The previous SEC case against Aurelio "Ray" Vuono shows his true character.
http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19920213_0000068.SNY.htm/qx
It's very long but here are some excerpts that involve Vuono (there's a LOT more about him in the full opinion):
SEC v. HASHO, et. al.
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
February 13, 1992
SECURITIES AND EXCHANGE COMMISSION Plaintiff, - v - ROBERT HASHO, BENJAMIN M. HASHO, WILLIAM X. MECCA, ROBERT B. YULE, KEVIN B. SULLIVAN, DAVID C. DEVER, RICHARD A. CHENNISI, AURELIO VUONO, PHILIP FALCONE, and MICHAEL F. UMBRO, Defendants.
The opinion of the court was delivered by: DAVID N. EDELSTEIN
OPINION & ORDER
EDELSTEIN, District Judge:
On December 13, 1990, the Securities and Exchange Commission (the "SEC") filed its complaint in this action alleging that defendants, ten registered representatives, engaged in unlawful high pressure sales of small highly speculative stocks, sometimes referred to in Wall Street parlance as "dogs," to unwary customers and caused trades to be entered in customer accounts without customer authorization. The SEC alleges that by such conduct, defendants violated Section 17(a) of the Securities Act of 1933, 15 U.S.C. ? 77q(a) (the "Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. ? 78j(b) (the "Exchange Act"), and Rule 10b-5, 17 C.F.R. ? 240.10b-5, thereunder (the "anti-fraud provisions"). In essence, the SEC alleges that defendants engaged in a "boiler room" operation, which the Second Circuit has described as:
a temporary operation established to sell a specific speculative security. Solicitation is by telephone to new customers, the salesman conveying favorable earnings projections, predictions of price rises and other optimistic prospects without a factual basis. The prospective buyer is not informed of known or readily ascertainable adverse information; he is not cautioned about the risks inherent in purchasing a speculative security; and he is left with a deliberately created expectation of gain without risk.
Hanly v. SEC, 415 F.2d 589, 597 n.14 (2d Cir. 1969). On December 13, 1990, the SEC also applied for an order to show cause and an order expediting discovery (the "Order") in connection with a motion for a preliminary injunction. This Court signed the Order and set a return date for a hearing on the SEC's motion for January 14, 1991.
On January 4, 1991, after a conference before this Court, the SEC and counsel for defendants Robert F. Hasho ("Robert Hasho"), Benjamin M. Hasho ("Ben Hasho"), William X. Mecca ("Mecca"), Robert B. Yule ("Yule") and Aurelio Vuono ("Vuono"), entered a stipulation and order maintaining the status quo. The January 14, 1991 hearing date was adjourned sine die.
On March 4, 1991, this Court: (1) issued a Final Judgment, on consent, permanently enjoining defendants David C. Dever, Michael F. Umbro, and Philip Falcone, from committing further violations of the anti-fraud provisions of the federal securities laws; (2) ordered that the preliminary injunction hearing be consolidated with the trial on the merits as to defendants Ben Hasho, Mecca, Yule and Vuono and further ordered that this trial commence on March 12, 1991; and (3) severed the case against defendants Robert Hasho, *fn1" Richard A. Chennisi and Kevin B. Sullivan and directed that it be tried at a later date. This Court subsequently issued Final Judgments, on consent, permanently enjoining defendants Robert Hasho, Richard A. Chennisi and Kevin B. Sullivan from committing further violations of the anti-fraud provisions of the federal securities laws.
On March 12, 1991, this Court commenced the trial of defendants Ben Hasho, Mecca, Yule, and Vuono. On March 15, 1991, defendants Ben Hasho, Mecca and Yule applied to this Court for an adjournment to retain new counsel. This Court granted the application and ordered that the trial of defendant Vuono continue. Defendant Vuono's trial ended with closing arguments on March 19, 1991.
On April 2, 1991, this Court proceeded to trial with defendants Ben Hasho, Mecca, and Yule. The trial ended on April 18, 1991, with closing arguments from the SEC and counsel for defendants Ben Hasho, Mecca, and Yule. The SEC offered the testimony of several customers of each defendant to support its allegations. These witnesses testified that defendants made several misstatements of fact, omitted certain information, and used other techniques to get them to invest in securities, including: (1) misleading statements by certain defendants about their past performances as registered representatives and unjustified predictions that their recommendations would produce future profits; (2) false statements by certain defendants that they possessed inside information; (3) false statements by certain defendants about the minimum amount of securities that customers were required to purchase; (4) omissions regarding risk factors, such as the speculative nature of securities and negative earnings of issuers; (5) baseless price predictions and profit guarantees; (6) misrepresentations about commissions; and (7) unauthorized trading in customer accounts. Defendants Ben Hasho, Mecca and Yule primarily contend that they did none of the wrongful conduct alleged in the SEC's complaint. Defendant Vuono argues, and the other defendants also each contend, that he is not responsible for the conduct alleged in the SEC's complaint because he acted at the direction of his employer and obtained the information passed on to his customers from his employer.
Third case reveals an outrageous abuse of trust by registered representatives who consistently preyed upon unsophisticated and unsuspecting customers through a myriad of misrepresentations, omissions, and other fraudulent devices for personal profit. Defendants' conduct here is akin to dealers of "three card monte" who prey upon unwary individuals by holding out the promise of easy money. Defendants' conduct, however, is even more reprehensible because they had an inviolable duty to deal fairly with the public and their customers, and they had a relationship of trust with those they swindled. Defendants' contemptible conduct did more than harm their clients; their actions destroy investor confidence, pollute the environment for securities transactions, and bring disgrace and shame upon Wall Street.
Ben Hasho, Mecca, and Yule's contentions that they did none of the conduct alleged is incredible. Furthermore, while defendants' employers may have encouraged and fostered defendants' unlawful activities, this does not by any means give registered representatives license to ignore their duty of fair dealing to their clients and to violate the anti-fraud provisions of the securities laws. Registered representatives who engage in unlawful activity can not point the finger at their employers to insulate themselves from liability. Pursuant to Rule 52 of the Federal Rules of Civil Procedure, the following constitutes this Court's findings of fact and conclusions of law. *fn2"
FINDINGS OF FACT
I. Relevant Entities
Organized in November 1986, but now defunct, J.T. Moran & Co., Inc. ("J.T. Moran"), was a Delaware corporation that had its principal place of business in New York, New York. [Pl. Exh. 1801 at p.4 & 31]. J.T. Moran was a wholly owned subsidiary of J.T. Moran Financial Corp. ("J.T. Moran Financial"). (Pl. Exh. 1801 at p.31]. J.T. Moran was registered as a broker-dealer with the SEC, and, at all relevant times to this action, was a member of the National Association of Securities Dealers, Inc. (Pl. Exh. 1801 at p.4]. J.T. Moran, which ceased operations in or about January 1990, employed approximately 600 registered representatives and maintained numerous branch offices in New York, including ones in Huntington and Garden City. [Pl. Exh. 1303 at p.10; Pl. Exh. 1801 at p.9]. In June 1989, the J.T. Moran Huntington office moved its operations to Garden City (hereinafter the "Long Island Office"). [Pl. Exh. 1303 at p.11].
In or about May 1988, J.T. Moran acquired its Long Island Office from the Sherwood Capital Group ("Sherwood"). In or about early 1987, Sherwood had acquired this same branch office from First Jersey Securities, Inc. ("First Jersey"). These acquisitions occurred as each predecessor firm ceased retail operations. [Trial at p.676]. Defendants Ben Hasho, Mecca and Yule each moved to the successor firm as their branch office was acquired.
II. The Defendants
A. Ben Hasho ...
B. Mecca ...
C. Yule ...
D. Vuono
Vuono, 25 years old, was employed as a registered representative at J.T. Moran's Long Island office from approximately December 1988 through January 1990. [Pl. Exh. 1301 at pp. 3-11]. Vuono had no stock market experience prior to working at J.T. Moran. [Pl. Exh. 1303 at p. 42]. He earned $ 75,000 in commission income in 1989. [Pl. Exh. 1301 at p. 13]. Vuono was subsequently employed as a registered representative at Prudential-Bache Securities, Inc., from in or about June 1990 to in or about January 1991.
From in or about December 1988 to in or about January 1990, Vuono typically cold-called 300 prospective customers per day at J.T. Moran. He found names and telephone numbers of these prospective clients from telephone books. [Pl. Exh. 1301 at p. 61].
During the first telephone call with any prospective customer, Vuono read from a script which described J.T. Moran. [Pl. Exh. 1303 at p. 7]. Vuono recommended that customers or prospective customers purchase only those securities that he was instructed to sell by J.T. Moran. [Pl. Exh. 1303 at pp. 17, 28, 56]. In this regard, he testified, "I was in the business for two months, I really didn't have a say of what I could recommend or what I could be doing. This is what I was told to do." [Pl. Exh. 1303 at p. 28]. He further testified, "I was in the business . . . four months, I wasn't going to second-guess an analyst, that was his job. My job was to sell stock based on information provided to me by the analyst." [Pl. Exh. 1303 at p. 69].
Vuono learned about securities through J.T. Moran supervisors, the J.T. Moran research department, or through representatives of issuers of the securities recommended. J.T. Moran supervisors or the J.T. Moran research department passed out sales scripts to registered representatives with respect to particular issuers of securities. [Pl. Exh. 1303 at pp. 17, 26, 47, 50, 72]. Vuono used these sales scripts in presenting securities recommendations to customers. [Pl. Exh. 1303 at pp 17, 26, 47, 50, 72]. *fn5"
Vuono did no independent research or analysis of the securities he recommended to customers. He based his recommendations solely on information received from J.T. Moran supervisors, from the J.T. Moran research department, and from representatives of issuers. [Pl. Exh. 1303 at pp. 26-28].
Nor did Vuono independently confirm, investigative or analyze the accuracy of this information. In fact, he never knew whether the information about issuers was accurate. [Pl. Exh. 1303 at pp. 43, 45, 48, 51]. Vuono testified that he "took on faith" everything the research department told him. [Pl. Exh. 1303 at p. 43]. He further testified that he knew nothing about the J.T. Moran research department, including who worked there or what their investment background was. [Pl. Exh. 1303 at p. 101].
Vuono testified that, while at J.T. Moran, he determined a potential customer's financial condition, by inquiring how much he or she had available to invest. [Pl. Exh. 1303 at p. 13]. He testified that it was up to his customers to decide whether the purchase of a particular security comported with that customer's investment objectives. [Pl. Exh. 1303 at p. 52]. Vuono stated that, "if a client likes what I'm talking about, then he's going to get involved with it." [Pl. Exh. 1302 at p. 16]. He further stated that he did not make suitability determinations and that a customer's financial information "was filled out on the new account card, and once that went into operations and they executed the order, obviously they felt it was suitable because everything was on the account form." [Pl. Exh. 1302 at pp. 16-17].
Vuono testified that he was not aware of suitability requirements for clients who wished to trade on margin. He further testified that he was not involved in the determination of customer suitability for margin trading. Vuono stated that, "Everything was made in the back office. I mean, the client would not apply to be on margin, so if it was approved, it was approved. If it wasn't, then it wasn't. And I'm not sure who made the determination. It was all sent to New York." [Pl. Exh. 1302 at pp. 17-18].
III. Customer Witnesses
A. Ben Hasho's Customers ...
B. Mecca's Customers ...
C. Yule's Customers ...
D. Vuono's Customers
1. Timothy W. St. Clair
Timothy W. St. Clair ("St. Clair"), a resident of Blue point, New York, owns a boat repair service. [Pl. Exh. 1304 at p. 10]. Vuono cold called St. Clair in or about February 1989 and soon thereafter St. Clair opened an account at J.T. Moran. [Trial at pp. 403, 457]. St. Clair is not a college graduate. [Pl. Exh. 1304 at p. 10].
Prior to investing through Vuono, St. Clair had invested only several thousand dollars in securities through Prudential-Bache. [Pl. Exh. 1304 at pp. 10-11, 199]. Prior to investing through Vuono, St. Clair did not know the meaning of an "over-the-counter security," a "market maker," or a "bid or ask price." [Trial at pp. 403-404]. St. Clair's investment objective was "slow secure growth." [Trial at p. 405]. St. Clair trusted Vuono to provide him with accurate information about securities, and relied upon Vuono because he considered Vuono to be a "licensed professional." [Trial at pp. 409, 427; Pl. Exh. 1304 at pp. 37, 44, 174-75]. St. Clair had trouble understanding his customer account statement and relied upon Vuono to decipher them "honestly." [Trial at pp. 418, 492-494; Pl. Exh. 1304 at pp. 92-95, 99-100, 196].
While St. Clair lost approximately $ 30,000 to $ 40,000 through investing with Vuono, Vuono earned approximately $ 18,690.63 in commission income through trading in St. Clair's account. [Trial at p. 433; Pl. Exh. 2801 at para. 10.h.].
2. Jeffrey Conte
Jeffrey Conte ("Conte"), a resident of Huntington Station, New York, is a technical writer. Vuono cold called Conte in or about March 1989 and soon thereafter Conte opened an account at J.T. Moran. [Pl. Exh. 1305 at p. 1-10]. Vuono never asked Conte about his investment objectives. [Pl. Exh. 1305 at pp. 15-16]. Conte lost approximately $ 3,500 through investing with Vuono. [Pl. Exh. 1305 at p. 31]. Vuono earned approximately $ 1,137.84 in commission income from trades in Conte's account. [Pl. Exh. 2801 at para. 10.h.3.].
3. Italo Guggino
Italo Guggino ("Guggino"), a resident of Merrick, New York, owns a pizzeria. Vuono cold called Guggino in or about January 1989 and soon thereafter Guggino opened an account at J.T. Moran. [Pl. Exh. 1306 at pp. 11-12]. Guggino had attended one semester of college. [Pl. Exh. 1306 at p. 6].
Guggino had no experience in the stock market prior to investing through Vuono. [Pl. Exh. 1306 at p. 11]. In this regard, Guggino testified that before investing with Vuono was "illiterate to the whole thing, and I still am." [Pl. Exh. 1306 at p. 11]. Guggino testified that he trusted Vuono because he was Italian. [Pl. Exh. 1305 at p. 17]. Guggino also testified that when he looked at the literature Vuono provided about issuers, "I was trying to read it, but I couldn't make any heads or tails out of it. You know, I still don't. Give me a prospective (sic) now, I still ain't going to tell you what's going on there." [Pl. Exh. 1306 at pp. 22-23]. Guggino relied upon Vuono to decipher his customer statements. [Pl. Exh. 1306 at pp. 56-57].
While Guggino lost approximately $ 1,300 through investing with Vuono, Vuono earned approximately $ 460.94 in commission income from trades in Guggino's account. [Pl. Exh. 1306 at pp. 32-33; Pl. Exh. 2801 at 10.h.4.].
4. Jonathan Treat
Jonathan Treat ("Treat"), a resident of Bolton, Connecticut, is a farmer. [Trial at p. 292; Pl. Exh. at p. 292]. In or about the summer of 1989, Vuono became Treat's registered representative at J.T. Moran, replacing Treat's previous J.T. Moran broker. [Trial at p. 297; Pl. Et. 1307 at p. 26]. Treat had limited investment experience prior to investing through Vuono. [Trial at p. 293; Pl. Et. 1307 at pp. 5-16]. Prior to investing through Vuono, Treat did not know the meaning of a market maker or a bid and ask price.
Treat lost approximately $ 140,000 through investing with Vuono. [Trial at p. 325]. Vuono earned approximately $ 25,153:60 in commission income from trades in Treat's account. [Pl. Exh. 2801 at para. 10.h.1.].
5. Kenneth C. Beck
Kenneth C. Beck ("Beck"), a resident of Cherry Hill, New Jersey, is a salesman. Vuono cold called Beck in or about August 1989 and soon thereafter Beck opened an account at J.T. Moran. [Pl. Exh. 1308 at p. 8]. Beck lost approximately $ 440 through investing with Vuono. [Pl. Exh. 1308 at p. 19]. Vuono earned approximately $ 156.25 in commission income from trades in Beck's account. [Pl. Exh. 2801 at para. 10.h.2.].
IV. House Stocks
While working for First Jersey, Sherwood and/or J.T. Moran, Ben Hasho, Mecca, Yule and Vuono recommended to numerous customers, and potential customers, that they purchase certain over-the-counter securities issued by unseasoned companies with low revenues and negative earnings. These securities were "house stocks."
J.T. Moran and Sherwood split with its registered representatives an average gross commission of 24% of the purchase price of these stocks. *fn6" Therefore, Sherwood and J.T. Moran registered representatives received an average of 12% of the customer's purchase price as net commission on Sherwood and J.T. Moran house stock sales. [Pl. Exh. 2801 at para. 4-211]. However, such commissions ranged as high as 25%. [Trial at pp. 847-848, 1017].
With one exception, the SEC profiled only J.T. Moran house stocks because these securities constitute the bulk of the securities recommended to the customer witnesses in this case. The house stocks recommended by J.T. Moran registered representatives included the following, [Trial at pp. 816-817; Pl. Exh. 1101 at pp. 65-67]: ...
END OF EXCERPT
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There is a lot more about Vuono's conduct that follows the above.
Link: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19920213_0000068.SNY.htm/qx
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