Litigation Release No. 15904 / September 24 , 1998.
SEC SUES FLORIDA MICROCAP COMPANY AND OTHERS FOR CARRYING OUT "PUMP AND DUMP" SCHEME
Securities and Exchange Commission v. VII Visionary Investments, Inc. d/b/a Historic Hotel Holdings, Inc., Ronald Obsgarten, M&M Holding Group, Inc., Leandro Javier Obenauer, and Brian Lynch, Civil Action No. 98-8675-CIV-Middlebrook (S. D. Florida) (Miami Div.)
The Securities and Exchange Commission announced that today it filed a complaint in an offering fraud and "pump and dump" matter involving mostly South Florida defendants. The SEC filed its complaint in the U.S. District Court for the Southern District of Florida against VII Visionary Investments, Inc. d/b/a Historic Hotel Holdings, Inc., Ronald Obsgarten, M&M Holding Group, Inc., Leandro Javier Obenauer, and Brian Lynch and is seeking orders of permanent injunction, disgorgement, and civil money penalties. Obsgarten, 61 years old, is a resident of Boca Raton, Florida. Obsgarten is the President of HHH, which is located in Lake Park, Florida. Obenauer, 28 years old, is a resident of Lake Worth, Florida. Obenauer is the President of M&M, which is located in Delray Beach, Florida. Lynch, 22 years old, is a resident of Woburn, Massachusetts.
The SEC's complaint alleges that all defendants violated the antifraud provisions of the federal securities laws. The SEC's complaint also alleges, among other things, that Obenauer illegally sold unregistered securities, and that Obenauer, M&M, and Lynch illegally acted as broker-dealers without being registered with the SEC. The SEC simultaneously settled the case with Obenauer, M&M, and Lynch, all of whom consented to the entry of a permanent injunction and other relief, without admitting or denying the SEC's allegations.
The SEC's complaint alleges that in the summer of 1996, Obsgarten, who was the President of both a Delaware private corporation (VII Visionary Investments, Inc.) and a Florida "shell" corporation, purported to merge them. Subsequently, the purportedly merged corporation issued stock certificates in the name of Historic Harder Hall, Inc., which was the name of an unrelated corporation that owned the Historic Harder Hall hotel in Sebring, Florida. Between October 1996 and January 1997, HHH, Obsgarten, and Obenauer solicited investors to purchase HHH stock. During that period of time, HHH, Obsgarten, and Obenauer fraudulently offered and sold at least approximately $553,000 worth of HHH stock, which was not registered with the SEC, to investors. The SEC's complaint further alleges that, among other things, HHH, Obsgarten and Obenauer misrepresented to investors:
that HHH owned the Historic Harder Hall hotel;
that funds raised from investors would be used to renovate the hotel;
the status of the merger and HHH's corporate name; and
that a medical facility would be able to lease out hotel rooms before the
hotel even opened.
The SEC's complaint also alleges that HHH and Obsgarten issued false press releases concerning an oil and gas company that HHH claimed it had acquired. According to the SEC's complaint, HHH, Obsgarten, and Obenauers' misrepresentations artificially inflated the price of HHH's stock, which reached $4.12 per share during the height of publicity, but later dropped to $.05 per share. During this time period, the Complaint alleges that the Defendants sold their stock out to the investing public at the artificially inflated prices. HHH's stock was quoted on the OTC Bulletin Board until the SEC suspended trading in the stock on April 10, 1997.
The SEC's complaint further alleges that from approximately January to June 1997, Obenauer, Lynch, and M&M solicited investors to purchase stock in Futuristic Enterprises, Inc., which planned to build high priced condominiums near West Palm Beach, Florida. Obenauer, Lynch, M&M, and others fraudulently offered and sold the Company's stock. During the course of telephone calls soliciting investors, Obenauer, Lynch, and M&M misrepresented that the Company already owned the land upon which it planned to build the condominiums and that it had obtained a construction loan. At least some of the stock certificates that Obenauer, Lynch, and M&M delivered to investors were fictitious; Obenauer, with Lynch's knowledge, created the stock certificates and kept for himself the funds he raised from investors.
Obenauer, M&M and Lynch consented to the entry of orders enjoining them from future violations of section 17(a) of the Securities Act, section 10(b) and 15(a)(1) of the Exchange Act and rule 10b-5 thereunder. Obenauer also consented to be enjoined from future violations of section 5(a) and 5(c) of the Securities Act.
The SEC thanks the Florida State Comptroller's Department of Banking and Finance for the assistance it provided in connection with the investigation leading to this action.
This enforcement action is one of several cases filed in an effort to address abuses in the offer and sale of microcap stocks. It is also part of the Commission's four-pronged approach to minimizing microcap fraud: enforcement, inspections, investor education and regulation. For more information about the SEC's response to microcap fraud, visit the SEC's Microcap Fraud Information Center at http://www.sec.gov/news/extra/microcap.htm.