U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22746 / July 9, 2013
Securities and Exchange Commission v. Stewart A. Merkin, Civil Action No. 1:11-cv-23585 (S.D. Fla.)
SEC Obtains Final Judgment Against Miami Attorney Stewart A. Merkin
On July 1, 2013, the Honorable Donald L. Graham, United States District Judge for the Southern District of Florida, signed the final judgment against defendant Stewart A. Merkin (“Merkin”) in a civil action originally filed on October 3, 2011. Merkin is an attorney in Miami, Florida.
The Commission brought a civil action against Merkin alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder. The Complaint alleged that on four occasions, Merkin, an experienced attorney, wrote letters falsely stating that his client, StratoComm Corporation (“StratoComm”), was not under investigation for violations of the securities laws. The Complaint further alleged that Merkin knew that his statements were false because, at the time that he wrote each letter, he was representing StratoComm and several individuals in the Commission’s investigation into the company’s activities. The Commission’s Complaint alleged that Merkin authorized his letters to be posted on the website maintained by Pink Sheets LLC (currently OTC Markets Group Inc.) for viewing by the investing public.
On October 3, 2012, the Court granted the Commission’s motion for summary judgment with respect to liability, finding that Merkin made false statements of material fact, with scienter, in connection with the purchase or sale of securities. Merkin subsequently consented to the entry of a final judgment that: (i) orders him liable to pay a total of $125,000 in disgorgement, prejudgment interest and a civil penalty; (ii) imposes a permanent injunction against future violations of Section 10(b) and Rule 10b-5 of the Exchange Act by making false or misleading statements; and (iii) permanently bars Merkin from participating in an offering of penny stock. In consenting to these remedies, Merkin retained his right to appeal from the Court’s ruling on summary judgment with respect to liability.
For further information, please see Litigation Release No. 22115 (October 6, 2011) [initial complaint filed].