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U.S. Securities and Exchange Commission

SEC Sues Company, Company President, and Three Promoters for Fraudulent Anthrax Protection Claims


Washington, DC, December 11, 2001 — The Securities and Exchange Commission today filed a civil action against a New York firm and four individuals involved in an ongoing fraudulent scheme to exploit the nation's fear of anthrax and bio-terrorism.

The Commission's complaint, filed in the United States District Court for the Eastern District of New York, alleges manipulation of the stock of a publicly traded shell company, Spectrum Brands Corp. Also today, the United States Attorney's Office for the Eastern District of New York brought criminal charges.

Thomas C. Newkirk, Associate Director of the Division of Enforcement, said: "Using bogus anti-terrorism claims to defraud investors is unconscionable. This case gives clear warning that we and the Department of Justice will act promptly and decisively to halt these schemes and punish the schemers."

According to the Complaint, on or before November 5, 2001, Spectrum Brands posted on its website that it had a hand-held device called the "DeGERMinator" capable of "WIP[ING] OUT SURFACE GERMS IN LESS THAN 5 SECONDS, INCLUDING ANTHRAX." The closing price of Spectrum Brands' common stock tripled on this news, shooting up from approximately $4 on November 1, to $7 on November 2, to $11.75 on November 5, with an intra-day high of $14 on November 5.

The Complaint alleges that Spectrum Brands, nominally of Hauppauge, New York, is secretly owned and controlled by a group of stock promoters located in Hicksville, New York. Unbeknownst to the investing public, Spectrum Brands continues to be owned and operated in secret by convicted felons.

These undisclosed principals include two individuals-Saverio (Sammy) Galasso III and David Hutter (a/k/a David Green)-who recently pled guilty to unrelated felony charges and are awaiting sentencing, and an associate, Charlie Dilluvio. Also charged was the sole officer and director of Spectrum Brands, Michael J. Burns. All four individuals (Galasso III, Hutter, Dilluvio and Burns) were arrested today on criminal charges relating to the Spectrum Brands stock fraud.

According to the Complaint, the Hicksville promoters engaged in a series of transactions designed to create artificial volume in the market for Spectrum Brands securities and sold stock into the inflated market. The company has made certain corrective disclosures on its website, but continues to tout in recent press releases and spam e-mails its supposed progress in combating "bio-terrorism" and "cyber-terrorism." These include a spam e-mail dated November 29 touting the company's management and predicting a "$15.00 stock price! Over a 10 fold move!"

The Commission charges Spectrum Brands, Saverio (Sammy) Galasso III, David Hutter (a/k/a David Green), Charlie Dilluvio and Michael J. Burns with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and seeks permanent injunctions, restitution, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties from all defendants and an officer and director bar against Burns.

The Commission acknowledges assistance provided by NASD Regulation Inc., the United States Attorney's Office for the Eastern District of New York and the United States Postal Inspection Service in this matter. The Commission's investigation is ongoing.

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/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.



Modified: 12/11/2001