UNITED STATES SECURITIES AND EXCHANGE
Litigation Release No. 16597 \ June 19, 2000
SECURITIES AND EXCHANGE COMMISSION V. UNIVERSE, INC. ET AL.
Simultaneously, the U.S. Attorney for the Eastern District of New York announced the filing of criminal complaints against seven defendants. The U.S. Attorney's Office had previously arrested Lawrence Burton and Jeffery Blocker.
The Commission's complaint named the following defendants:
UniVerse , a Wyoming corporation that maintains its offices in San Clemente, California. UniVerse was the successor corporation to VikingWare, following a merger in August 1997.
Richard Fenning, a 44-year-old resident of San Clemente, California, who was the Chief Executive Office ("CEO") of VikingWare and is the President of UniVerse.
Susan Richards, a 43-year-old resident of Mission Viejo, California who was the President of VikingWare and is the CEO of UniVerse.
John Richards, a 38-year-old resident of Mission Viejo, California and husband of Susan Richards, who was the Chief Financial Officer of VikingWare and the Chief Operating Officer of UniVerse until September 1999.
Lawrence Burton, a 36-year-old resident of North Patchogue, New York.
Jeffery Blocker, a 35-year-old resident of Islip, New York.
Third Tier Marketing Corp., a New York corporation controlled by Burton and Blocker that maintained its headquarters in Hauppauge, New York.
Robert Hasho, a 41-year-old resident of St. James, New York. Hasho was previously enjoined from violating the antifraud provisions of the federal securities laws, and the Commission previously barred Hasho from association with a broker, dealer, investment company, investment adviser or municipal securities dealer.
Landmark Corp., a New York corporation owned and controlled by Hasho that maintained its headquarters in Northport, New York.
Danoo Noor, a 29-year-old resident of Ozone Park, New York, who was a registered representative.
Howard Toomer, a 38-year-old resident of Brentwood, New York.
Toomer & Associates, a Delaware corporation owned and controlled by Toomer that maintained its headquarters in Hauppauge, New York.
Tore Larson, a resident of Middletown, New York.
Fiberlinks, Inc., a New York corporation owned and controlled by Larson that maintains its headquarters in Middletown, New York.
The key elements of the fraudulent scheme alleged in the complaint are as follows:
Specifically, the Complaint alleges the following. Between June 1996 and August 1997, VikingWare raised approximately $2.3 million from over 50 investors through the sale of unregistered securities. Between September 1997 and April 1999, UniVerse raised approximately $1.6 million from over 50 investors through the sale of unregistered stock.
In connection with the VikingWare and UniVerse offerings, Fenning and the Richards created and distributed private placement memoranda ("PPMs") that contained false and misleading information. For instance, the PPMs materially understated the amount of compensation to be paid to persons who sold the VikingWare and UniVerse securities to investors. Specifically, the VikingWare PPM provided that the company intended to engage salespersons to assist in the VikingWare offering, and that the aggregate compensation paid to salespersons would not exceed 10 to 12 percent of the gross proceeds of the offering. In fact, Fenning and the Richards paid commissions of 42½ to 47 percent to salespersons for their sales of VikingWare units to investors. Burton, Blocker, Third Tier, Hasho, Landmark, and Toomer, who were not registered brokers, as well as Noor, who was a registered representative, then sold VikingWare units to investors, but they never disclosed to their customers that VikingWare paid them commissions of 42.5 to 47 percent to sell these securities. Similarly, the UniVerse PPM stated that the aggregate compensation to be paid to salespersons would not exceed 10 to 15 percent of the gross proceeds of the offering. In fact, Fenning and the Richards paid 40 percent commissions to salespersons who sold UniVerse stock, including Toomer, Toomer and Assoc., Larson and Fiberlinks, who did not then disclose these commissions to their customers.
In its complaint, the Commission charged that all of the defendants violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. Additionally, the Commission charged Burton, Blocker, Third Tier, Toomer, Toomer & Assoc., Larsen and Fiberlinks with violating Section 15(a) of the Exchange Act, and Fenning and S. Richards with aiding and abetting violations of Section 15(a) of the Exchange Act. The Complaint seeks: (1) permanent injunctive relief against defendants Universe, Fenning, S. Richards, J. Richards, Blocker, Burton, Third Tier, Hasho, Landmark, Toomer, Toomer & Assoc., Larsen, Fiberlinks and Noor; (2) an order requiring Hasho to comply with the Commission's order that barred him from association with a broker or dealer; (3) disgorgement and prejudgment interest from Burton, Blocker, Third Tier, Hasho, Landmark, Noor, Toomer, Toomer & Assoc., Larsen, and Fiberlinks; and (4) civil penalties from Fenning, S. Richards, J. Richards, Burton, Blocker, Third Tier, Hasho Landmark, Noor, Toomer, Toomer & Assoc., Larsen, and Fiberlinks.http://www.sec.gov/litigation/litreleases/lr16597.htm