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U.S. Securities and Exchange Commission


Litigation Release No. 18860 / August 30, 2004

SEC v. Kimberly J. Carrella, et al., CV-04-3754 (LDW) (E.D.N.Y.)


The Securities and Exchange Commission today filed a complaint in the U.S. District Court for the Eastern District of New York against former employees of Kimberly Securities, Inc. a broker-dealer that was located on Long Island, New York. The complaint alleges that from early 2000 through September 2002, Kimberly Securities registered representatives, or brokers, participated in a scheme to defraud their customers by repeatedly executing unauthorized, unsuitable transactions in their customers' accounts, and churning these customers' accounts.

The complaint names the following defendants:

  • Kimberly J. Carrella, age 29, is a resident of Bellport, New York. Kimberly Carrella was a registered principal of Kimberly Securities, as well as its President, Secretary, and Treasurer. Kimberly Carrella also worked as a registered representative.
  • Vincent M. Carrella, age 38, is a resident of Bellport, New York, and is Kimberly Carrella's husband.
  • James R. Mancuso, age 35, is a resident of Patchogue, New York. Mancuso worked as a registered representative at Kimberly Securities.
  • Kevin J. Barton, age 23, is a resident of East Hampton, New York. Barton worked as a registered representative at Kimberly Securities.
  • Philip J. Hourican, age 37, is a resident of North Babylon, New York. Hourican worked as a registered representative at Kimberly Securities.
  • Noel J. Belmonte, age 34, is a resident of Bellport, New York. Belmonte worked as a registered representative at Kimberly Securities.
  • John C. Kawas, Jr., age 63, is a resident of East Northport, New York. Kawas served as the Compliance Officer at Kimberly Securities.

The complaint alleges the following. From early 2000 until September 2002, Kimberly Carrella and Vincent Carrella directed the scheme to defraud Kimberly Securities' customers. In the initial phase of the scheme, Kimberly Carrella, Mancuso, Barton, Hourican, and Belmonte misrepresented, and failed to disclose, material information to investors to persuade them to open brokerage accounts at Kimberly Securities and to invest significant funds. Once customers invested their funds, Kimberly Carrella, Mancuso, Barton, and Hourican executed numerous transactions that were unauthorized by, and unsuitable for, these customers, and the registered representatives churned their customers' accounts. When the customers' accounts were depleted of funds through commission charges and trading losses, the defendants lured new, unsuspecting customers into opening accounts at Kimberly Securities, and repeated the same conduct. Kawas assisted the scheme by, among other things, failing to address red flags that registered representatives were executing unauthorized trades and churning accounts, and by obstructing customers' efforts to stop the improper trading in their accounts. Through this scheme, defendants enriched themselves at their customers' expense. For example, from January 2000 to September 2002, Kimberly Securities charged customers approximately $4.5 million in commissions. During the same time period, customers lost in excess of $4 million through trading losses and commission charges.

The Commission's complaint charges Kimberly Carrella, Vincent Carrella, Mancuso, Barton, Hourican, and Belmonte with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The complaint also charges Kawas with aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and the imposition of civil monetary penalties against each of the defendants.

SEC Complaint in this matter


Modified: 08/30/2004