U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21447 / March 10, 2010
SEC v. Richard Verdiramo, Vincent L. Verdiramo, Edward Meyer, Jr., and Victoria Chen, Civil Action No. 10-CIV-1888 (S.D.N.Y.)
SEC Charges Richard Verdiramo, Attorney Vincent L. Verdiramo, Recidivist Edward Meyer, Jr., and Victoria Chen for their Roles in a Fraudulent Share Issuance Scheme
The U.S. Securities and Exchange Commission today charged Richard Verdiramo with securities fraud and violating the registration provisions of the federal securities laws in connection with a scheme to issue shares of RECOV Energy Corporation for his own personal benefit and to benefit his father, attorney Vincent L. Verdiramo, Esq. The SEC’s Complaint charges Vincent Verdiramo with aiding and abetting his son’s fraud. In addition, the SEC’s Complaint alleges that Vincent Verdiramo, Edward Meyer, Jr., and Victoria Chen violated the securities registration provisions and that Meyer engaged in insider trading in connection with his sales of RECOV stock.
The Complaint alleges that between February and August 2005, Richard Verdiramo, RECOV’s then Chairman, CEO, President, and CFO, directed RECOV to issue more than three million shares in unregistered, non-exempt transactions to Meyer, Chen, and others. According to the Complaint, the issuances to Meyer and Chen were made pursuant to a contract under which Richard and Vincent L. Verdiramo agreed to sell Meyer and Chen a controlling interest in RECOV. At the time of the contract, RECOV was involved in merger negotiations with a private company which had hired Meyer as a merger consultant. Although Richard Verdiramo directed RECOV to issue unregistered shares to Meyer, Chen and others purportedly in conversion of RECOV notes payable, the Complaint alleges that Meyer and others paid Richard and Vincent Verdiramo at least $350,000 for the shares; monies which should have gone to RECOV.
The Complaint alleges that Vincent L. Verdiramo aided and abetted his son’s fraudulent share issuance scheme by participating in negotiations regarding the sale and issuance of the shares, being a party to the contract with Meyer and Chen, and by using his attorney trust account to funnel the money Meyer and others paid for RECOV shares to a private company Richard and Vincent L. Verdiramo controlled.
The Complaint alleges that after directing these issuances, Richard Verdiramo signed three RECOV periodic reports filed with the Commission in 2005 that he knew, or was reckless in not knowing, contained materially false and misleading statements about RECOV’s share issuances. As alleged, Richard Verdiramo falsely represented in these filings that RECOV had issued shares of common stock without restrictive legends in conversion of convertible notes payable and that the company had received an opinion from counsel that the shares could be issued without restrictive legends. The Complaint alleges that, in fact, Richard Verdiramo knew that the share issuances were not in conversion of convertible notes payable and were not supported by an attorney opinion.
The Complaint also alleges that Richard Verdiramo made false statements in RECOV periodic reports regarding a large restricted stock issuance he made to himself in April 2005 and subsequently cancelled in September 2005. In addition, the Complaint alleges that Richard Verdiramo failed to file a Schedule 13D and Form 4 with the Commission regarding this issuance to conceal his seizure of control of RECOV.
The Complaint further alleges that Meyer, Chen, and Vincent Verdiramo all sold illegally issued shares of RECOV in unregistered, non-exempt transactions for proceeds of at least $220,000, $45,000, and $30,000, respectively.
Finally, the Complaint alleges that in August 2005, Meyer sold RECOV shares while in possession of material, non-public information about the status of RECOV’s merger negotiations with a private company for proceeds of more than $40,000 and avoided losses of approximately $14,000.
The Commission’s Complaint alleges that Richard Verdiramo violated Section 5(a) of the Securities Act of 1933 (Securities Act), Sections 10(b), 13(b)(5), 13(d) and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rules 10b-5, 13b2-1, 13d-1, 13d-2 and 16a-3 and that he aided and abetted RECOV’s violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13. The complaint alleges that Meyer violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Vincent Verdiramo aided and abetted his son’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, the complaint alleges that Vincent Verdiramo, Meyer, and Chen violated Section 5(a) of the Securities Act. The Commission’s complaint seeks a permanent injunction, an accounting, disgorgement of ill-gotten gains with prejudgment interest, civil monetary penalties, and a penny stock bar against each defendant. The Complaint also seeks penalties pursuant to the Insider Trading Sanctions Act of 1984 against Meyer, and an officer and director bar as to Richard Verdiramo.
Meyer was the subject of a previous Commission action, which he settled in May 2002, by consenting to a permanent injunction against violations of the anti-fraud, anti-touting, and registration provisions of the federal securities laws, among other sanctions. (SEC v. Vertucci, Straughn, Petry, Baughman, Johnson, Meyer, and Hazlet Investors, Inc., Litigation Release No. 17519, May 15, 2002).
See Also: SEC Complaint