SEC FILES INJUNCTION AGAINST BOND SELL AND HIS COMPANY

"The Securities and Exchange Commission today announced its filing of a civil injunctive action alleging fraud in the offer and sale of municipal bonds by Charles A. Aiken and his entity, Aiken Continental, L.L.C.

Filed December 29, 2011 in the U.S. District Court for the Southern District of West Virginia, the SEC’s complaint alleges that Aiken and Aiken Continental made material misrepresentations and omissions in connection with the 2006 offer and sale of $2.96 million of industrial development revenue bonds. Raleigh County, West Virginia issued the bonds in October 2006 to facilitate Aiken Continental’s acquisition of Continental Casket, Inc., a casket manufacturing facility located within its jurisdiction. Aiken formed Aiken Continental in August 2006 for the sole purpose of acquiring Continental Casket’s assets, and served as its sole principal.

According to the SEC’s complaint, Aiken concealed from key participants to the transaction, including the issuer, bond counsel, the underwriter, and the bondholders’ trustee, that he had been indicted for felony financial fraud in late 2005. Aiken also concealed the fact that he was in the process of negotiating a plea agreement just before the bonds were issued in October 2006, which included a term of imprisonment. In addition, Aiken failed to disclose material information about a $200,000 loan to Aiken and Aiken Continental from an entity partially owned by their attorney, in order to facilitate the closing of the transaction. This loan required a $100,000 interest payment, and gave the lender a twenty percent equity interest in Aiken Continental if the loan plus interest was not fully repaid within six months. Aiken’s failure to disclose details about his criminal proceeding and the loan rendered certain statements in the bonds’ Official Statement materially misleading. For example, one section of the Official Statement contained information about Aiken’s background, but failed to mention his felony indictment for financial fraud. Another section of the Official Statement contained projected financial statements for Aiken Continental, but failed to take into account the repayment of the $200,000 loan plus $100,000 interest. Aiken Continental supplied and authorized the use of information in the Official Statement. Aiken signed the Official Statement on behalf of Aiken Continental, and authorized it to be distributed to investors.

According to the SEC’s complaint, Aiken served 90 days in federal prison and 90 days of home detention in Georgia following the close of the transaction. Aiken’s six-month absence negatively affected the operations of the casket company and the Raleigh County bonds are now in default, with the entire principal amount and accrued interest due.

Based on this conduct, the SEC’s complaint alleges that Aiken and Aiken Continental violated Section 17(a)(2) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. The SEC’s complaint seeks permanent injunctions, disgorgement, prejudgment interest, and civil money penalties."

TWO FORMER PRUDENTIAL REPRESENTATIVES ORDERED T PAY BACK OVER $1.1 MILLION

Martin J. Druffner Ordered to Pay $1,131,157 in Ill-Gotten Gains and Prejudgment Interest; Skifter Ajro Ordered to Pay $124,427

The following is an excerpt from the SEC website:

The Commission today announced that, on July 13, 2011, a Massachusetts federal court entered an order against Martin J. Druffner of Hopkinton, Massachusetts, and Skifter Ajro of Milford, Massachusetts, two defendants in a civil injunctive action filed by the Commission on November 4, 2003, requiring them to pay $1,131,157 and $124,427, respectively, in disgorgement and prejudgment interest. The court had previously entered judgments against Druffner and Ajro on October 10, 2006 enjoining them from future violations of the federal securities laws. The Commission alleged in its complaint that Druffner and Ajro, former registered representatives of broker-dealer Prudential Securities, Inc., committed fraud in connection with their deceptive market timing trades in dozens of mutual funds.
The Commission filed its complaint against Druffner and Ajro, three other former Prudential Securities registered representatives, and their former branch manager, on November 4, 2003, and amended its complaint on July 14, 2004. The amended complaint alleged that Druffner and Ajro were part of a group of registered representatives that defrauded mutual fund companies and the funds' shareholders by placing thousands of market timing trades worth more than $1 billion for five hedge fund customers from at least January 2001 through September 2003. According to the amended complaint, Druffner and Ajro knew that the mutual fund companies monitored and attempted to restrict excessive trading in their mutual funds. The amended complaint alleged that, to evade those restrictions when placing market timing trades, members of the group disguised their own identities by establishing multiple broker identification numbers and disguised their customers' identities by opening numerous customer accounts for what were, in reality, only a handful of customers.
The order was entered by the Honorable Nathaniel M. Gorton of the United States District Court for the District of Massachusetts.
In addition to the Commission's civil injunctive action, Druffner pled guilty to four counts of securities fraud and four counts of wire fraud on September 15, 2006. He was sentenced to 6 months of home confinement, three years of probation, and a $4,000 fine. He was also barred from associating with any broker, dealer, or investment adviser on March 17, 2006. Similarly, Ajro pled guilty to four counts of securities fraud and four counts of wire fraud on August 9, 2006. He was sentenced to two years of probation and a $2,000 fine. He was also barred from associating with any broker, dealer, or investment adviser on February 2, 2006.”