SEC, In Coordination With FBI Undercover Sting Operation, Sues Three Publicly-Traded Companies And Ten Individuals Involved In Fraudulent Schemes

The U.S. Securities and Exchange Commission yesterday filed four separate lawsuits in the U.S. District Court for the Southern District of Florida arising from four schemes. In three of those schemes, defendants made numerous materially false and misleading statements in reports filed with the Commission; the fourth scheme involves a pump-and-dump of a company's publicly traded stock. Most of these charges arise from a two-year undercover FBI sting operation and, simultaneously in related criminal prosecutions, the U.S. Attorney's Office for the Southern District of Florida (USAO) announced the indictments of fifty-eight defendants.

In three schemes related to proposed fraudulent sales of stock to a purported European-based investment fund (the Fund), the Commission's lawsuit alleges that Rhino Ecosystems Inc., COI Solutions Inc., and Uncommon Media Group Inc., violated the federal securities laws by filing materially false annual reports or false registration statements with the Commission. Also named in these complaints were seven individuals: Charles Cini, Mark Wiertzema, Gordon Novak, Robert Wilder, Lawrence Gallo, Douglas Rasberry, and Melvin Levine.

The Commission alleges that in each scheme the individual defendants, most of whom are officers or affiliates of the issuer defendants, conspired to sell securities to the Fund in exchange for millions of dollars in kickbacks to be secreted in offshore accounts. The securities were to be issued either directly by the issuer defendant through bogus S-8 registration statements on file with the Commission or in the Uncommon Media scheme, were to come from several offshore corporate nominees maintained by an undisclosed control person. In reality, there was no Fund and its purported representative was an undercover FBI agent. The sales of securities were never completed, but, in anticipation of the fraudulent sales, the issuer defendants made filings with the Commission that contained material misrepresentations and/or omissions in violation of the antifraud provisions of the federal securities laws. Certain defendants in the Rhino Ecosystems and Uncommon Media schemes are also charged with violating various filing requirements of the federal securities laws.

The Commission also filed suit against Jeffery Senger, Brad Nirenberg and Norman Piatti, alleging that they engaged in a scheme to pump-and-dump Lifekeepers International Inc.'s (Lifekeepers) common stock, which was publicly-traded until the Commission suspended its trading in February of 2000. The Complaint alleges that defendants attempted to inflate artificially the price of Lifekeepers' stock by issuing press releases and other public documents that contained materially false and misleading information concerning, among other things, Lifekeepers' operations and expected financial results. The three defendants are charged by the Commission with violations of the anti-fraud provisions of the federal securities laws, and Senger has also been indicted by the USAO as part of the FBI's sting operation.