SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17390 / March 5, 2002
SEC ALLEGES FRAUD AGAINST PRINCIPALS OF DAYTONA BEACH BROKER RELATIONS FIRM THAT REAPED ILLEGAL PROFITS OF MORE THAN $3.4 MILLION IN CONNECTION WITH PUMP AND DUMP SCHEMES
SECURITIES AND EXCHANGE COMMISSION V. DAVID S. HEREDIA AND RAYLEN PARRA, Case No. 6:02-CV-218-ORL-19-JGG (M.D. Fla., filed Feb. 27, 2002)
The Securities and Exchange Commission ("SEC" or the "Commission") announced that on February 27, 2002 it filed a federal civil action against David S. Heredia ("Heredia"), 31, of Apopka, Florida and Raylen Parra ("Parra"), 24, of Orlando, Florida. Heredia and Parra were the principals of a now defunct broker relations firm Norrstar Advertising, Inc. ("Norrstar") located in Daytona Beach, Florida.
According to the SEC's complaint ("Complaint"), from approximately September 1998 to September 1999, at the direction and under the supervision of Heredia and Parra, Norrstar's staff of "broker relations executives" disseminated false and misleading information to the investment community concerning the stock of at least five public companies quoted on the Over-the-Counter Bulletin Board. The Complaint further alleges that the broker relations executives at Norstarr made hundreds of thousands of telephone calls to registered representatives of registered broker-dealers, and sent faxes of "bullet sheets" -- prepared by Heredia and Parra - making false and misleading material misrepresentations and omissions about the public companies touted. The Complaint also alleges that while touting the stock of the public companies, Norrstar's principals, Heredia and Parra, reaped illegal profits of more than $3.4 million by engaging in the practice of "scalping" -- selling the stock of the public companies they were simultaneously recommending to others to purchase. Finally, the Complaint alleges that Heredia and Parra also failed to disclose the compensation they received for their touting services.
As a result, the Commission charges Heredia and Parra with violations of Section 17(a) and 17(b) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is also seeking in its lawsuit a permanent injunction, disgorgement of ill-gotten profits and a civil money penalty against Heredia and Parra. The Commission wishes to thank the NASD and the Florida Office of the Comptroller, Division of Securities for their assistance in this matter.