ENFORCEMENT PROCEEDINGS - Stock Promoter Receives 10-Year Sentence for

Mar 19, 2008 (SECURITIES AND EXCHANGE COMMISSION RELEASE/ContentWorks via COMTEX) -- NO MATCHES FOUND. | news | PowerRating | PR Charts -- The Commission today announced that on March 14, Michael Saquella, a.k.a. Michael Paloma, was sentenced to serve ten years in federal prison consisting of 60 months for conspiracy to commit securities fraud and 60 months for conspiracy to commit electronic mail fraud. Paloma was also ordered to pay restitution to the victims of his crime in the amount $7,806,303.58.

On Aug. 20, 2007, Paloma pleaded guilty to one count of conspiracy to commit securities fraud and one count of electronic mail fraud. The criminal case was prosecuted by the U.S. Attorney's Office for the Eastern District of Virginia.

In a related case, on Sept. 17, 2007, the Commission filed a complaint in U.S. District Court for the Eastern District of Virginia, alleging that, over the past four years, Paloma repeatedly passed himself off to principals of private, cash-strapped companies as a legitimate financier, persuading company principals to issue to Paloma-affiliated entities large controlling blocks of stock, which were then resold in unlawful public offerings.

According to the Commission's complaint, Paloma surreptitiously gained control of the company's shares by convincing management to issue large blocks of stock to one or more entities he controlled. These issuances, purportedly made under federal registration exemptions to "accredited investors," were part of a plan to circumvent the registration requirements of the federal securities laws. In furtherance of this plan, Paloma obtained bogus opinions of counsel that permitted transfer agents to issue share certificates to his entities free of legends restricting resale. In fact, the entities Paloma controlled were not bona fide accredited investors, but merely conduits through which he and Kaplan effected unregistered public distributions of stock.

The Commission further alleged that, once his entities acquired the "free-trading" shares, Paloma then coordinated manipulative public trading -- carried out in part by Kaplan -- which artificially inflated the value of each issuer's stock. With the appearance of an active trading market established, Paloma coordinated the dissemination of millions of false and/or misleading blast fax and spam e-mails touting the companies' shares. Ultimately, Paloma and Kaplan dumped stock of the microcap issuers into the public market at the artificially inflated prices, realizing profits of some $2,155,000 and $677,000, respectively.

After Paloma and Kaplan liquidated their holdings of each company's stock, they ceased trading in the stock and the market for the shares collapsed. The Commission alleged that Paloma and Kaplan carried out versions of this scheme using the shares of Courtside Products, Inc., Latin Heat Entertainment, Inc., Xtreme Technologies, Inc., PokerBook Gaming Corp., Commanche Properties, Inc., TKO Holdings Ltd. and Motion DNA Corp.

In the Commission's action, Paloma consented to the entry of a final judgment (1) permanently enjoining him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) imposing a penny stock bar against him; and (3) directing that he disgorge $2,155,034 in unlawful profits, plus prejudgment interest of $364,265. Kaplan has consented to the entry of a final judgment (1) permanently enjoining him from violating 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; (2) imposing a penny stock bar against him; and (3) directing that he disgorge $677,632 in unlawful profits, plus prejudgment interest of $121,127. [SEC v. Michael Saquella, a.k.a. Michael Paloma, and Lawrence Kaplan, Civil Action No. 1:07CV895 (BRP) (E.D. Va.)] (LR-20502)

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