SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. LR-16788 / November 2, 2000
SECURITIES AND EXCHANGE COMMISSION V. ELLIOT LAVIGNE, 00-CV-6024 (E.D.N.Y.)
The Securities and Exchange Commission filed a civil injunctive action on November 2, 2000 in the United States District Court for the Eastern District of New York against Elliot Lavigne, formerly the Chairman of the Perry Ellis Division of Salant Corp., Executive Vice President of Marketing at Salant Corp., Chief Operating Officer of Donna Karan Jeanswear (when it was a division of Designer Holdings), and Chief Executive Officer of Jordache Enterprises. The Commission alleged that Lavigne violated the federal securities laws by participating in the manipulation of twenty-three initial public offerings (IPOs) underwritten by Stratton Oakmont, Inc. (Stratton) over a five-year period. The United States Attorney's Office for the Eastern District of New York has also filed related criminal charges against Lavigne.
The Commission's Complaint alleges as follows:
From 1991 through 1995, Lavigne was a key participant in a series of manipulations orchestrated by Stratton, obtaining illicit profits totaling at least $7.4 million for his role in the frauds. Lavigne had a secret agreement with one of Stratton's principals, Jordan Belfort (Belfort), by which Lavigne would make illegal trades and the two men would split Lavigne's profits. Lavigne paid Belfort his share of the profits by delivering large sums of cash to Belfort.
Stratton was the quintessential "boiler room," and the manipulations followed a standard formula. Stratton gained control over the float of each stock by issuing allocations of IPO stock to persons with whom Stratton had entered into secret agreements to serve as "nominees." The nominees received their stock with the understanding that they would sell the stock back to Stratton shortly after trading had commenced in the aftermarket. Stratton would then manipulate the price of the stock up to artificially inflated levels, and earn huge profits by using high-pressure sales tactics to sell the stock to their own customers. Lavigne acted as a nominee in twenty-three of the manipulations, and earned over $7.2 million in total profits by selling his stock back to Stratton.
In one of the Stratton IPO manipulations in which Lavigne served as a nominee, he also received bridge units in exchange for a bridge loan he had made to the issuer. According to the prospectus filed by the issuer, the bridge units were subject to a lock-up agreement prohibiting Lavigne from selling the units for at least thirteen months after the IPO without the underwriter's permission. However, Lavigne entered into a secret agreement with Stratton that was contrary to the representations made in the prospectus. Pursuant to this secret deal, Lavigne was released from the lock-up agreement shortly after trading had commenced in the aftermarket. Lavigne then sold his shares back to Stratton, earning over $200,000 more in illegal profits.
As a result of this conduct, the Commission alleges that Lavigne violated Section 17(a) of the Securities Act of 1933, Section 10(b) and of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Commission seeks an order barring Lavigne from serving as an officer or director of a public company, permanent injunctive relief, disgorgement of ill-gotten gains, civil money penalties, and other relief.
The Commission acknowledges the assistance of the United States Attorney's Office for the Eastern District of New York in the investigation of this matter.