U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16588/ June 14, 2000
SECURITIES AND EXCHANGE COMMISSION v. BRUCE M. FOLLICK, DONALD BROOKS, KARL E. DONOVAN, AARON J. SANDSTROM, DEREK H. SHAPIRO, a/k/a DAVID SHAPIRO, SALVATORE A. TAVOLACCI, FREDERICK W. WALL, FIRST FIDELITY FINANCIAL CORP., EXCHANGE ONLINE, INC., FIRST FIDELITY EQUITIES, INC., AMERIVEST ONLINE, INC., FIRST COMMERCE CORP., and FIRST FIDELITY INVESTMENT MANAGEMENT, INC., U.S. District Court, S.D.N.Y., No. 00 CIV. 4385 (KMW)
The Securities and Exchange Commission today charged seven brokers and five issuers in a phony private placement scheme that defrauded at least 300 investors out of approximately $2.7 million. Simultaneously, the United States Attorney for the Southern District of New York announced criminal indictments of these defendants, and others, based upon the same underlying conduct. The Commission also charged the seven brokers and a sixth entity with acting as unregistered brokers.
Named in the Commission's Complaint filed in the U.S. District Court for the Southern District of New York are:
The Complaint alleges as follows:
From April 1997 through at least July 1999, the defendants, in various combinations, raised at least $2.7 million through five fraudulent offerings of securities. The offerings were conducted in typical boiler-room style. Unregistered salespeople, working from various offices in lower Manhattan, cold-called investors using a high-pressure sales pitch that included numerous material misrepresentations and omissions. The defendants used mail drops and telephone forwarding services so that investors would not know their actual location. The unregistered salespeople were paid undisclosed cash commissions of approximately thirty percent.
Among the misrepresentations and omissions used by the defendants to induce investors to part with their savings were the following:
The sales of First Fidelity Financial, Exchange Online, First Fidelity Equities, Amerivest and First Commerce stock violated the antifraud provisions of the Securities Act of 1933 ("Securities Act") and the Securities Exchange Act of 1934 ("Exchange Act"). Specifically, the Complaint charges the defendants, other than First Fidelity Investment Management, with violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint also charges Follick, Brooks, Donovan, Sandstrom, Shapiro, Tavolacci, Wall, and First Fidelity Investment Management with violations of the broker-dealer registration provisions, Section 15(a) of the Exchange Act. The Commission seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, civil monetary penalties against all of the defendants, and officer and director bars against the individual defendants.
The Commission acknowledges the valuable assistance of the United States Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation in bringing this case.http://www.sec.gov/litigation/litreleases/lr16588.htm