Securities Law Prof Blog

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

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Thursday, October 6, 2011

SEC Charges StratoComm, Execs and Attorney with Securities Fraud

The SEC recently filed two actions involving allegedly illegal unregistered stock offerings by StratoComm Corporation.  It charged the company, its CEO Roger D. Shearer, and its former Director of Investor Relations, Craig Danzig, in one action and its outside counsel, Stewart A. Merkin, in the other.The SEC alleges that StratoComm, acting at Shearer’s direction and with Danzig’s assistance, issued and distributed public statements falsely portraying the company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no product and no revenue. The SEC’s complaint also alleges that StratoComm, Shearer and Danzig sold investors approximately $3 million worth of StratoComm stock in unregistered transactions. Shearer used much of that money for his own purposes, including paying a substantial part of the restitution he owed in connection with his guilty plea in a prior criminal proceeding.

In the other action, the SEC alleges that Merkin wrote four attorney representation letters for posting on the website of Pink Sheets LLC and its successor, Pink OTC Markets, Inc. In those letters Merkin disclaimed knowledge of any investigation into possible violations of the securities laws by StratoComm or any of its officers or directors. However, the SEC’s complaint alleges, Merkin was representing StratoComm and several individuals in connection with the SEC’s investigation at the time. Nevertheless, in order that StratoComm’s shares would continue to be quoted, the SEC’s complaint alleges that Merkin falsely stated that to his knowledge StatoComm was not under investigation.

http://lawprofessors.typepad.com/securities/2011/10/sec-charges-stratocomm-execs-and-attorney-with-securities-fraud.html

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