U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19941 / December 11, 2006
Securities and Exchange Commission v. U.S. Gas & Electric, Inc., et al., Case No. 06-22440-CIV-LENARD (S.D. FL)
Court Enters Default Judgments of Permanent Injunction Against Defendants Melvin Webman and Larry Webman
The Securities and Exchange Commission announced that on November 16, 2006, the Honorable Joan A. Lenard of the United States District Court for the Southern District of Florida entered default judgments of permanent injunction against Defendants Melvin Webman and Larry Webman. The Court found that the Webmans violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition, the Webmans are barred from participating in penny stock offerings. The Court reserved jurisdiction to determine upon the Commission's motion the amount of disgorgement, prejudgment interest and civil penalties the Webmans are liable to pay.
The Complaint alleged that U.S. Gas & Electric, Inc., through the Webmans and others 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 investors throughout the United States, many of whom were senior citizens. The Commission's complaint alleged that the Webmans and others 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, the Webmans and others, 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. The Webmans also misappropriated money raised in one of the offerings and acted as unregistered brokers of securities.