SEC Charges Four With Penny Stock Fraud Aimed at the Elderly
On April 7, the U.S. Securities and Exchange Commission sued Boca Raton-based eCareer Holdings, Inc., and its chief executive officer, Joseph J. Azzata, with securities fraud in connection with the sale of the company’s penny stock. According to a complaint filed in Miami federal court, Azzata engaged several individuals previously barred from acting as brokers to sell eCareer stock in a “boiler room” setup. The SEC claims investors, many of them elderly, were misled by Azzata and his agents, and Azzata himself misappropriated hundreds of thousands of dollars for his personal use.
SEC v. eCareer Holdings, Inc.
Azzata is the CEO and controlling shareholder of eCareer, which he formed in 2009 as an Internet-based career advertising company. To market his company to investors, Azzata hired Viper, another Boca Raton-based company consisting primarily of three men—Dean A. Esposito, Joseph DeVito and Frederick J. Birks—who also served as directors of eCareer. In fact, the SEC noted, Viper shared offices with eCareer and the former was essentially a shadow operation of the latter.
All four defendants were involved with another online staffing company that was shut down by Alabama securities regulators in 2010. The SEC previously issued orders against Esposito, DeVito and Birks, preventing them from ever selling penny stocks on commission. To circumvent this ban, the SEC said, Azzata hired Viper as an “advisor” and paid them a “finder’s fee” in exchange for soliciting investors.
Viper was little more than a boiler room run by unregistered brokers, the SEC said. Investors were never informed of the three men’s ban from selling penny stocks, nor were they told about the actual fees Viper collected. Potential investors were told that brokerage commissions would not exceed 10%; in reality, the SEC said Viper was paid as much as 30%.
Like many boiler rooms, Viper relied primarily on cold calls rather than targeting more sophisticated institutional investors. The SEC said most of the investors targeted by Viper were “older senior citizens,” many of them over the age of 80.
Aside from Viper’s 30% commissions, the SEC said Azzata himself used about $650,000 from the funds raised through penny stock sales to finance personal expenses. Among the highlights, the SEC claimed, were $135,000 for “motorsports-related expenditures,” $175,000 in credit card charges run up by Azzata’s wife, and $25,000 to pay school tuition for Azzata’s children.
Azzata and all of his co-defendants asserted their Fifth Amendment privilege against self-incrimination and have refused to speak with the SEC about this matter. A federal judge in Miami has already frozen Azzata’s assets and suspended him from participating in the management of eCareer until the SEC charges are resolved. The SEC has also suspended trading of eCareer shares.
Protecting Yourself from Boiler Rooms
Elderly investors are always a prime target for penny stock scams. Investors should always be wary of cold calls from unknown brokers. You should only deal with registered broker-dealings in good standing with regulators. If you or someone you know has been the victim of a “boiler room” scam and requires advice from an experienced Florida securities fraud attorney, contact Gregory Tendrich, P.A., in Boca Raton today.