Litigation Release No. 19882 / October 25, 2006

SEC v. U.S. Gas & Electric, Inc., et al., (U.S. District Court for the Southern District of Florida, Civil Action No. C-06-22440-CIV-LENARD (S.D. FL))

Federal Judge Permanently Enjoins U.S. Gas & Electric Inc., Donald E. Secunda, and Douglas W. Marcille

The Securities and Exchange Commission ("Commission") announced that the Honorable Joan A. Lenard, United States District Judge for the Southern District of Florida entered Final Judgments as to three of the Defendants in this case. Judge Lenard entered a Final Judgment as to Defendant Donald E. Secunda on October 3, 2006, an Amended Final Judgment as to Defendant U.S. Gas & Electric, Inc. ("U.S. Gas") on October 13, 2006 and a Final Judgment as to Defendant Douglas W. Marcille on October 23, 2006. Defendant U.S. Gas was enjoined from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 13a-1 and 13a-13 thereunder. The Court ordered disgorgement and prejudgment interest against U.S. Gas but waived payment of all but $167,000 and did not impose a civil penalty based on inability to pay. Defendant Secunda was enjoined from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and was ordered to pay disgorgement, prejudgment interest and a civil penalty in an amount to be determined later by the Court. Defendant Marcille was enjoined from future violations of Sections 5(a), 5(c), 17(a)(2) and 17(a)(3) of the Securities Act and was ordered to pay a civil penalty of $40,000. The Defendants consented to the entries of the judgments against them without admitting or denying any of the allegations of the Commission's Complaint.

The Complaint alleged that between March 2002 and August 2003 U.S. Gas, acting through Secunda, the company's former chief executive officer, Marcille, its then-chief financial officer, and co-defendants Larry Webman and Mel Webman, raised more than $6.8 million from investors in a series of unregistered offerings of securities. The defendants used a boiler room of telemarketers to offer and sell securities to approximately 180 investors throughout the United States, many of whom were senior citizens. The Commission's complaint alleged that U.S. Gas, Larry Webman, Mel Webman, and Secunda misrepresented to investors in two of the offerings that U.S. Gas would register an initial public offering and that its stock would trade publicly, which would result in generous returns for investors. In addition, they falsely represented to investors in three of the securities offerings that investors should expect to receive annual returns ranging from 25% to 50% for decades. Moreover, U.S. Gas, through Secunda, Marcille, and the Webmans, failed to disclose to investors that excessive commissions were being paid to the boiler room telemarketers out of the offering proceeds, and made misrepresentations to investors in one of the offerings regarding the amount of management fees that would be paid out. According to the complaint, co-defendant Mel Webman, with the help of Secunda and Larry Webman, also misappropriated monies raised in one of the offerings.

The Commission's complaint also alleged that U.S. Gas, Secunda and Marcille violated the registration provisions of the federal securities laws by failing to file registration statements in connection with the offerings. The complaint further alleged that U.S. Gas committed issuer reporting violations by failing to make required periodic filings with the Commission.

Litigation of the charges against Larry and Mel Webman in this matter continues.