Securities and Exchange Commission

Litigation Release No. 16411 / January 18, 2000

Securities and Exchange Commission v. Golf Emporium Corporation and Frederick Tropeano, 99 Civ. 10259 (JSR)(S.D.N.Y.)

The Commission announced today that on January 6, 2000 the United States District Court for the Southern District of New York entered a Partial Final Judgment By Default Against Defendant Golf Emporium Corporation ("Golf"). The Partial Final Judgment permanently enjoins Golf from further violations of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and orders the continuation of the asset freeze and other preliminary relief, ordered by the Court on November 3, 1999, until an amount of disgorgement of Golf's ill-gotten gains plus pre-judgment interest may be determined.

The Partial Final Judgment arises from a Complaint filed by the Commission on October 5, 1999, in which the Commission alleged that since at least January 1998, Golf and its president, Frederick Tropeano, obtained at least $640,000 by using material misrepresentations to induce investors – many of whom are elderly – to buy Golf common stock. The Complaint alleges that Defendants Golf and Tropeano, directly and through salespeople under their control, fraudulently offered and sold Golf stock misrepresenting, among other things, that the price of Golf stock would appreciate to at least three times the "private placement" price following a purported imminent initial public offering of Golf stock. The money obtained from investors has been frozen by court order throughout the litigation. Golf failed to answer, plead, or otherwise respond to the Commission's Complaint. The litigation is pending as to Tropeano.

The Commission also announced today that on December 27, 1999 it filed an Amended Complaint in this matter in the United States District Court for the Southern District of New York to add allegations that Golf and Tropeano made misstatements of material facts in the private placement memorandum for Golf's common stock ("PPM"), received by a majority of Golf investors, in violation of Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5. Specifically, the Commission alleges that the PPM misrepresents Golf's financial condition, its management and advisors, and the use of the proceeds of its stock offering. The Commission also alleges that, since the filing of its Complaint on October 5, 1999, it has discovered that a total of $4,860,642 has been raised by Golf through the sale of its stock to at least 193 – mostly elderly – investors in its purported private placement.