United States Securities and Exchange Commission
Litigation Release No. 18054 / March 31, 2003
Accounting and Auditing Enforcement Release No. 1753 / March 31, 2003
Securities and Exchange Commission v. Eagle Building Technologies, Inc. and Anthony Damato, No. (D.D.C. 1:02CV00397 ESH)
DC Court Orders Damato to Give Up Trading Profits and Shares
The Securities and Exchange Commission announces that on March 10, 2003, the United States District Court for the District of Columbia ordered Anthony M. Damato, the former president and chief executive officer of Eagle Building Technologies, Inc., a company located in Boca Raton, Florida, to disgorge trading profits from his sales of Eagle Building stock in the amount of $56,263 plus prejudgment interest of $5,637, and to cancel 286,500 shares of stock he received as compensation for acting as an officer and director of the company. Damato agreed to give up an additional 81,242 shares to satisfy the requirement that he repay his trading profits and prejudgment interest. Damato consented to the order without admitting or denying the allegations in the Commission's complaint.
Damato previously consented to entry of a permanent injunction on October 22, 2002 that prohibits him from making false statements in press releases and reports made to the SEC, creating false business records, and providing false information to the company's auditors in violation of the anti-fraud, periodic reporting and internal record-keeping provisions of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13b2-1, and 13b2-2, and aiding and abetting Eagle Building's violations of Section 13(a) and 13(b)(2) of the Exchange Act and Rules 13a-1 and 13a-13. The SEC alleged that Damato created false purchase orders and bank records for business supposedly conducted by the company in India, which he then provided to accountants to inflate the revenues reported by the company in its annual and quarterly reports filed with the SEC, and false press releases that were distributed to the investing public. Damato sold stock during the time period when the false press releases and false reports were circulated to the investing public and made profits of $56,263. The district court also barred Mr. Damato from acting as an officer or director of any public company. Mr. Damato consented to entry of the permanent injunction without admitting or denying the allegations of the Commission's complaint, which was filed against him on March 1, 2002.
The Commission alleged in its complaint that Damato, as the president and chief executive officer of Eagle Building Technologies Inc., and the company engaged in a massive financial fraud by falsely recognizing millions of dollars of non-existent revenue from Eagle Building's purported sales of cement building blocks through its foreign operations in India. This revenue, which was reported in the company's annual report for 2000 filed with the SEC on Form 10-K and its quarterly reports filed on Forms 10-Q for the first three quarters of 2001, was almost completely fictitious, according to the complaint. The Commission alleged that Damato created false purchase orders and bank records to create the appearance of foreign transactions, which he then provided to the company's accountants. Additionally, the complaint asserts that Damato and the company issued three false and misleading press releases after September 11, 2001 touting anti-terrorism security measures marketed by Eagle that capitalized on the public's anxiety post-September 11.
The district court previously entered a permanent injunction against Eagle Building on May 20, 2002, based on the consent of the company in which it neither admitted nor denied the allegations of the complaint. The order prohibits the company from violating the anti-fraud, periodic reporting and internal record keeping provisions of the federal securities laws.
On February 15, 2002, the Commission suspended trading in the securities of Eagle Building Technologies Inc. (symbol "EGBT") for ten days to allow the investing public to obtain accurate information about the company. At that time, the company's stock was trading on the Over-The-Counter Bulletin Board System (OTCBB). On February 28, 2002, the National Association of Securities Dealers delisted the securities of Eagle Building from trading on the OTCBB.