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SEC bans Riviello for Asia Global, GH3 Int'l

2012-02-15 14:47 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-1927076&symbol=*SEC&news_region=C

The U.S. Securities and Exchange Commission has secured a permanent ban against Marc Riviello, the California broker who served a $6.2-million market manipulation scheme that included former Investors Hub operator Matthew Brown. (All figures are in U.S. dollars.) The ban, contained in an administrative order dated Feb. 10, 2012, prevents him from acting as a broker and from trading penny stocks. The SEC has also secured a $283,268 disgorgement order against Mr. Riviello in a related civil suit, payment of which the judge has waived based on his financial condition. Both orders represented the product of settlements, in which Mr. Riviello did not admit to any wrongdoing.

The penalties stem from a scheme to manipulate four stocks with misleading news and manipulative trades in 2006 and 2007. The stocks included Playstar Corp., an Ontario pink sheets listing that was purportedly developing a text messaging system for cellphones. Mr. Riviello's role in the scheme was to help Mr. Brown and others dump 54 million improperly issued shares through nominee accounts at Los Angeles firm AIS Financial Inc., which he co-owned.

The ban comes as Mr. Riviello, 53, is nearing completion of a jail term he received for the scheme. In April, 2010, he pleaded guilty to one count of conspiracy to commit money laundering and later received eight months in jail. (The judge also ordered him to participate in a drinking driver program and to enroll in cognitive behaviour therapy, which is commonly used to treat substance abuse and anxiety.) He is scheduled for release from the medium-security Lompoc prison in California on May 10, 2012.

Mr. Brown, who planned much of the scheme, is also in jail. He pleaded guilty to securities fraud and money laundering charges in February, 2010, and received a four-year sentence. As part of the sentence, the judge entered a $4.78-million criminal forfeiture order against him (which Mr. Brown called a "financial death sentence" as part of an unsuccessful attempt to have the penalty overturned). He is scheduled for release from a medium-security prison in Atlanta on Dec. 9, 2014.

Riviello's charges

The charges against Mr. Riviello are described in a civil complaint the SEC filed against him and others in the District of Delaware on May 21, 2009. The regulator said that he was part of a "ring of serial penny stock manipulators" that operated at least partly through Investors Hub in 2006 and 2007. The stocks that the men manipulated, in addition to Playstar, were GH3 International Inc., Asia Global Holdings Inc. and Xtreme Motorsports of California Inc.

The largest of the manipulations was that of Asia Global Holdings which, according to the SEC, produced $4-million in illicit proceeds for the men. The company purported to have the rights to the show "Who Wants to be a Millionaire" in China. The scheme, as described by the SEC, began in August, 2006, when Mr. Riviello, Mr. Brown and a third defendant, Joseph Mangiapane, planned a series of misleading press releases to boost the stock. As part of the manipulation, Mr. Riviello opened several nominee accounts that received millions of shares issued in improper S-8 offerings.

The trading part of the scheme began on Aug. 9, 2006, when two other defendants, Pawel Dynkowski and Nathan Michaud, boosted the stock with wash sales and matched orders, sending it to 41 cents from 11.5 cents, the SEC said. As the pair were manipulating the stock, Mr. Riviello accepted sell orders from Mr. Brown representing millions of shares.

Around the same time, Mr. Dynkowski and Mr. Brown arranged for the company to issue news touting purportedly good financial results. "Dynkowski told Brown to 'make it sound good ... like AAGH [Asia Global] announces record revenue net profits [sic]' and suggested that the press release state that the company's profits had increased by at least 300%," the complaint stated. The company then issued a release claiming that second quarter income had risen by 370 per cent.

The SEC said that Mr. Riviello either knew or was reckless in not knowing that the shares he was selling were part of a pump-and-dump. The men sold 54 million shares of the company through three promotional cycles, and the $4-million in proceeds was divided between Mr. Dynkowski, Mr. Brown, Mr. Michaud, Mr. Riviello and Mr. Mangiapane. (Asia Global has since become inactive, and was last at 0.12 cent.)

Mr. Riviello also had a role in the manipulation of GH3 International, a company that claimed to be developing an anti-aging treatment. Like Asia Global, the men boosted the stock with wash trades and misleading news releases, the SEC said. They then dumped $747,609 worth of stock while the company claimed that it would have revenue of over $3-million in 2006. According to the SEC, a bank account that Mr. Riviello controlled received $253,000 in proceeds from the scheme. He withdrew $220,000 and delivered the money to others.

The SEC sought injunctions preventing future violations of the U.S. Securities Act, appropriate civil penalties and disgorgement of profits.

While the SEC is still attempting to secure civil penalties against some of the men, the parallel criminal cases are mostly done. The criminal defendants originally included Mr. Mangiapane, but prosecutors dropped the charges against him before trial, saying it would "not be prudent for the government to proceed." He has not yet answered the SEC case. There were no criminal charges against Mr. Michaud, and he settled the SEC case by agreeing to pay $50,000. He did not admit to any wrongdoing.

Mr. Dynkowski, meanwhile, remains a fugitive. Although he lived in Delaware during the manipulation, he is a citizen of Poland and has not answered either the criminal or SEC cases. (The SEC has since charged him for his role in the $11-million pump-and-dump of Rudy Nutrition in 2008. His co-defendants include Notre Dame football player Daniel "Rudy" Ruettiger, who was the subject of the 1993 movie "Rudy." Mr. Ruettiger settled the case when it was filed in December, 2011, agreeing to pay $382,866, without admitting any wrongdoing.)

http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1927076&symbol=*SEC&news_region=C