Zeons Corporation (ZEON)

[scion]

42. The Commission has established reasonable approximations of the ill-gotten gains which flowed to Rivera and Price as a result of the “pump and dump” scheme and the benefit which inured to Rivera and Price from their long-term access to the proceeds from the scheme. Thus the Court will order Rivera’s estate and Price to disgorge $1,492,687.53 and to pay prejudgment interest of $143,852.59, totaling $1,636,540.12.

C. Civil Penalties against USSE and Rivera’s Estate

43. A civil penalty is determined “in light of the facts and circumstances” of a particular case. 15 U.S.C. § 78u(d)(3)(B)(i). “First tier” penalties for violations occurring after February 14, 2005, but on or before March 3, 2009, may be imposed up to the greater of $6,500 or the amount of ill-gotten gain to the defendant as a result of the violation. See 17 C.F.R. § 201.1003. When the violation involves fraud, “second tier penalties” may be imposed up to the greater of $65,000 or the amount of ill-gotten gain to the defendant as a result of the violation. A “third tier” civil penalty of up to the larger of $130,000 or the amount of pecuniary gain to the defendant as a result of the violation may be imposed if the violation involved fraud or deceit and the violation resulted in substantial losses or created a significant risk of substantial losses to other persons. Id. The decision to impose a penalty, and the amount of any such penalty, is a matter within the discretion of the Court. In determining whether to award civil penalties, courts consider numerous factors, including the egregiousness of the violation, the isolated or repeated nature of the violations, the degree of scienter involved, whether the defendant concealed his trading, and the deterrent effect given the defendant’s financial worth. SEC v. Sargent, 329 F.3d 34, 42 (1st Cir. 2003).

44. Rivera’s death is not a bar to an award of civil penalties. The court in Fielding further held that the cause of action under Rule 10b-5, rooted in equity, may survive even if punitive damages are requested, and that punitive damages may be awarded if the cause of action is otherwise one that survives. 316 F.Supp. at 85. Because the civil penalties here presuppose disgorgement of ill-gotten gains, the action survives Rivera’s death and civil penalties may be assessed against Rivera’s estate.

45. For all of the reasons which justify a permanent injunction here, USSE’s and Rivera’s conduct falls under the “third tier.” The Court may assess a penalty against each of them in an amount it deems appropriate for each violation.

Dated: November 10, 2011 Respectfully Submitted,
/s/ Alex Rue
Alex Rue
Senior Trial Counsel
Georgia Bar No. 618950
COUNSEL FOR PLAINTIFF
Securities and Exchange Commission
3475 Lenox Road, N.E. Ste. 1000
Atlanta, Georgia 30326-1232
Tel: [phone]
Fax: [phone]

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