U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23572 / June 17, 2016
Securities and Exchange Commission, Plaintiff-Appellee v. StratoComm Corporation, Roger D. Shearer, Defendants-Appellants, United States Court of Appeals for the Second Circuit, Appeal No. 15-1538/15-1695
Securities and Exchange Commission v. StratoComm Corporation, et al., Civil Action No. 1:11-CV-1188 (N.D.N.Y.)
Court of Appeals Affirms Summary Judgment Against Stratocomm Corporation and Roger D. Shearer
On June 16, 2016, the United States Court of Appeals for the Second Circuit affirmed entry of summary judgment in favor of the Securities and Exchange Commission (SEC) on its claims against StratoComm Corporation and Roger D. Shearer in a penny stock fraud case.
On October 4, 2011, the SEC filed a complaint in the United States District Court for the Northern District of New York charging StratoComm Corporation, its CEO Roger D. Shearer, and another defendant with violating the antifraud provisions of the securities laws and with illegally selling securities in unregistered transactions. The complaint alleged that StratoComm, acting at Shearer's direction and with another defendant's assistance, issued and distributed public statements falsely portraying the company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no products and no revenue.
The SEC's complaint charged StratoComm with 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 and Rule 10b-5 thereunder. It charged Shearer with violations of Sections 5(a) and 5(c) of the Securities Act, aiding and abetting StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and with being liable as a control person for StratoComm's violations.
On February 19, 2014, the District Court granted the SEC's motion for summary judgment on liability against all defendants on all charges against them. On March 26, 2015, the District Court entered an amended judgment against all defendants. With respect to defendants StratoComm and Shearer, the judgment: (i) ordered them to pay a total of $4,968,709.68 in disgorgement and prejudgment interest; (ii) ordered Stratocomm and Shearer to pay a civil penalty in the amount of $100,000 and $50,000, respectively; (iii) imposed permanent injunctions; and (iv) imposed a permanent penny stock bar and a permanent officer and director bar against Shearer.