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Initial Decision of an SEC Administrative Law JudgeIn the Matter of
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In the Matter of SALVATORE PIAZZA, |
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INITIAL DECISION
September 26, 2003 |
| APPEARANCES: | Peter A. Pizzani, Jr. and Daphna Abrams, for the Division of Enforcement, Securities and Exchange Commission Avraham C. Moskowitz, for Respondent John Bruzzese Respondent Robert Gallo, pro se |
| BEFORE: | Robert G. Mahony, Administrative Law Judge |
The Securities and Exchange Commission (Commission) initiated this proceeding on June 14, 2000, with an Order Instituting Proceedings (OIP) pursuant to Section 8A of the Securities Act of 1933 (Securities Act) and Sections 15(b)(6) and 21C of the Securities Exhange Act of 1934 (Exchange Act), against thirty-two Respondents.1 The OIP charged Respondents with willful participation in securities manipulation schemes in violation of Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
On July 5, 2000, Respondent John Bruzzese (Bruzzese) filed an Answer to the OIP, in effect, denying all of the allegations in the OIP except those found in paragraph fifteen, which concerned his association with broker-dealers. On January 21, 2003, Respondent Robert Gallo (Gallo) filed an Answer, but failed to deny any of the allegations in the OIP.
On August 19, 2003, the Division of Enforcement (Division) filed a motion for summary disposition of this proceeding and an accompanying memorandum (Motion and Memorandum),2 requesting that I either default or grant summary disposition against each Respondent except Palla.3 Also, on August 19, 2003, the Division filed with the Commission a Motion to Modify the Order Instituting Proceedings to Withdraw the Disgorgement and Civil Penalties Claims Against All Respondents, which the Commission granted on September 11, 2003. Bruzzese and Gallo failed to respond to the Motion and Memorandum. In this Initial Decision, I will address the Division's request for summary disposition against Bruzzese and Gallo.
The OIP alleges that, from 1995 through 1996 (the relevant period), Bruzzese allegedly participated in three fraudulent manipulation schemes directed by principals of DMN Capital Investments, Inc. (DMN), involving securities issued by Spaceplex Amusement Centers International Ltd., Inc. (Spaceplex), Beachport Entertainment Group, Inc. (Beachport), and International Nursing Services, Inc. (International Nursing). During the relevant period, Gallo allegedly participated in those manipulation schemes in addition to a manipulation scheme involving stock issued by Reclaim, Inc. (Reclaim). By willfully participating in these securities manipulation schemes, Bruzzese and Gallo allegedly violated Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Pursuant to Rule 250(a) of the Commission's Rules of Practice, 17 C.F.R. § 201.250(a), a party may make a motion for summary disposition as to any or all allegations against a respondent in the OIP. The facts of the pleadings of the party against whom the motion is made shall be taken as true, except as modified by stipulations or admissions made by that party, by contested affidavits, or by facts officially noted pursuant to Rule 323 of the Commission's Rules of Practice, 17 C.F.R. § 201.323. According to Rule 250(b) of the Commission's Rules of Practice, 17 C.F.R. § 201.250(b), the administrative law judge may grant the motion for summary disposition if there is no genuine issue of material fact and the party making the motion is entitled to summary disposition as a matter of law.
Bruzzese was a registered representative at Atlantic General Financial Group (Atlantic General) from June 1995 through August 1995, and a registered representative at Monitor Investment Group, Inc. (Monitor), from August 1995 through February 1996. During the relevant period, Bruzzese participated in offerings of penny stock issued by Spaceplex, Beachport, and International Nursing. (Memorandum at 7-8; Abrams Decl. ¶¶ 7-8.) Bruzzese pled guilty to Count One of the Indictment in United States v. Dacunto, 00 Crim. 0620 (S.D.N.Y. June 5, 2000) (Dacunto Indictment), which alleged conspiracy to commit securities fraud, wire fraud, and commercial bribery in connection with the manipulation of penny stock issued by Spaceplex. (Motion and Memorandum, Ex. 2 at 1-17, Ex. 29.) In his plea, Bruzzese admitted that he agreed to, and did accept, undisclosed commissions in connection with the sale of Spaceplex stock to customers. (Motion and Memorandum, Ex. 29 at 20-21.) On July 9, 2001, the United States District Court for the Southern District of New York (District Court) entered a judgment of conviction against Bruzzese for the offenses charged in Count One of the Dacunto Indictment. (Motion and Memorandum, Ex. 30.)
Gallo was an undisclosed principal at Atlantic General from June 1995 through September 1995, and a registered representative and undisclosed principal at Monitor from September 1995 through September 1996. In February 1998, the National Association of Securities Dealers barred Gallo from associating with any of its member firms. During the relevant period, Gallo participated offerings of penny stock issued by Spaceplex, Reclaim, Beachport, and International Nursing. (Memorandum at 7, 9; Abrams Decl. ¶¶ 7-8.) Gallo pled guilty to Counts One and Two of the Indictment in United States v. Lino, 00 Crim. 0632 (S.D.N.Y. June 7, 2000) (Lino Indictment). (Motion and Memorandum, Ex. 4 at 2-49, Ex. 17.) As part of his plea agreement, he admitted to participating in fraudulent schemes, including the failure to disclose to customers the receipt and transmission of secret payments in connection with the sale of stock issued by Spaceplex, Reclaim, Beachport, and International Nursing. (Motion and Memorandum, Ex. 17 at 22-25.) On June 1, 2001, the District Court entered a judgment of conviction against Gallo for the offenses charged in Counts One and Two of the Lino Indictment. (Motion and Memorandum, Ex. 18.)
Section 17(a) of the Securities Act prohibits any person from using, directly or indirectly, the mails or instruments of interstate commerce in the offer or sale of securities to employ any device, scheme, or artifice to defraud; use false statements or omissions of material fact to obtain money or property; or engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a purchaser. Furthermore, Section 10(b) of the Exchange Act and Rule 10b-5 prohibit any person from using, directly or indirectly, the mails or instruments of interstate commerce in connection with the purchase or sale of any security to employ any device, scheme, or artifice to defraud; make any untrue statement or omission of material fact; or engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. Based on their participation in the fraudulent schemes described above, I conclude that Respondents Gallo and Bruzzese willfully violated Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
I have concluded that Respondents Bruzzese and Gallo committed the violations charged in the OIP. The remaining issue is to determine what sanctions are appropriate in the public interest. See Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff'd on other grounds, 450 U.S. 91 (1981). The severity of a sanction depends on the facts of each case and the value of the sanction in preventing a recurrence. Berko v. SEC, 316 F.2d 137, 141 (2d Cir. 1963); see also Richard C. Spangler, Inc., 46 S.E.C. 238, 254 n.67 (1976); Leo Glassman, 46 S.E.C. 209, 211-12 (1975). Willfulness does not require intent to violate, but merely intent to do the act, which constitutes a violation. Arthur Lipper Corp. v. SEC, 547 F.2d 171, 180 (2d Cir. 1976).
Section 8A of the Securities Act and Section 21C of the Exchange Act authorize the Commission to issue a cease-and-desist order against any person who is violating, has violated, or is about to violate any provision of the Securities Act and Exchange Act, or any rule or regulation thereunder, from committing or causing such violation and any future violation of the same provision, rule, or regulation. The Commission has held that in order to issue a cease-and-desist order, there must be "some likelihood of future violations" and "[a]bsent evidence to the contrary, a finding of [a] violation raises a sufficient risk of future violation." KPMG Peat Marwick, LLP, 74 SEC Docket 384, 429-30 (Jan. 19, 2001), pet. denied, 289 F.3d 109 (D.C. Cir. 2002).
Respondent Bruzzese participated in fraudulent schemes in connection with penny stocks and accepted undisclosed commissions in violation of the antifraud provisions of the securities laws. Furthermore, he pled guilty to conspiracy to commit securities fraud, wire fraud, and commercial bribery in connection with the sale of Spaceplex stock. Respondent Gallo also participated in fraudulent schemes involving penny stock. Specifically, Gallo failed to disclose to customers the transmission and receipt of secret payments in connection with the sale of stock issued by Spaceplex, Reclaim, Beachport, and International Nursing. Gallo's conviction was based on conduct that violated the antifraud provisions of the securities laws. Gallo has admitted to the charges in the OIP by his failure to deny such allegations. See 17 C.F.R. § 201.220(c). Based on their conduct, a strong likelihood exists that Respondents Bruzzese and Gallo will violate Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in the future. Accordingly, cease-and-desist orders are appropriate as to Respondents Bruzzese and Gallo.
Pursuant to Section 15(b)(6) of the Exchange Act, the Commission is authorized to impose certain remedial sanctions against persons associated with broker-dealers and persons who participate in offerings of penny stock, if it is in the public interest and the person has been convicted of a felony or misdemeanor involving "the purchase or sale of any security . . . bribery . . . or conspiracy to commit to any such offense" or that "arises out of the conduct of the business of a broker [or] dealer" within ten years of the commencement of the proceeding. The Commission can also impose, in the public interest, remedial sanctions against such persons if they have willfully violated, or aided and abetted a violation of a provision of the Securities Act and the Exchange Act. The sanctions under Section 15(b)(6) of the Exchange Act include a bar from association with any broker or dealer and a bar from participating in any offering of penny stock.
Bruzzese and Gallo were both associated with broker-dealers and participated in penny stock offerings during the relevant period. Bruzzese was convicted of conspiracy to commit securities fraud, wire fraud, and commercial bribery within ten years of the commencement of this proceeding. Respondent Gallo's conviction, which also occurred within ten years of the commencement of this proceeding, was related to his fraudulent acts as a registered representative in connection with the sale of securities issued by Spaceplex, Reclaim, Beachport, and International Nursing. Both Respondents admitted to willful violations of the antifraud provisions of the securities laws. Due to their conduct, I conclude that it is in the public interest to bar Respondents Bruzzese and Gallo from association with any broker or dealer. I further conclude that is in the public interest to bar them from participating in any offering of penny stock.
IT IS ORDERED that the Division of Enforcement's motion for summary disposition against Respondents John Bruzzese and Robert Gallo is GRANTED;
IT IS FURTHER ORDERED that, pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Respondents John Bruzzese and Robert Gallo CEASE AND DESIST from committing or causing any violation or any future violation of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;
IT IS FURTHER ORDERED that, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Respondents John Bruzzese and Robert Gallo are hereby BARRED from association with any broker or dealer; and
IT IS FURTHER ORDERED that, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, Respondents John Bruzzese and Robert Gallo are hereby BARRED from participating in any offering of penny stock.
This Order shall become effective in accordance with and subject to the provisions of Rule 360 of the Commission's Rules of Practice, 17 C.F.R. § 201.360. Pursuant to that rule, a petition for review of this Initial Decision may be filed within twenty-one days after service of the decision. It shall become the final decision of the Commission as to each party who has not filed a petition for review pursuant to Rule 360(d)(1) within twenty-one days after service of the Initial Decision upon it, unless the Commission, pursuant to Rule 360(b)(1), determines on its own initiative to review this Initial Decision as to any party. If a party timely files a petition for review, or the Commission acts to review as to a party, the Initial Decision shall not become final as to that party.
| ______________________________ Robert G. Mahony Administrative Law Judge |
1 The United States Attorney for the Southern District of New York (USAO) brought criminal charges against each of the thirty-two Respondents. On July 27, 2000, at the request of the USAO, I stayed the proceeding. On March 7, 2002, the Commission entered into a settlement agreement with Respondent Facundo Ponce. The stay has been lifted as to all Respondents, except Respondent William F. Palla (Palla), whose criminal proceeding has not yet been resolved.
2 The Motion for Disposition of this Proceeding, Except as to Disgorgement and Civil Penalties, Against all Respondents Other than William F. Palla and the accompanying memorandum will be referred to as (Motion and Memorandum), and the attached Exhibits will be referred as (Motion and Memorandum, Ex. __.). The Declaration of Daphna Abrams in Support of the Division of Enforcement's Motion for Disposition of this Proceeding, Except as to Disgorgement and Civil Penalties, Against all Respondents Other than William F. Palla will be referred to as (Abrams Decl.).
3 On September 17, 2003, I issued an Order Making Findings and Imposing Remedial Sanctions By Default against the following Respondents, who failed to file Answers to the OIP: Salvatore Piazza, James S. Labate, Emmanuel Gennusso, Cary F. Cimino, Todd M. Nejaime, Kevin P. Radigan, Robert J. Dacunto, Michael P. Dacunto, Joseph P. Meduri, Vincent A. Padulo, Jr., Vito G. Padulo, Salvatore F. Ruggiero, Patrick Giglio, Irving Stitsky, Paul L. Burton, Marc I. Burton, Kenneth J. Fuina, Marc L. Weissman, Anthony P. Dinota, Jr., Chester L. Chicosky, Lawrence M. Choiniere, William P. Burke, Michael Caso, John Catalano, Jr., George Bisnoff, Damien Douglas, Craig P. McGuinn, II, and Mark Danieli. Salvatore Piazza, Exchange Act Release No. 48497 (Sept. 17, 2003).
http://www.sec.gov/litigation/aljdec/id236rgm.htm| Home | Previous Page | Modified: 09/30/2003 |