Securities and Exchange Commission
Litigation Release No. 17854 / November 21, 2002
SEC v. Inorganic Recycling Corp., et al., (S.D.N.Y.) 99 CIV. 10159 (GEL)
The Securities and Exchange Commission ("Commission") announced that following a decision by the Honorable Gerard E. Lynch, United States District Court Judge for the Southern District of New York, the Commission's action in SEC V. Inorganic Recycling Corp., et al. (S.D.N.Y.) 99 Civ. 10159 (GEL), alleging securities fraud and other violations, has now been concluded.
On November 19, 2002, Judge Lynch granted the Commission's motion for an order requiring defendant Edward Halloran ("Halloran"), following his default earlier in the case, to disgorge his ill-gotten gains and pay a civil penalty for his violations. The court found Halloran jointly and severally liable with another defendant, Michelle Caridi ("Caridi"), for $1,042,292 in disgorgement, plus $487,535 in prejudgment interest, and imposed a $1 million civil penalty against Halloran. The court previously entered a partial final judgment on default against Halloran permanently enjoining him from violating the relevant registration and antifraud provisions of the federal securities laws, and barring him from serving as an officer or director of a public company.
On November 19, 2002, the Commission also withdrew its claims for disgorgement and a civil penalty against defendant Richard Furman ("Furman"). Newly obtained evidence showed that Furman did not retain or make use of any investor funds, but rather acted solely as a conduit for transferring funds to Halloran and Caridi. The funds that the Commission had previously sought to have Furman disgorge were included in the disgorgement amount that the Court ordered Halloran to pay. In a parallel criminal case brought by the New York County District Attorney's Office ("NYDA"), Furman was sentenced to twelve months in prison and paid $20,000 in restitution. The court previously entered a partial final consent judgment against Furman permanently enjoining him from violating the relevant registration and antifraud provisions.
The Commission's complaint was filed on September 30, 1999, alleging that from August 1995 to October 1997, defendants Halloran, Caridi, Daniel J. Moore ("Moore"), and Furman conducted a fraudulent offering of securities issued by defendant Inorganic Recycling Corp. ("Inorganic"), a hazardous waste recycling company based in Coral Springs, Florida. The complaint alleges that Caridi, Moore, Halloran and Furman made a series of material misrepresentations to investors, including, among other things, that the offering proceeds would be used for working capital when, in truth, the lion's share of the offering proceeds -- at least $1.6 million of $2.5 million raised from investors -- were misappropriated for the personal benefit of Halloran, Caridi, and Moore. The Commission has now obtained final judgments or otherwise resolved its claims against all the defendants.
On August 23, 2002, the court granted the Commission's motion for summary judgment against Caridi and Moore on the issues of disgorgement and civil penalties. The court ordered that Caridi pay $1,010,764 in disgorgement, plus $487,535 in prejudgment interest, and imposed a $100,000 civil penalty against Caridi. The court ordered Moore to pay $177,000 in disgorgement and $115,769 in prejudgment interest. The court previously entered partial final consent judgments against Caridi and Moore permanently enjoining them from violating the relevant registration and antifraud provisions, and barring them from serving as officers or directors of a public company.
On September 20, 2002, the Commission voluntarily dismissed its claims against defendant Inorganic, which has filed a petition under Chapter 7 of the United States Bankruptcy Code and is being liquidated. In the parallel criminal case brought by the NYDA, Inorganic contributed $450,000 to a restitution fund for victims of the fraud.
There are no other claims pending.