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Univ. of Toledo College of Law

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Thursday, August 6, 2009

Attorney Settles Charges in Pump and Dump Scheme

On July 31, 2009, the United States District Court for the Northern District of Georgia entered final judgments by consent against Albert J. Rasch, Jr., Kathleen R. Novinger, Sandra B. Masino and 144 Opinions, Inc. (144 Opinions) in a civil injunctive action charging them for their roles in issuing legal opinions in a pump-and-dump scheme. The final judgments enjoined all defendants from future antifraud and registration violations of the federal securities laws, imposed civil monetary penalties, and barred all defendants from participating in a penny stock offering for a period of five years.

The Commission filed its Complaint in this matter on May 5, 2009. The Complaint alleged that during 2007, the defendants collectively operated a legal "opinion mill" which issued fraudulent legal opinions used by promoters in a pump-and-dump scheme, and others, to sell securities in violation of the registration provisions of the federal securities laws. Masino and 144 Opinions drafted and Rasch or Novinger executed, at least 24 legal opinion letters concerning the removal of restrictive legends on certificates representing over 22 million shares of Mobile Ready Entertainment Corp. ("Mobile Ready"). The defendants cited to non-existent documents and misrepresented critical facts in executing the 24 legal opinions. The complaint alleges that the false and misleading statements drafted by Masino and 144 Opinions and thereafter executed by Rasch and Novinger fraudulently induced the transfer agent for Mobile Ready to remove the restrictive legends and permit the illegal sale of over 22 million shares of Mobile Ready in violation of the registration provision of the federal securities laws.

Without admitting or denying the allegations in the Commission's Complaint, Rasch, Novinger, Masino and 144 Opinions consented to judgments entered by the Court that permanently enjoin them from future violations of Sections 5 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 and bar them from participating in the offering of a penny stock for a period of five years. The judgments ordered Rasch and Masino each to pay a $20,000 civil monetary penalty, while Novinger was ordered to pay a $10,000 civil monetary penalty. Additionally, the final judgments ordered Rasch and Masino to disgorge all professional and service fees related to the Mobile Ready legal opinions.

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