ridgefield, Connecticut. On October 31, 2007, the Court entered a final judgment by consent against defendant McPike, enjoining him from violating Sections 9(a) and 10(b) of the Exchange Act and Rule 10b-5 thereunder and ordering him to pay a civil penalty of $60,000, but leaving the issue of an officer and director bar open.
For further information about the Commission's action in SEC v. Competitive Technologies, Inc., et al., see Litigation Release No. 18827 (August 11, 2004), Litigation Release No. 19320 (August 2, 2005), Exchange Act Release No. 56785 (November 14, 2007), and Litigation Release No. 20388 (December 7, 2007).