Paul Skulsky, et al.

Litigation Release No. 17558 / June 12, 2002

SEC v. Paul Skulsky, et al., No. CV-02-1524 (E.D.N.Y.) (DRH)

JUDGMENTS ENTERED AGAINST FIVE DEFENDANTS IN FINANCIAL
FRAUD CASE CONCERNING APPONLINE.COM, INC.

The Commission announced that on May 21, 2002 the Honorable Denis R. Hurley of the United States District Court for the Eastern District of New York entered partial final judgments with respect to five defendants named in the Commission's action alleging financial reporting fraud involving AppOnline.com, Inc. ("AppOnline"), a now bankrupt Melville, New York mortgage bank.

The Court entered partial judgments against defendants Paul Skulsky, Jeffrey Skulsky, Edward Capuano ("Capuano"), Cindy Eisele ("Eisele") and Joseph Casuccio ("Casuccio"), all of whom consented to the entry of the judgments, without admitting or denying the allegations in the Commission's complaint.

The judgments permanently enjoin Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, and Casuccio from further violations of Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a), 13(b), 13(b)(5) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, 13b2-1, and 13a-13 thereunder. In addition, the judgments bar Paul Skulsky, Jeffrey Skulsky, and Capuano from acting as an officer or director of a public company.

Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele and Casuccio have all entered guilty pleas to various criminal charges arising out of the same conduct identified in the Commission's complaint. Additional relief sought in the Commission's complaint is deferred until completion of the criminal proceedings now pending against these defendants in the United States District Court for the Eastern District of New York.

The Commission's complaint, filed on March 12, 2002, alleges that, from May 1997 through June 2000, AppOnline engaged in two simultaneous schemes to defraud AppOnline's public investors. First, AppOnline diverted at least $60 million AppOnline's lenders had advanced to fund specific mortgage loans and used those funds to pay AppOnline's operating expenses. To conceal the misappropriation, AppOnline prepared false and misleading financial reports that were filed with the Commission. Second, AppOnline manipulated the public market for its stock by paying bribes in exchange for three brokerage firms recommending the purchase of AppOnline stock to their retail customers.

The Commission's complaint alleges that Paul Skulsky (a former de facto officer and control person of AppOnline), Jeffrey Skulsky (AppOnline's former president and a director), Capuano (AppOnline's former Chief Executive Officer), Eisele (AppOnline's former Chief Financial Officer) and Casuccio (the audit partner for the audit of AppOnline's December 31, 1997 and 1998 financial statements) participated in AppOnline's financial reporting fraud.

The Commission continues to prosecute the litigation against the remaining defendants. [SEC v. Paul Skulsky, et al., No. CV-02-1524 (E.D.N.Y.) (DRH)] (LR-17407).