WASHINGTON (Legal Newsline) - A Hawaii man was charged Wednesday with operating a fraudulent stock sale scheme.
Accused along with Nicholas Louis Geranio was his longtime business partner, Keith M. Field, and two firms he used to orchestrate the sales.
The Securities and Exchange Commission alleged that Geranio covertly founded small companies, installed management, and recruited overseas boiler rooms - which were nothing more than call centers staffed with telemarketers each run by one unregistered trader. The trader was typically an ex-patriate U.S., British or Australian residing in Spain, it is alleged. Each one allegedly had his or her own team and competed with other teams to sell the Regulation S shares.
Regulation S stock, is exempt from Securities and Exchange Commission registration under the securities laws because it is offered solely to investors located outside the United States.
The boiler rooms allegedly used false and misleading, high-pressure sales tactics to sell the Regulation S shares, and received most of the sales proceeds. According to the SEC communique, Geranio worked covertly to maintain publicly-traded shares trading at prices conducive to the boiler room sales.
He allegedly accomplished this by directing Field, personal friends, and others to open accounts and buy or sell the publicly-traded shares. These manipulative trades created the impression of active trading and market value that the stock would not have otherwise had, the SEC says.
The SEC alleges that Geranio created eight U.S.-based companies used to raise money through the sale and handpicked the management for the companies, primarily Field. Geranio then allegedly set up consulting arrangements through his firms - The Good One Inc. and Kaleidoscope Real Estate Inc. - so he could instruct management on how to run the companies and raise money offshore. Geranio extracted consulting fees from the companies, which generally had few or no employees, little or no office space, and no sales or customers, the SEC says.
According to the SEC, Field drafted bogus business plans, fake marketing materials, and website information about the companies. These were then allegedly provided to investors as part of the fraudulent solicitation efforts of the, primarily Spanish boiler rooms. More than $35 million was obtained from investors, the SEC says.
"Geranio covertly set up companies and manipulated the market for their stock to profit from aggressive offshore boiler room activity," said Stephen L. Cohen, Associate Director in the SEC's Division of Enforcement.
"Geranio pulled the strings while Field scripted the show for the boiler rooms to bring a payday to everyone but the investors."
The SEC filed its complaint in the U.S. District Court for the Central District of California. The alleged fraudulent activities took place from April 2007 to September 2009.