U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18859 / August 27, 2004
Securities and Exchange Commission v. George Carapella and Alan S. Lipstein, Case No. 8:04-CV-01858-T-23MSS (M.D. Fla.) (August 12, 2004)
SEC SUES RECIDIVIST SECURITIES LAW VIOLATORS, ALLEGES FRAUD AND VIOLATIONS OF ADMINISTRATIVE PENNY STOCK BARS
The Securities and Exchange Commission ("Commission") announced that on August 12, 2004, it filed an emergency federal civil action against George Carapella and Alan S. Lipstein (collectively the "defendants") for illegally participating in penny stock offerings and committing securities fraud in violation of prior injunctions and Commission orders barring them from such activities.
The Commission's action includes a civil complaint and also a contempt motion against the defendants for violating permanent injunctions entered against them in SEC v. Tel-One, Inc. et al., Civil Action 8:02-120-T-30TGW (M.D. Fla. 2002), in which the Commission alleged that Carapella and Lipstein orchestrated a pump-and-dump fraud involving the common stock of Tel-One, a Tampa, Florida company. Following the entry of the injunctions, the Commission entered administrative orders in July 2002, on consent, that barred Carapella and Lipstein from participating in offerings of penny stocks.
The Commission's most recent complaint, filed in the United States District Court for the Middle District of Florida, alleges that despite the entry of those prior orders, the defendants participated in a penny stock offering in late 2003 and early 2004 by attempting to merge a Florida company they control with a private cellular telephone retailer and take the newly-created company public through a reverse merger or an initial public offering. According to the Commission's complaint, the defendants fraudulently represented themselves as experienced consultants who had successfully taken companies public and concealed their history of criminal convictions, securities law violations, and enforcement actions against them.
The Commission also alleges that Carapella and Lipstein currently control a Nevada shell company and are violating the Commission's penny stock bars by actively seeking a company to merge into that shell.
The Commission's complaint charges the defendants with violating Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, and with participating in penny stock offerings in violation of Section 15(b)(6)(B)(i) of the Securities Exchange Act of 1934. In addition to emergency relief, the complaint seeks permanent injunctions prohibiting future violations of the securities laws, civil penalties, personal trading bans, and judicial penny stock bars.
The SEC also filed a contempt motion against Carapella and Lipstein for disobeying a prior final judgment of permanent injunction entered against them on July 12, 2002 in SEC v. Tel-One, Inc., et al. Among other things, those prior injunctions enjoined Carapella and Lipstein from violating the antifraud provisions of the federal securities laws.