The Securities and Exchange Commission's case against a global boiler-room ring has yielded some unusual assets: a dance club in downtown Salt Lake City; a truck stop and mobile-home park in Elko, Nev.; and a strip shopping center in Las Vegas.
Those properties are among the assets that one defendant, David M. Wolfson, has agreed to surrender to settle his part of the case.
The SEC filed suit in October 2003 against him and 21 other defendants, alleging that they participated in a scheme that took in more than $16 million, primarily from investors in the United Kingdom, Australia and New Zealand.
The suit charges that the defendants lied to investors about the prospects of the companies they were promoting and that only a small percentage of the money raised through stock sales actually went to the businesses.
Investors bought shares in five small U.S. companies from an unlicensed, offshore brokerage that did business under several names, including Sukumo Ltd. and Fujiwara Group.
One of the stocks was Stem Genetics Inc. of Salt Lake City. It was created by Allen Z. Wolfson, a repeat white-collar criminal currently imprisoned in New York on an unrelated case.
He is David Wolfson's father. The SEC has alleged that Allen Wolfson, mindful that he was headed to prison, turned over some business operations to his son.
Sukumo brokers told investors that Stem Genetics was set for an initial public stock offering and poised to get a $300 million federal grant for stem-cell research.
In reality, Stem Genetics was a startup with no revenue, lab or scientists. It never went public; its shares are worthless.
The federal judge handling the SEC case in Salt Lake City issued a final judgment against Stem Genetics last month. The order required the company to pay a $120,000 civil penalty and turn over all its cash, property and other assets to the court-appointed receiver trying to recover money for investors.
The judge also permanently barred David Wolfson from participating in the offering of any penny stock.
Wolfson consented to the order without admitting or denying guilt. He agreed to surrender $2.76 million he received through the scheme, plus $172,000 in interest, and to pay a $120,000 civil penalty.
Wolfson turned over the assets of 18 businesses, including the dance club, truck stop, shopping center and other property.
The SEC continues to pursue the other four companies whose stocks Sukumo sold: Diversified Financial Resources Corp.; F10 Oil and Gas Properties Inc.; NCI Holdings Inc.; and Valesc Holdings Inc.
The stock Sukumo sold investors is all but worthless.
Diversified Financial Resources, which says it has interests in real estate and mining, has issued hundreds of millions of additional shares in recent months. Its stock trades for less than one-tenth of a cent.
F10 merged with a company that operates sandwich and smoothie shops in Illinois and Indiana. The combined business, GFY Foods Inc., authorized two reverse stock splits, which left most, if not all, of the foreign investors holding a fraction of one share.
GFY has since issued more than 3 billion additional shares, further diluting the stake held by former Sukumo customers.
NCI Holdings also has undergone a metamorphosis. It now is Dark Dynamite Inc., a clothing and candle maker with a store in Salt Lake City. Dark Dynamite also has issued hundreds of millions of additional shares.
The SEC has been battling with Gino Carlucci, who was president and chief executive of NCI Holdings and processed overseas stock sales for Stem Genetics and Diversified Financial.
Richard D. Clayton, the receiver in the case, said in a report last month that much of his time has been spent "responding to numerous motions and proceedings filed by Mr. Carlucci and his attorneys, designed primarily to put Carlucci's assets beyond the reach of this Court and the receivership."
Reporter Christopher Carey
E-mail: ccarey@post-dispatch.com
Phone: 314-340-8291
