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SEC OBTAINS ASSET FREEZE AND OTHER RELIEF IN

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Monday, September 17, 2012 6:19:45 PM
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SEC OBTAINS ASSET FREEZE AND OTHER RELIEF IN MICROCAP FRAUD

U.S. Securities and Exchange Commission

Litigation Release No. 22482 / September 17, 2012

SEC v. Freedom Environmental Services, Inc., et al., Civil No.: 6:12-CV-1415-ORL-28-DAB (USDC M.D. Fla., Filed September 17, 2012).

SEC OBTAINS ASSET FREEZE AND OTHER RELIEF IN MICROCAP FRAUD

On September 17, 2012, the Securities and Exchange Commission obtained a temporary restraining order against future violations of the antifraud, issuer reporting, books and records, internal controls and officer certification provisions of the federal securities laws. It is alleged these violations occurred in furtherance of a scheme orchestrated by Michael Borish and Michael Ciarlone, through Freedom Environmental Services, Inc. (Freedom) which also involved misappropriation of corporate assets by Borish and Ciarlone. The court also appointed a receiver to preserve and marshal assets, froze Borish’s assets, prohibited the destruction of documents and records, and ordered expedited discovery.

The Commission’s complaint, filed in the U.S. District Court for the Middle District of Florida (Orlando Division), alleges Borish, Freedom’s former chief executive officer, orchestrated a scheme to remain in control of the company after being removed by the board of directors. Despite the board’s action, Borish continued to act as the company’s de facto CEO and to control its operations. From at least July 2010 – both before and after his ostensible removal – Borish caused Freedom to file numerous false and misleading annual, quarterly, and periodic reports with the Commission. Freedom also issued a false press release regarding the acquisition of another company, failed to file Forms 8-K regarding material events, such as Freedom’s recent bankruptcy filing, insider litigation settlements, and repeatedly misrepresented the composition of the board of directors and identities of Freedom’s officers in Freedom’s filings. It is further alleged that Borish and Ciarlone, from July 2011 through at least May 2012, stole corporate funds to pay personal expenses.

The complaint alleges that through this conduct Freedom, Borish and Ciarlone violated Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(2)(A) and (B), Section 13(b)(5) and 14(c) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13a-14, 13b-1 and 14c-6 thereunder.

A hearing has been set for October 1, 2012, on the Commission’s motion for a preliminary injunction. Separately, the Commission issued an order suspending trading in the securities of Freedom from September 17, 2012 through September 28, 2012.

Paul N. Feindt and Scott R. Frost conducted the Commission’s investigation; Thomas M. Melton and Daniel J. Wadley will lead the litigation.

SEC Complaint in this matter
http://www.sec.gov/litigation/complaints/2012/comp22482.pdf




http://www.sec.gov/litigation/litreleases/2012/lr22482.htm


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