SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17755 / September 30, 2002
DEFAULT JUDGMENT OF PERMANENT INJUNCTION ENTERED AGAINST PRINCIPALS OF DAYTONA BEACH BROKER RELATIONS FIRM WHO REAPED OVER $3.4 MILLION IN 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 September 13, 2002, a Default Judgment of Permanent Injunction and Other Relief ("Default Judgment") was entered against David S. Heredia ("Heredia"), 31, of Apopka, Florida and Raylen Parra ("Parra"), 24, of Orlando, Florida, by the United States District Court for the Middle District of Florida. Heredia and Parra were the principals of a now defunct broker relations firm Norrstar Advertising, Inc. ("Norrstar"), formerly located in Daytona Beach, Florida. The Default Judgment permanently enjoins Heredia and Parra from future violations of the antifraud and anti-touting provisions of the federal securities laws, orders them to pay disgorgement in the amount of $3,402,722, plus prejudgment interest thereon in the amount of $103,019.96, and imposes a third tier civil money penalty against them in the amount of $110,000 each.
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 alleged 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 alleged 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 alleged that Heredia and Parra also failed to disclose the compensation they received for their touting services.
As a result, the Commission charged 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. Heredia and Parra defaulted in the civil action by failing to appear, answer or otherwise plead in response to the Commission's Complaint. The District Court thereafter entered the Default judgment on substantial evidence submitted by the Commission proving the amount of ill-gotten gains reaped by Heredia and Parra as a result of their fraudulent conduct.