First Pet Life, Inc. (FPLF)

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NEW YORK—The former chief executive officer of The Classica Group Inc. has pleaded guilty to securities fraud charges.

Scott Halperin, 45, entered a guilty plea before U.S. Magistrate Judge Robert M. Levy at the U.S. Courthouse in Brooklyn. When sentenced, Halperin faces a maximum sentence of 25 years’ imprisonment and a fine of up to $250,000, or twice the gain or loss from the offenses.

Prosecutors say the charges leading to the guilty plea stem from Halperin’s participation in two related schemes in August and September 2003, one involving The Classica Group, Inc. and one involving Marx Toys and Entertainment, Inc.

With respect to the Classica scheme, Halperin negotiated agreements in which Classica gave the Rubin Investment Group, an investment bank which at one time maintained offices in Los Angeles, Manhattan, and Lake Helen, Florida, an option to purchase 1.8 million Classica shares, more than 28 percent of the company’s outstanding shares, at a significant discount to the prevailing market price, in exchange for purported investment banking services.

On March 28, Dan Rubin, chief executive officer of Rubin Investment Group Inc. pleaded guilty to securities fraud and conspiracy charges, marking the final plea by the senior management of the firm. Previously, the firm’s former managing director, the former director of investment banking, and the former director of mergers and acquisitions, entered guilty pleas to securities and conspiracy charges.

The shares were registered pursuant to Securities and Exchange Commission Form S-8, which permits companies to register shares to pay employees or bona fide consultants, but specifically prohibits using the shares to raise capital. In fact, the promised investment banking services were never provided, and the Form S-8 registration was simply a ruse employed by Halperin to unlawfully raise capital for Classica and defraud Classica’s shareholders.

On the day prior to the Rubin Investment Group’s receipt of the majority of the Classica shares, the share price – which had previously languished under a dollar and had caused the NASDAQ to threaten Classica with delisting – more than doubled on trading volume far in excess of normal. The Rubin Investment Group then promptly sold the shares on the open market at the higher price and sent a portion of the proceeds from these sales to Classica.

With respect to the Marx Toys scheme, Halperin, a large shareholder and former Marx Toys officer, negotiated a purported investment banking agreement with the Rubin Investment Group similar to the Classica stock deal. Specifically, Marx Toys issued 6.8 million shares, more than 18 percent of its outstanding shares, to the Rubin Investment Group at a significant discount in exchange for investment banking services, which were never provided. Again, the shares were fraudulently registered under Form S-8. The Rubin Investment Group sold the Marx shares at a substantial profit on the open market and gave a portion of the proceeds to Marx Toys.

As compensation for his involvement in the scheme, Halperin was promised undisclosed finder’s fees in the name of a nominee by both Marx Toys and the Rubin Investment Group, and was also given additional discounted shares of Marx Toys. 4-14-07

http://www.northcountrygazette.org/news/2007/04/14/marx_fraud/