SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17525 / May 21, 2002
SEC v. INVESTCO, INC., JOSEPH L. LENTS, FIRST INTERNATIONAL FINANCE CORPORATION, MICHAEL E. ZAPETIS, BRIAN E. BAGINSKI, ELECTRONIC COMMERCE CONSULTANTS, INC., ANTHONY V. YONADI, AND SOUTHEAST CAPITAL PARTNERS, INC., U.S. District Court for the Southern District of Florida, Civil Action No. 02-80466 (Hurley, J.)
On May 20, 2002, the Commission obtained a Temporary Restraining Order (TRO) from the United States District Court for the Southern District of Florida, temporarily restraining Investco, Inc. (Investco), Joseph L. Lents (Lents), Brian E. Baginski (Baginski), Electronic Commerce Consultants, Inc. (ECC), Anthony V. Yonadi (Yonadi), and Southeast Capital Partners, Inc. (Southeast Capital) from violating the anti-fraud and registration provisions of the federal securities laws. The TRO also temporarily restrains First International Finance Corporation (FIFC) and Michael E. Zapetis (Zapetis) from violating the anti-fraud provisions of the federal securities laws. The Court also entered orders freezing the assets of Lents, Baginski, ECC, Yonadi and Southeast Capital, requiring Lents to repatriate assets, requiring the defendants to give an accounting, prohibiting document destruction and permitting expedited discovery.
In its Complaint, the Commission alleged that the defendants, from December 2001 through the filing of the Complaint, engaged in a scheme to manipulate the price of Investco's common stock. Investco's stock was quoted on the OTC Bulletin Board until the Commission suspended trading on April 29, 2002. The Complaint alleged that, in November 2001, Lents e-mailed Zapetis a blueprint of a scheme to manipulate the stock of public companies by obtaining shares pursuant to S-8 registration statements, then using Lents' "network" and news releases about asset infusions by companies controlled by Zapetis to drive up the stock price of the public company. The Complaint further alleged that Lents, with the knowing and substantial assistance of Zapetis and FIFC, followed this blueprint with Investco. The Commission alleged that Lents obtained 500,000 shares of Investco stock subject to a Form S-8 registration and issued numerous press releases that made false and misleading statements about Investco's assets, operations and business combinations. According to the Complaint, Investco's press releases concerning Investco's acquisition of $15 million worth of a NASDAQ stock, its acquisition of a Costa Rican insurance company with purportedly $100 million worth of assets and FIFC's $10 million cash tender offer for Investco stock, were all false. The Complaint also alleged that Lents knew Investco's press releases were false and misleading, and yet actively sold into the demand for Investco stock created by the press releases. Further, the Complaint alleged that Lents distributed Investco stock through others, including Baginski and ECC. The Commission alleged also that Baginski arranged with Yonadi to simulate demand for Investco stock by placing buy orders, through Southeast Capital, at prices above the quoted bid. According to the Complaint, Lents, Baginski, ECC, Yonadi and Southeast Capital obtained ill-gotten gains from the manipulative scheme.
The complaint alleged that, by the above conduct, Investco, Lents, Baginski, ECC, Yonadi, and Southeast Capital violated and are violating Section 5 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 thereunder. Investco and Lents, the Complaint alleged, have also violated Section 17(a) of the Securities Act. The complaint alleged FIFC and Zapetis aided and abetted the violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
In its Complaint, apart from emergency relief, the Commission seeks preliminary and permanent injunctive relief, disgorgement, civil penalties, and an order barring Lents from serving as officer or director of a public company.