Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, May 5, 2011

EC Sues Allen E. Weintraub and Sterling Global Holdings for Securities Fraud

The SEC filed a Complaint alleging fraud and violations of a tender offer rule against AWMS Acquisition, Inc., d/b/a Sterling Global Holdings (Sterling Global), a shell company, and Allen E. Weintraub, Sterling Global’s sole owner, officer, director, and employee.  The Complaint, which was filed in U.S. District Court for the Southern District of Florida, alleges that Weintraub and Sterling Global deceived the public by making false and misleading statements regarding Sterling Global’s ability to purchase and operate two public companies–Eastman Kodak Company (Kodak) and AMR (AMR), the parent company of American Airlines. Specifically, the Complaint alleges:

On March 19, 2011, Weintraub, on behalf of Sterling Global, emailed a written tender offer to Kodak for all its “outstanding stock” at a total price of approximately $1.3 billion in cash. On March 29, 2011, Weintraub emailed substantially the same letter to AMR offering to purchase all AMR’s “outstanding stock” for approximately $3.25 billion in cash. These offer prices represented almost a 50% premium over each company's then current stock price.

In an effort to generate publicity, Weintraub emailed the purported tender offers to media outlets and financial investment research firms. In published media interviews, Weintraub boasted that he has 15 years experience buying distressed companies, that banks had agreed to finance the acquisitions, and that letters of credit could be readily provided.

Weintraub was convicted in Florida for fraud and grand larceny in 1992, 1998, and 2008. Weintraub is on probation for his 2008 conviction.

The Commission requests that the court permanently enjoin Weintraub and Sterling Global from violating the antifraud and tender offer provisions of the federal securities laws, order them to pay disgorgement plus prejudgment interest, and impose a civil money penalty against them.

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