U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16316 / September 30, 1999
SECURITIES AND EXCHANGE COMMISSION v. ROBERT J. DALTON, JAMES L. MASINI, AND GEORGE J. BODLAK, Civil Action No. 99-09826 RAP (AJWx)(C.D. Cal.)
SEC SUES THREE WORM FARM EXECUTIVES FOR FRAUD
The SEC today filed civil fraud charges in Los Angeles against three worm farm executives for fraudulently offering securities. The complaint alleges that the defendants employed telemarketers who told investors that an investment in a Riverside County, California worm farming operation would make a 25-100% annual profit from the sale of worms and worm castings. Instead, sales of worms and worm castings failed to make a profit and investor returns were paid with other investors' money in a Ponzi-like scheme. Moreover, the complaint alleges that the defendants misused 52% of the money raised to fund further sales of securities rather than using the money to pay for worm farm operations. More than 250 investors nationwide invested a total of approximately $8.5 million between March 1995 and June 1998.
The defendants are:
The Complaint alleges that Dalton, Masini, and Bodlak variously violated the securities registration provisions (Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act")), antifraud provisions (Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder); and broker-dealer registration provision (Section 15(a) of the Exchange Act). The Commission seeks disgorgement and penalties from the three defendants.
Simultaneously with the filing of the Complaint, Bodlak consented, without admitting or denying the allegations in the Complaint, to a permanent injunction against future violations of the antifraud provisions, disgorgement in the amount of $6,500, plus prejudgment interest, and a civil penalty in the amount of $6,500.