Blackout Media Corp (BKMP)

[scion]

SEC wins default judgment against Winick

2010-10-01 13:24 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1765606&symbol=*SEC&news_region=C

The U.S. Securities and Exchange Commission has won a default judgment against Sandy Winick, the Toronto man facing civil charges in New York for improperly creating 59 shell companies and selling them. The SEC sought the judgment earlier this year, stating that Mr. Winick had not answered the 15-month-old case. U.S. District Court Judge George Daniels granted the SEC's request on Sept. 30, 2010, and referred the case to a magistrate judge to determine damages.

The SEC claims that Mr. Winick, over a two-year period, amassed an inventory of public shells by creating spinoffs from a public company he controlled, First Canadian American Holding Corp. He sold the spinoffs at prices between $50,000 and $100,000. (All figures are in U.S. dollars.) At least six of those shells later became targets of regulatory action. The SEC halted five of them in Operation Spamalot, a crackdown on spam stocks, and it launched an enforcement case against another, ZNext Mining Corp., in 2009.

The SEC is seeking $3.55-million from Mr. Winick, which includes disgorgement of $3.2-million, interest of $229,465 and a $130,000 civil penalty. The regulator says it served Mr. Winick with the suit on July 16, 2009, but he has not filed any response, nor has he hired a lawyer to represent him.

SEC's complaint

The SEC launched the case on June 12, 2009, when it filed a civil complaint against Mr. Winick in the Southern District of New York. According to the complaint, Mr. Winick created the 59 shells between 2002 and 2004. He did not file any meaningful disclosure documents for them, and simply created the companies so that he could have an inventory of public shells for sale. He held complete control of the shells because he controlled all the shares of First Canadian American, both personally and through accounts in the names of his wife and his friends.

The buyers of these shells included a convicted securities violator from Kansas, who the SEC did not name. According to the complaint, the Kansas man purchased a shell that became HEE Corp., which touted a drug supplement that could purportedly cure Type II diabetes. The stock had a high of 94 cents on July 20, 2004, and fell to under a penny on Dec. 21, 2004. The SEC said Mr. Winick served as a straw president of the company so the unnamed Kansas man could secretly operate it.

Another spinoff became ZNext Mining and was controlled by Elvira Gamboa, a Philippine woman who was once president of the non-existent Dominion of Melchizedek. (In a separate enforcement action, the SEC claimed that she promoted a mining interest in the Philippines that ZNext did not actually have, while selling 19 billion shares for proceeds of $5.4-million. As with Mr. Winick, she did not answer the case, and the SEC won a default judgment against her on Aug. 30, 2010.)

The SEC identified another of the spinoffs as a company that became Koko Petroleum Inc., which the regulator halted in 2007 as part of Operation Spamalot. (The complaint did not mention that Koko had links to B.C. promoter Robert Shull. In April, 2004, he registered its domain name, www.kokooil.com, and his wife owned five million of its shares. The SEC has not accused Mr. Shull of any wrongdoing.)

Four other shells that Mr. Winick sold also became Operation Spamalot targets. These were Amerossi International Group Inc., Relay Capital Corp., Wataire Industries Inc. and WayPoint Biomedical Holdings Inc.

In addition to his cash fee of between $50,000 and $100,000, Mr. Winick retained stock in some of the shells. The SEC claimed that he later sold some of this stock, grossing $3.2-million.

The SEC sought appropriate civil penalties and disgorgement of profits, as well as an order that Mr. Winick cancel shares of any First Canadian subsidiary he owns or controls. In addition, the regulator asked for an order permanently banning Mr. Winick from participating in penny stock offerings. In filing the case, the SEC acknowledged the assistance of the Ontario Securities Commission.

http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1765606&symbol=*SEC&news_region=C