U.S. Securities and Exchange Commission
Litigation Release No. 19529 / January 13, 2006
SEC v. Kimberly J. Carrella, et al., Civil Action No. 04-CV-3754 (E.D.N.Y.)
SEC OBTAINS FINAL JUDGMENTS BY DEFAULT AGAINST DEFENDANTS KIMBERLY J. CARRELLA AND VINCENT M. CARRELLA
The Securities and Exchange Commission announced today that on January 9, 2006, the United States District Court for the Eastern District of New York entered final judgments by default against defendants Kimberly J. Carrella and Vincent M. Carrella. The final judgments permanently enjoin defendants from 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. In addition, the final judgments find defendants liable, on a joint and several basis, for disgorgement of $3,324,791.46 plus prejudgment interest of $601,940.60, and civil monetary penalties of $20,000.
The Commission’s complaint alleged that from early 2000 until September 2002, Kimberly Carrella and Vincent Carrella directed a scheme to defraud Kimberly Securities, Inc.’s customers. Kimberly Carrella and other Kimberly Securities brokers misrepresented, and failed to disclose, material information to investors to persuade them to open brokerage accounts at Kimberly Securities and to invest significant amounts of money. Kimberly Carrella and the other brokers then repeatedly executed unauthorized, unsuitable trades in customer accounts, and churned accounts. This frequent trading typically depleted customers’ capital investments through trading losses and commission charges. Once there were no funds remaining in the customers’ accounts, or the customers closed their accounts, Kimberly Securities brokers lured new, unsuspecting customers into opening accounts at Kimberly Securities, and repeated the same conduct. 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 is continuing to pursue this action against the four remaining defendants.