SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16980 / May 1, 2001
SECURITIES & EXCHANGE COMMISSION v. U.S. ENVIRONMENTAL, INC. ET AL.,
United States District Court for the Southern District of New York, Civil Action No. 94 Civ. 6608 (PLK)
The Securities and Exchange Commission announced today the settlement of claims against four defendants in this action, filed by Complaint on September 13, 1994, and Amended Complaint on October 23, 1995. These four defendants are:
- John Romano, age 39, resides in Fort Salonga, New York.
- Dudley M. Freeland, age 35, resides in Lakewood, California.
- Leslie Roth, age 43, resides in East Meadow, New York.
- Ernest Micciche, age 41, resides in Mount Laurel, New Jersey.
The Commission's Amended Complaint alleged a classic fraudulent blind pool offering, subsequent market manipulation and fraudulent sale of the underlying securities of U.S. Environmental, Inc. ("USE"), by broker- dealers who accepted undisclosed kickbacks from promoters in return for retailing the stock to unsuspecting customers. Without admitting or denying the allegations of the Amended Complaint, Romano, Freeland, Roth and Micciche consented to final judgments that imposed permanent injunctions and other equitable relief against them.
The Amended Complaint alleged that:
- Romano, as well as other defendants, manipulated the price of shares of common stock of U.S. Environmental, Inc. ("USE"), from $.05 to over $5.00 per share during the period from September through at least December 1989. During that period, defendant Castle Securities Corp. ("Castle") was the principal market maker, and Romano was the principal trader, of USE securities. Castle and Romano executed wash trades and matched orders while trading USE securities, and defendant Mark D'Onofrio and other defendants ("the D'Onofrio Group") provided Castle and Romano with guaranteed trading profits.
- Freeland was a Vice President and 25% shareholder of H.K. Freeland and Company, Inc. ("Freeland Co."), which received undisclosed compensation from the D'Onofrio Group for retailing shares of USE to Freeland Co.'s customers. Between January 1990 and September 1990, over 300 Freeland Co. customers purchased more than 200,000 shares of USE stock at prices ranging from approximately $4.25 to $7.25 per share. At no time during this period did Freeland or Freeland Co. disclose the existence of the undisclosed payments to Freeland Co.'s customers.
- Roth, as President of USE's predecessor Windfall Capital Corporation ("Windfall"), did not reveal in Windfall's Form S-18 Registration Statement that she was acting under the control of defendants Michael T. Studer ("Studer") and Castle Securities Corporation and that she had received payments from Studer.
- Micciche, as USE's Treasurer, caused USE to issue false and misleading statements, through press releases and filings with the Commission, that USE had a world-wide license for a detoxified hazardous waste process that was scientifically proven and commercially viable, and that USE was on the verge of entering two multimillion dollar contracts to use this process.
The final judgments permanently enjoin: 1) Romano, Freeland, Roth and Micciche from committing future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5; 2) Romano, Freeland and Micciche from committing future violations of Rules 101 and 102 of Regulation M; 3) Romano from committing future violations of Section 5(a) and 5(c) of the Securities Act; 4) Freeland from committing future violations of Section 15(c) of the Exchange Act and Rules 10b-3, 10b-5 and 15c1-2 thereunder; and 5) Micciche from causing future violations of Section 13(a) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Further, the final judgments require 1) Romano to disgorge gains and interest totaling $43,776; 2) Roth to disgorge gains and interest totaling $616; and 3) Micciche to disgorge gains and interest totaling $234,269, but waiving payment of such moneys based on Micciche's demonstrated inability to pay. The final judgment against Freeland does not order any disgorgement as Freeland previously disgorged all ill-gotten gains in the related action: SEC v. H. K. Freeland et al., 91 Civ. 7986 (S.D.N.Y.) (CSH). Finally, the final judgment against Micciche bars him from acting as an officer or director, for five years, of any issuer of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Romano and Freeland also consented to a Commission order imposing penny stock bars against Romano and Freeland, and barring Freeland from associating with any broker or dealer.
See prior releases ## 14233, 14233A & 14249.