SEC FILES ILLEGAL TRADING SUIT AGAINST FORMER INCOMNET HEAD.Byline: Enrique Rivero Daily News Staff Writer Capping a nearly three-year investigation, the Securities and Exchange Commission on Thursday filed suit against the former head of Woodland Hills-based Incomnet Inc. and two consultants for alleged illegal stock trading. The 20-page civil complaint, filed in U.S. District Court in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , charges that Sam Schwartz Samuel I. Schwartz, a.k.a. "Gridlock Sam," is one of the leading transportation engineers in the United States, and is widely believed to be the man responsible for popularizing the phrase gridlock. He originally worked as a cabbie. , former president and chairman of the long-distance service marketer, failed to properly disclose that he was trading in the company's stock, said Lisa Gok, assistant regional enforcement director for the SEC in Los Angeles. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the suit, Schwartz - who resigned in November 1995 - had bought about 1.1 million shares of Incomnet stock between June 1994 and July 1995 and sold 900,000 shares. ``He was doing undisclosed trading of the stock,'' Gok said. ``As a control person and (chief executive officer) you have to disclose your trades on a certain form, and he didn't do that.'' Neither Schwartz nor his attorney, Sheldon Jaffe of the Los Angeles law firm Gartenberg Jaffe Gelfand & Stein, could be reached for comment Thursday. According to the Bloomberg News, Schwartz in 1996 agreed to give the company more than $2 million he made on the transactions in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with federal securities laws requiring executives who make money on ``short-swing'' profits from their company stock to return the money. Gok said the company's board subsequently covered for the former company head by agreeing, after the fact, to submit a filing that said it had voted to approve Schwartz's transactions. ``They did that even though they knew nothing about it; he got them to go along with the scheme or to sanction sanction, in law and ethics, any inducement to individuals or groups to follow or refrain from following a particular course of conduct. All societies impose sanctions on their members in order to encourage approved behavior. it,'' Gok said. In addition, Gok said the company made matters worse by issuing official denials that the SEC was investigating it. Melvyn Reznick, Incomnet's current chairman and president, refused to comment Thursday. According to Bloomberg News, Incomnet agreed to a cease-and-desist order Cease-and-desist order An order issued after notice and opportunity for hearing, requiring a depository institution, a holding company or a depository institution official to terminate unlawful, unsafe or unsound banking practices. to settle the SEC's claims that it filed false disclosure statements without admitting or denying the allegations. The suit also charges that Incomnet's investment consultants, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of City-based Broad Capital Associates Inc. and principals Murray A. Huberfeld and David B. Bodner, received about 513,000 shares of restricted stock as collateral on a loan but failed to hold onto it for two years before selling it on the market as the law demands. Broad and the two principals, however, agreed Thursday to settle the suit for $4.7 million, an amount that includes the $3.7 million they earned on the illegal stock transaction plus interest and penalties, she said. ``Everyone in this case has settled but Schwartz,'' Gok said. ``At this point, we're going to go forward with the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. .'' Schwartz faces ``hundreds of thousands'' of dollars in civil penalties should a jury side with the SEC, Gok said. In addition, he also faces an injunction that he would have to disclose should he become an officer of another publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. . ``(It) kind of puts the red flag on you,'' Gok said. Incomnet's stock - which between Aug. 1, 1994, and Sept. 1, 1995, rose from $10.25 to a record high of $21.75 - in the fall of 1995 plunged to less than $4 on word that Schwartz was under investigation for the illegal stock trades. This prompted a shareholder's suit that the company settled in October for $8.65 million. The company's legal and financial troubles - at several points its stock price has fallen below $1 - also prompted the Nasdaq to threaten to delist delist To drop a security from trading on an organized exchange. Delisting may occur for a number of reasons including failure to meet an exchange's standards or placement of a new listing on another exchange. Compare list. it from the SmallCap Market. |
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