U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20869 / January 27, 2009
Securities and Exchange Commission v. Jeffery Steven Stone, et al., Case No. 06-CIV-6258 (HB) (S.D.N.Y. filed Aug. 17, 2006)
COURT AWARDS SEC OVER $642,000 FROM DEFENDANTS IN STOCK MANIPULATION SCHEME
The Securities and Exchange Commission announced today that on January 13, 2009, the United States District Court for the Southern District of New York entered a final judgment against former Connecticut resident Janette Diller Stone (aka Janette Dillerstone) in which it ordered her to pay a total of $462,247.21 in disgorgement and prejudgment interest and a $60,000 penalty for her alleged involvement in a 2005 microcap market manipulation scheme. Diller Stone earlier agreed to a partial settlement of the Commission's charges in which, without admitting or denying the Commission's allegations, she consented to imposition of an injunction permanently enjoining her from violating the antifraud, registration, and other provisions of the federal securities laws.
This judgment follows the Court's entry of a default judgment on November 25, 2008 against Diller Stone's husband, Jeffery Steven Stone, a convicted felon, in which the Court found that Stone had violated the antifraud, registration, and other provisions of the federal securities laws. The Court permanently enjoined Stone from further securities law violations and ordered him to pay $462,247.21 in disgorgement and prejudgment interest and a $120,000 penalty. Stone and Diller Stone were ordered to pay the disgorgement and prejudgment interest together with two entities they controlled, Pedracar, Inc. and Crescent Fund, LLC, against which default judgments were entered in March 2007.
The Commission's complaint alleges that Stone and Diller Stone, through Pedracar and Crescent Fund, acquired massive amounts of the stock of WebSky, Inc., a San Francisco-based penny stock company, under false pretenses. They then hired stock promoters to hype the stock in a spam email campaign that falsely portrayed WebSky — a start-up company with virtually no revenues or profits — as having a successful joint venture in Argentina that would result in over $40 million in annual revenues. After artificially inflating WebSky's stock price, Stone and Diller Stone dumped their shares into the unsuspecting market at a profit. Combined with proceeds from other stock sales during the scheme, Stone and Diller grossed more than $1 million in proceeds.
The Commission previously reached a settlement with WebSky and its CEO, Douglas Haffer, of Oakland, California, in which, without admitting or denying the Commission's allegations, they agreed to disgorge $35,000 received in a subsequent unregistered transaction with Stone and Diller Stone. Haffer also paid a $25,000 civil penalty. See Litigation Release No. 19805.