SEC News Digest

ENFORCEMENT PROCEEDINGS

In the Matter of PanWorld Minerals International, Inc.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registration by Default (Default Order) in PanWorld Minerals International, Inc., Administrative Proceeding No. 3-14006. The Order Instituting Proceedings (OIP) alleged that Respondent failed to file required annual and quarterly reports while its securities were registered with the Securities and Exchange Commission.

The Default Order finds the allegations in the OIP to be true and revokes the registration of each class of registered securities of PanWorld Minerals International, Inc., pursuant to Section 12(j) of the Securities Exchange Act of 1934. (Rel. 34-62913; File No. 3-14006)

In the Matter of Berkshire Resources, L.L.C.

On September 15, the Commission issued Orders Instituting Public Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against David G. Rose, Jason T. Rose (the Rose's), and Mark D. Long (Long). The Orders find that the Rose's, with Long's assistance, orchestrated a fraud through their company, Berkshire Resources, L.L.C. (Berkshire), a Wyoming Limited Liability Company established in April 2006, which purported to develop and operate gas and oil properties. The Orders further find that on Sept. 2, 2010, the U.S. District Court for the Southern District of Indiana entered by consent judgments against the Rose's and Long. David and Jason Rose were permanently enjoined from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Securities Exchange Act), and Rule 10b-5 thereunder. Long was permanently enjoined from future violations of Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act. These judgments were entered in the civil action entitled Securities and Exchange Commission v. Berkshire Resources, L.L.C., et al., Civil Action No. 09-CV-704 (S.D. Ind.).

The Orders find that the Commission's complaint alleged that, among other things, from at least April 2006 through December 2007, the Rose's used Berkshire to carry out an offering fraud and sell unregistered securities. Although Jason Rose was put forward as the public face of the company, his father, David Rose, who had an extensive disciplinary history, ran the company behind the scenes. The complaint further alleged that Berkshire raised approximately $15.5 million from approximately 265 investors in the US and Canada. The complaint also alleged that Berkshire misled defendants, among other things, about the use of investor proceeds, the experience of Jason Rose, David Rose's role at the company, and the expected rate of return. Additionally, the complaint alleges that Long, the head of sales at Berkshire, ran one of two "boiler room" operations that used teams of sales agents to sell units of participation to the public.

Based on the above, the Orders bar David Rose, Jason Rose, and Long from association with any broker or dealer. The Rose's and Long consented to the Commission's Order without admitting or denying any of the findings therein, except as to the entry of the judgment. (Rel. 34-62915, File No. 3-14048; 34-62916, File No. 3-14049; 34-62917, File No. 3-14050)

In the Matter of Aaron Donald Vallett

On September 15, the Commission issued an Order Making Findings and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 against Aaron Donald Vallett (the Order). The Order finds that on June 9, 2010, an order of permanent injunction was entered by consent against Aaron Donald Vallett (Vallett), permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act, in the civil action entitled Securities and Exchange Commission v. Aaron Donald Vallett and A.D. Vallett & Co., LLC., Civil Action Number 3:10-CV-00551, in the United States District Court for the Middle District of Tennessee. The Order further finds that the Commission's complaint in the district court action alleged that, between September 2008 and April 2010, Vallett raised approximately $5.5 million from around 20 investors through three unregistered offerings. According to the complaint, many of the investors were advisory clients of Vallett & Co. The complaint alleged that Vallett and his firm misrepresented that investor funds would be secured and would be used to make various investments, including investments in various real estate ventures. According to the complaint, Vallett used substantial investor funds to pay prior investors or to pay personal or business expenses. The complaint alleged these actions operated as a fraud or deceit on investors.

Based on the above, the Order bars Aaron Donald Vallett from associating with any broker or dealer and bars Aaron Donald Vallett from associating with any investment adviser. Aaron Donald Vallett consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted to the injunction. (Rels. 34-62918; IA-3083; File No. 3-14054)

In the Matter of Frank L. Constantino

On September 15, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Frank L. Constantino.

The Division of Enforcement (Division) alleges in the Order that at various times from October 1981 through December 2002, Constantino was a registered representative with broker-dealers registered with the Commission. The Division also alleges that on February 3, 2010, following a jury trial, Constantino was found guilty in State of Georgia v. Frank Constantino, Criminal Action File No.: 09-9-5301-42, in the Superior Court of Cobb County, Georgia of, among other things, material misrepresentations and omissions in connection with the offer and sale of securities in violation of the Georgia Securities Act. The Division further alleges that Constantino was also found guilty of theft by taking an investor's funds.

A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true, to provide Constantino an opportunity to respond to these allegations, and to determine what, if any, remedial action is appropriate in the public interest. The Order directed the Administrative Law Judge to issue an initial decision within 210 days from the date of service of the Order. (Rel. 34-62920; File No. 3-14051)

In the Matter of Frank L. Schwartz

On September 15, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (Order) against Frank L. Schwartz. The Order finds that on August 23, 2010, a judgment was entered against Schwartz in Securities and Exchange Commission v. Earthly Mineral Solutions, Inc., et al. (Civil Action Number 2:07-CV-01057-JCM-(LRL)) (D. Nev.), permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.

Based on the above, the Order bars Schwartz from association with any broker or dealer. Schwartz consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-62922; File No. 3-14052)

Final Judgment of Permanent Injunction and Other Relief Entered Against Defendant Ross E. Barall

The Commission announced that on Aug. 23, 2010, the United States District Court for the Middle District of Florida entered a final judgment of permanent injunction and other relief against Defendant Ross E. Barall. The final judgment enjoins Barall from violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. In addition to injunctive relief, the final judgment bars Barall from participating in the offering of any penny stock and orders him to pay disgorgement in the amount of 9,580.00, plus prejudgment interest of $356.09 and imposes a civil penalty of $60,000. Barall consented to entry of the final judgment without admitting or denying any of the allegations in the complaint.

The Court also approved the stipulation of dismissal as to the claims against Defendant Howard A. Scala due to his death and because there is no estate open on his behalf, and approved the Commission's notice of voluntary dismissal as to the claims for disgorgement and civil penalty against Defendant Wall Street Communications, Inc. Previously, on Sept. 8, 2009, the Court entered an order of permanent injunction and other relief against Wall Street by default.

The Commission began this action by filing its complaint on June 5, 2009, against Wall Street, Scala, Barall, and another defendant, charging them with securities fraud in connection with a series of stock manipulation schemes and a fraudulent, unregistered distribution of stock. [SEC v. Wall Street Communications, Inc., et al., Civil Action No. 8:09-CV-1046-JSM-TGW (M.D. Fla.)] (LR-21647)

Federal Court Finds Hedge Fund Manager Liable for Securities Fraud in Connection With Pipe Investments

The Securities and Exchange Commission announced today that a federal court on Sept. 13, 2010 found hedge fund manager Robert A. Berlacher, along with several of his investment advisory entities and various hedge funds he managed, liable for securities fraud in connection with the funds' PIPE investments. In entering judgment for the Commission, the Court ordered the defendants to pay, jointly and severally, $352,363.68 in disgorgement. The ruling followed a three-day bench trial in March 2010 in Philadelphia, Pennsylvania, before the Honorable Mitchell S. Goldberg, United States District Judge for the United States District Court for the Eastern District of Pennsylvania.

The Commission's complaint, filed on Sept. 13, 2007, alleged that Berlacher - and his investment advisory entities (LIP Advisors, LLC, NCP Advisors, LLC, and RAB Investment Company, LLC) and the hedge funds he managed (Lancaster Investment Partners, L.P., Northwood Capital Partners, L.P., Cabernet Partners, L.P., Chardonnay Partners, L.P., Insignia Partners, L.P., and VFT Special Ventures, Ltd.) - made materially false representations to issuers in connection with two unregistered securities offerings that are commonly referred to as "PIPEs" (an acronym for private investments in public equities).

In connection with the February 2004 Radyne ComStream, Inc. (Radyne) PIPE, the Court found that Berlacher misrepresented in the securities purchase agreement that he did not hold a short position, directly or indirectly, in Radyne securities. Contrary to this representation, Berlacher, after learning about the PIPE, had established a "barrier option" position on a "basket" of securities (i.e., a portfolio of underlying assets), one of which included a short position in Radyne securities. Berlacher's "barrier option" on a "basket" of securities was an exotic derivative product that provided him with leverage and gave him the right to the underlying assets.

Similarly, in connection with the May 2004 International Displayworks, Inc. (IDWK) PIPE, Berlacher misrepresented in the securities purchase agreement that he had not engaged in any transactions in the company's securities when he had in fact, after learning about the PIPE, established a "barrier option" position that included positions in IDWK as part of its underlying "basket" of securities.

As a result of these material misrepresentations, the Court found that Berlacher, along with his investment advisory entities and the hedge funds he managed, violated Section 10(b), the antifraud provision of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

The Court found Berlacher and the other defendants not liable for insider trading in connection with the Radyne offering and for fraud in connection with two other offerings. Previously, the Court dismissed the Commission's claim that Berlacher had violated the registration requirements of Section 5 of the Securities Act of 1933.

Additional information about this matter can be found at SEC v. Berlacher et al., Civil Action No. 07-cv-3800 (E.D. Pa. Sept. 13, 2007) (MSG) [Release No. LR-20278] (Sept. 13, 2007). [SEC v. Robert A. Berlacher, Lancaster Investment Partners, L.P., Northwood Capital Partners, L.P., Cabernet Partners, L.P., Chardonnay Partners, L.P., Insignia Partners, L.P., VFT Special Ventures, Ltd., LIP Advisors, LLC, NCP Advisors, LLC, and RAB Investment Company, LLC, Civil Action No. 07-cv-3800 (E.D. Pa.) (MSG)] (LR-21648)

Final Judgment of Permanent Injunction and Other Relief Entered Against Defendants Amante Corporation and Commonwealth Capital Management, and Notice of the Commission's Voluntary Dismissal of Claims Against Amante and Commonwealth For Disgorgement, Prejudgment Interest and Civil Penalties, and Claims for Disgorgement Against Relief Defendants MVC Group LLC, and East Coast Bullion Exchange, Inc. (f/k/a Capital One Consulting, Inc.)

The Commission announced that on Sept. 13, 2010, the Honorable James I. Cohn, United States District Court Judge for the Southern District of Florida entered a final judgment of permanent injunction and other relief against Defendants Amante Corporation and Commonwealth Capital Management, Inc. Through the Court-appointed Receiver, Amante and Commonwealth consented to be enjoined against future violations of Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act). In addition, the final judgment enjoins Commonwealth against future violations of Section 15(a) of the Exchange Act and Amante against future violations of Sections 5(a) and 5(c) of the Securities Act.

On Sept. 8, 2010, the Commission filed a Notice of Voluntary Dismissal as to Commission's claims for disgorgement, prejudgment interest and civil penalties against Amante and Commonwealth and its claims for disgorgement against Relief Defendants MVC Group LLC, and East Coast Bullion Exchange, Inc. (f/k/a Capital One Consulting, Inc.). [SEC v. Amante Corporation, et al., Civil Action No. 09-CIV-61716-COHN] (LR-21649)

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