U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18990 / December 2, 2004
Securities and Exchange Commission v. Larry Grabarnick, Marc David Shiner, Donald LaBarre and Sara Jane Peck, Case No. 02 Civ. 20875 (Lenard, J.) (S.D. Fla., filed March 21, 2002)
Florida Boiler Room Operator Settles SEC Charges For Selling Bogus Limited Liability Partnership Interests
The Securities and Exchange Commission announced on November 29, 2004, the Honorable Joan A. Lenard of the United States District Court for the Southern District of Florida entered a final judgment by consent against Sara Jane Peck ("Peck"), a resident of Aventura, Florida. Without admitting or denying the allegations in the Commission's complaint, Peck agreed to be enjoined permanently from violating various antifraud and registration provisions of the federal securities laws and to pay $200,000 in disgorgement. The three other defendants in the case, Larry Grabarnick ("Grabarnick"), Marc David Shiner ("Shiner") and Donald LaBarre ("LaBarre") have previously settled to judgments requiring them to collectively pay over $7 million in disgorgement, prejudgment interest and civil penalties.
The Commission's complaint alleges that Grabarnick and Shiner promoted investments in unregistered LLP units to the public through bulk e-mails and Internet websites. Interested investors responded over the Internet by providing contact information, which Peck and LaBarre then purchased as "leads" from Grabarnick and Shiner. The complaint alleges that Peck and LaBarre used boiler room sales tactics to offer and sell the LLP units. Investors were told they would benefit from the deregulation of the electric service provider market in California. According to the complaint, more than 580 people nationwide invested over $10 million by purchasing units, or fractions thereof, in eight LLPs. Each LLP consisted of 80 partnership units, each valued at $19,675, for a total of $1,547,000 per fully funded partnership.
According to the Complaint, Peck made numerous material misrepresentations and omissions to investors regarding, among other things, the use of investor funds, the profitability of the investment, its likelihood of success, the risks associated with the investment, and the need to invest quickly. After all 80 units were sold, or as many as could be, investors were told that the partnerships would not be viable and they were offered Over-the-Counter penny stock in exchange for their remaining escrowed funds. None of the partnerships ever became operational electric companies. Many investors were elderly; many rolled over money from IRA and 401(k) accounts. All of the investors were left with worthless partnership units and delisted penny stock.
Peck, without admitting or denying the allegations, settled the action by consenting to entry of a court order that: (i) permanently enjoins her from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) requires her to pay $333,725 in disgorgement. Peck has consented to pay $200,000 in disgorgement. She was not ordered to pay a civil penalty and the remainder of her disgorgement obligation was waived based upon a demonstrated inability to pay more.
The Commission acknowledges the assistance provided by the Department of Banking and Finance of the State of Florida's Office of the Comptroller in this matter. For tips on how to avoid Internet "pump-and-dump" stock manipulation schemes, visit http://www.sec.gov/investor/online/pump.htm. For more information about Internet fraud, visit http://www.sec.gov/investor/pubs/cyberfraud.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.