SECURITIES AND EXCHANGE COMMISSION
Litigation Release No.17025 / June 5, 2001
Securities and Exchange Commission v. David J. Naughton, et al., Civil Action No. 00-07531 R (Ex) (C.D. Cal.)
On May 31, 2001, the Honorable Manuel L. Real, United States District Judge for the Central District of California, entered a Final Judgment against Charles F. Hagemann, a former salesperson employed by Papa Holdings, Inc., concluding the Commission's litigation in this matter. Hagemann, without admitting or denying the allegations in the Commission's complaint, consented to the entry of the Final Judgment which permanently enjoins Hagemann from future violations of the securities registration, antifraud and broker-dealer registration provisions of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Although the Final Judgment also orders Hagemann to pay $53,685 in disgorgement, all but $25,000 was waived and a civil penalty was not assessed based upon Hagemann's demonstrated inability to pay.
The Commission's complaint alleged that Hagemann failed to disclose the actual commissions paid to him in connection with his sales of the unregistered securities of two restaurant subsidiaries controlled by Papa Holdings: Ponzu V, Inc. and Ponzu VI, Inc. Papa Holdings and its restaurant subsidiaries, operating out of offices in Woodland Hills, California, raised over $21 million from approximately 1,300 investors nationwide from November 1995 to January 1999. The restaurant subsidiaries each raised money purportedly to open a "Papashon" or "Papashon Express" restaurant, but instead used the money to pay undisclosed commissions and pay for losses incurred by existing Papashon restaurants. None of the restaurant subsidiaries ever opened a restaurant and, due to their losses, existing Papashon restaurants in Pasadena, Beverly Hills, Encino and Long Beach, California, each closed in 1999.
For additional information, see Litigation Release Nos. 16141 (May 13, 1999), 16470 (March 16, 2000), 16624 (July 12, 2000), 16976 (April 26, 2001), and 17009 (May 17, 2001).http://www.sec.gov/litigation/litreleases/lr17025.htm