SEC CHARGES EXECUTIVES OF PENNY STOCK COMPANY FOR ISSUING FALSE AND MISLEADING PRESS RELEASES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today charged father-and-son executives at a New Jersey-based penny stock company for issuing false and misleading press releases while secretly selling thousands of their own stock shares into the market.  They agreed to pay nearly $325,000 and accept officer-and-director bars to settle the SEC’s charges.

Conolog Corporation’s public filings state that it manufactures communications equipment primarily for use by electric utilities, fiber optic service providers, and the military.  The SEC alleges that Conolog issued three consecutive press releases in early 2010 with distorted information at the behest of chairman and then-CEO Robert Benou with assistance from his son and company president Marc Benou.  Among the company’s mischaracterizations were that Conolog had secured $1.9 million in new equipment orders when, in fact, only $50,000 worth of new orders had been received at the time.  Conolog also created the misimpression that it had developed new fiber optic technology that was fully vetted and ready for commercial use and sale.  Marc Benou was quoted saying it “surpassed our expectations in field tests” when in reality there had been no independent third-party testing as implied in the press release.  The “testing” was merely an in-house demonstration of the product.

“Information released by a company into the marketplace must be truthful and substantiated so investors can make well-informed trading decisions,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “The Benous caused Conolog Corporation to issue press releases with false and misleading information that was used to promote the stock to unwitting investors.”

According to the SEC’s complaint filed in federal court in Newark, N.J., Robert Benou hired a public relations firm to promote Conolog’s stock using the false and misleading statements from the press releases.  The promotional efforts significantly increased the company’s stock price and trading volume, and Robert and Marc Benou made combined profits of more than $81,000 through undisclosed sales of some of their stock holdings at the artificially inflated prices.  They also each violated the federal securities laws requiring company insiders to disclose information about their holdings and transactions in company stock so other investors are aware of their moves.

“Officers and directors of public companies must promptly report their own purchases and sales of company stock so the marketplace has the benefit of knowing what insiders are doing with their shares,” said Sanjay Wadhwa, Senior Associate Director for Enforcement in the SEC’s New York Regional Office.  “Robert and Marc Benou ignored their responsibilities to shareholders as they bought and sold Conolog stock over the years without informing investors about their transactions on a timely basis.”

The SEC’s complaint charges Conolog Corporation and the Benous with violating the antifraud provisions of the federal securities laws.  The complaint charges Robert and Marc Benou with violating securities law provisions requiring officers and directors of public companies to report their transactions in the company’s stock within two business days, and requiring all owners of more than 5 percent of a company’s stock to timely report the size of their holdings and any material changes to them.

Robert Benou agreed to settle the charges without admitting or denying the allegations by paying $77,490 in disgorgement of illegal profits made from selling Conolog stock as the misleading press releases were issued.  He also must pay prejudgment interest of $12,400 and a penalty of $177,490, and will be permanently barred from acting as an officer or director of a public company or participating in penny stock offerings.  Marc Benou agreed to settle the charges by paying disgorgement of $4,191 plus prejudgment interest of $671 and a penalty of $51,250.  He will be barred for at least two years from acting as an officer or director of a public company or participating in penny stock offerings.  The settlement is subject to court approval.

The SEC’s investigation has been conducted by Justin P. Smith and George N. Stepaniuk of the New York office and supervised by Mr. Wadhwa.

SEC CHARGED PENNY STOCK CO. CEO IN ALLEGED PUMP-AND-DUMP SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Litigation Release No. 23134 / November 17, 2014
Securities and Exchange Commission v. Joseph A. Noel, Civil Action No. 3:14-CV-5054
SEC Charges San Francisco-Based Penny Stock Company CEO for Defrauding Investors in Pump-And-Dump Scheme

The Securities and Exchange Commission today charged a San Francisco-based penny stock company CEO with defrauding investors by issuing false and misleading press releases portraying his purported marketing and infomercial company as a successful venture in order to drive the stock price up while he covertly sold millions of shares into the public market for more than $300,000 in illicit profits.

According to the SEC's complaint filed against Joseph A. Noel in federal district court in San Francisco, the deceptive press releases about his company YesDTC Holdings touted exclusive distribution rights, licensing agreements, and certain products purportedly certified by the government. Noel's promotional campaigns based on such false information caused a spike in YesDTC's thinly-traded stock and enabled him to dump millions of his own shares for a profit. To conceal his sales, Noel sold the shares through a company he created in his teenage daughter's name without disclosing as required that he was actually selling the shares.

The SEC also suspended trading in YesDTC stock today, and instituted an administrative proceeding to revoke its registration.

The SEC's complaint charges Noel with violating antifraud and registration provisions of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest and a financial penalty as well as a permanent injunction. The SEC also is seeking an officer-and-director bar and a penny stock bar against Noel.

The SEC's investigation was conducted by Heather E. Marlow and David Berman of the San Francisco Regional Office, and the case is supervised by Tracy Davis. The SEC's litigation will be led by Aaron Arnzen and Ms. Marlow. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of California and the Federal Bureau of Investigation.

SCE ANNOUNCES FRAUD CHARGES AGAINST CEO OF RENEWABLE ENERGY PENNY STOCK COMPANY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission announced fraud charges against a penny stock company and its CEO linked to a scam artist whom the agency separately charged earlier this month.

The SEC alleges that MSGI Technology Solutions and its CEO J. Jeremy Barbera defrauded investors by touting a joint venture to develop and manage solar energy farms across the country on land purportedly owned by an electricity provider operated by Christopher Plummer.  Barbera and Plummer co-authored press releases falsely portraying MSGI as a successful renewable energy company on the brink of profitable solar energy projects.  However, MSGI had no operations, customers, or revenue at the time, and Plummer’s company did not actually possess any of the assets or financing needed to develop the purported solar energy farms. 

The SEC previously charged Plummer and a different penny stock company and CEO that similarly issued false press releases depicting a thriving business that in reality was struggling financially.

Barbera and MSGI agreed to settle the SEC’s charges.

“It is vital that information disseminated by a company into the marketplace be corroborated and truthful,” said Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office.  “Barbera caused MSGI to issue press releases baselessly touting nonexistent assets and phony business opportunities, which had the harmful effect of misleading investors.”

According to the SEC’s complaint filed in federal court in Manhattan, in addition to co-authoring misleading press releases with Plummer, Barbera himself made other material misstatements about MSGI’s operations.  For example, he described MSGI in press releases and on its website as an operational security company with customers all over the world, despite the fact that MSGI had long lacked the financial means to manufacture any security products on a commercial scale.  Barbera also falsely claimed in press releases that another sham entity operated by Plummer had purchased MSGI’s sizable outstanding debt, and he falsely touted nonexistent solar energy projects with an entity unrelated to Plummer.

The SEC’s complaint charges Barbera and MSGI with violating antifraud provisions of the federal securities laws.  The defendants have consented to the entry of final judgments permanently enjoining them from future violations of the antifraud provisions.  Barbera has agreed to pay a $100,000 penalty and be permanently barred from acting as an officer or director of a public company or from participating in a penny stock offering.  Barbera and MSGI neither admitted nor denied the charges.  The settlement is subject to court approval.

The SEC’s investigation has been conducted by Justin P. Smith and George N. Stepaniuk of the New York office and supervised by Sanjay Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut and the Federal Bureau of Investigation.