ummm i was not talking about that i was talking about this
United States Securities and Exchange Commission
Litigation Release No. 21423 / February 23, 2010
Securities and Exchange Commission v. Frank J. Custable, Jr., et al., Civil Action No. 03-CV-2182 (N.D. Ill.)
SEC Obtains Final Judgments Against 12 Defendants in Penny Stock Scheme
TheSecurities and Exchange Commission announced that the court has enteredfinal judgments against nine defendants and three relief defendants inconnection with a penny stock scheme orchestrated by Frank J. Custable,Jr. Filed on March 28, 2003 as an emergency TRO action, theCommission's complaint alleged that, for the period from at least Nov.2001 until the commencement of the Commission's action, Frank J.Custable Jr. and others engaged in a scheme to violate theregistration, antifraud and reporting violations of the federalsecurities laws through the use of unregistered and fraudulent pennystock offerings. The complaint alleged that Custable accomplished thisby obtaining and dumping massive quantities of improperly registeredshares of stock of at least seven different penny stock companies onthe general public, generating proceeds to Custable of at least $4.3million. The complaint further alleged that Custable fraudulentlyconcealed his ownership interest in the seven penny stocks by havingvarious entities and persons he controlled engage in a host ofsecurities transactions on his behalf. The complaint alleged thatCustable obtained stock through fraudulent Form S-8 registrations(normally intended to allow distribution of securities to employees andconsultants), fraudulent manipulations of Rule 144(k) holdingrequirements for resales of restricted stock, and through a scheme tocounterfeit nearly half of the outstanding stock in InnovationsHoldings, Inc., then known as "Blagman Media International, Inc." Inaddition to charging Custable and certain of his employees, theCommission also charged certain of the penny stock companies and theirofficers with securities fraud and registration violations. Custablehas pled guilty to various federal charges arising conduct in thescheme, and on June 9, 2009 was sentenced to a prison term of 21 years.
OnJanuary 28, 2010, Judge Joan B. Gottschall of the U.S. District Courtfor the Northern District of Illinois issued final judgments, bydefault, against: (i) Suburban Capital Corporation, the entity throughwhich Custable perpetrate his scheme; (ii) Blagman Media International,Inc. (now doing business as "Marketing Concepts International, Inc."),one of the penny stock company defendants with whom Custable perpetratehis scheme; (iii) Wasatch Pharmaceutical, Inc., another penny stockcompany defendant; (iv) ThermoElastic Technologies, Inc. (now doingbusiness as Wannigan Capital Corp."), a third penny stock companydefendant; (v) and three relief defendants to which Custabletransferred ill-gotten stock and sale proceeds - Active Investments,Inc., Pine Services, Ltda., and Sothis III, LDC. The final judgmentspermanently enjoin Suburban Capital, Wasatch and ThermoElastic fromviolations of Sections 5(a), 5(c) and 17(a) of the Securities Act of1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Actof 1934, and enjoin Blagman Media from violations of Section 5(a) and5(c) of the Securities Act. The Court also barred Suburban Capital fromengage in any future penny stock offering. The Court ordered SuburbanCapital to disgorge ill-gotten gains amounting to $3,447,617, plusprejudgment interest thereon in the amount of $1,667,026.67, for atotal monetary judgment of $5,114,644.47. The Court ordered BlagmanMedia to disgorge $803,500, plus prejudgment interest of $388,516.39,for a total of $1,192,016.39. The Court ordered Wasatch to disgorge$779,065, plus prejudgment interest of $376,701.31, for a total of$1,155,766.31. The court ordered disgorgement and prejudgment interesttotaling $506,774.32 against Active Investments, $224,275.08 againstPine Services, and $33,300.79 against Sothis II.
On February 12,2010, the court entered final judgments, by consent, against defendantsSara Wetzel (an employee of Custable) and David Giles (the former ChiefOperating Officer of Wasatch), permanently enjoining them fromviolations of Sections 5(a), 5(c) and 17(a) of the Securities Act of1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Actof 1934, and barring them from participating an any future penny stockoffering. The judgment against Giles also bars him from serving as anofficer or director of a public company. The judgment against Wetzelrequires her to pay disgorgement of $56,500, prejudgment interest of$27,739, and a civil penalty of $120,000. Wetzel and Giles consented tothe entry of these judgments without admitting or denying theallegations in the complaint. Wetzel and Giles also pled guilty in therelated criminal actions for their roles in Custable's scheme, eachreceiving 5 years probation.
Previously, on October 8, 2009, thecourt entered final judgments, by consent, against defendants RobertBlagman (the former CEO of Blagman Media), Pacel Corporation, MarshallHoldings International, Inc, and its former CEO, Richard Bailey. Thosejudgments permanently enjoin each of the defendants from violations ofSection 5(a) and (c) of the Securities Act, and additionallypermanently enjoin defendants Pacel, Bailey and Marshall Holdings fromviolations Section 17(a) of the Securities Act, and Section 10(b) andRule 10b-5 of the Exchange Act. The judgment against Bailey also barshim, for a period of five years, from acting as an officer or directorof a publicly held company. The judgment against Blagman orders him topay disgorgement in the amount of $250,000, prejudgment interest of$83,934, plus a civil penalty in the amount of $50,000. The judgmentagainst Pacel requires it to pay disgorgement in the amount of$200,000, plus prejudgment interest of $96,459. Blagman, Bailey,Marshall Holdings and Pacel all consented to the entry of these finaljudgments against them without admitting or denying the allegations inthe complaint.
For further information, see LR-18057 (March 31, 2003).
http://www.sec.gov/litigation/litreleases/2010/lr21423.htm
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