SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16875 / January 30, 2001
Securities and Exchange Commission v. Barry J. Goodman et al.(United States District Court for the District of Massachusetts C.A. No. 01 CV 10163-JLT)
SEC Brings Action Against Massachusetts Investment Adviser for Defrauding Clients of $800,000 in Fictitious lPO Pool and Arbitrage Schemes
The Securities and Exchange Commission ("Commission") announced today the filing of a civil fraud action in federal court against Barry J. Goodman of North Andover, Massachusetts, and his company New England Capital Advisory Group, LLC, of Beverly, Massachusetts, based upon allegations that Goodman defrauded clients of at least $800,000 by soliciting investments in a non-existent AIPO pool," and an Aarbitrage" opportunity. The Commission alleged that, beginning in February 2000, Goodman, a former broker who is currently operating as an unregistered investment adviser, obtained $500,000 from investors by falsely claiming that he had a special relationship with five investment banks through which he would obtain stock in initial public offerings and sell the IPO shares immediately for a profit. Goodman then allegedly collected an additional $300,000 in a second scheme, in which he falsely represented that investor fund would be used in an arbitrage program buying stock in Lycos, Inc. Goodman´s scheme was an affinity fraud targeting individuals of Middle Eastern descent.
The Commission´s complaint alleges that, after receiving investors´ funds, Goodman repeatedly represented that the IPO pool had purchased shares in specific IPOs and sold them at an overall profit of over 40%. In fact, however, according to the Commission´s complaint, neither Goodman nor New England Capital ever had accounts at any of the investment banks and never purchased IPO shares in any of the companies he identified. Instead, Goodman allegedly used most of the investor funds from both the IPO pool and Lycos schemes for his personal benefit, transferring them to his personal bank account, making payments to third parties, and losing the rest in risky daytrading. The complaint further alleges that in order to transfer investor funds to his own use, Goodman forged the signature of his former partner on written instructions to the bank where investor funds had been placed in a New England Capital account.
The Commission´s complaint alleges that Goodman and New England Capital violated the antifraud provisions of the federal securities laws, including Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks injunctive relief, disgorgement of Goodman´s ill-gotten gains and civil monetary penalties.