securities' law violations was established against Diamond.
Likewise, the SEC established that Jenkins aided and abetted
frauds by allowing Braverman to hold himself out as a
registered representative, although his license was suspended,
and to transact customer business while under Jenkin's
supervision. Plaintiff's Exh. 54.
The SEC alleges that Ventura, along with its principals Beck
and Sands, knowingly mislead the public as to the financial
prospects of its subsidiary, First Equipment Leasing
Corporation ("FELCO"). Beck has been a trustee and a member of
a voting trust which represents a controlling interest in
Ventura since Ventura's acquisition of FELCO. Plaintiff's Trial
Exh. 7 at 23. Currently, Beck is Chairman of Ventura's Board
and a Senior Equity Portfolio Manager of the Putnam Company, a
registered investment company. Tr. at 438; Plaintiff's Trial
Exh. 8 at 10. Sands has, at all times relevant to this action,
been an officer and a member of the Board of Directors of FELCO
and/or Ventura. Plaintiff's Trial Exh. 9 at 7, 12-14, 17,
In the spring of 1989, Ventura acquired FELCO, a
Massachusetts corporation that leased, among other things,
exercise equipment. Tr. 440-47. Although FELCO had acquired
insurance and entertainment subsidiaries by the time Ventura
took over, both concerns were in a development stage with no
proven financial histories. Tr. 459-461.
I find that the case established against Beck and Sands for
the alleged violations in connection with Ventura's FELCO
concerns was insufficient. Both Beck and Sands used due
diligence in correcting Wellshire's market letter misstatements
and misinterpretations of projected profits with respect to
FELCO and its entertainment and reinsurance subsidiaries.
Likewise, both Beck and Sands, on the assertions of
accountants, believed that although none of Ventura's
subsidiaries had demonstrated an earning capacity, both the
reinsurance and entertainment concerns had a valid projected
earning potentials as going concerns. Tr. 440-50. In addition
to demonstrating good faith in their financial reporting, Beck
and Sands enlisted the help of an attorney to verify that the
information disseminated to Wellshire for its market letter was
forthright and truthful.
I find that any nexus between Beck and Sands and securities
violations to be too weak to constitute the requisite showing
for a prima facie case. Moreover, Wellshire, controlled almost
exclusively by Cohen, vested in Cohen control of the supply of
Ventura stock that essentially constituted the only market for
that stock. Wellshire alone had the means to alert Ventura
shareholders of developments. Neither Beck nor Sands profited
by their positions in the Ventura stock.
In sum, I find that a prima facie case of securities
violations is established as to Wellshire, Cohen, Martino,
Diamond, Jenkins, and Ventura. The SEC failed to make a prima
facie showing of securities violations as to Beck and Sands
with respect to FELCO.
II. LIKELIHOOD OF REPETITION
Evidence that a company is integrally involved in the
securities markets weighs heavily in support of a finding that
there exists an opportunity and/or a reasonable likelihood for
similar additional future violations to occur. SEC v. Universal
Major Industries Corp., 546 F.2d 1044, 1048 (2d Cir. 1976),
cert. denied, 434 U.S. 834, 98 S.Ct. 120, 54 L.Ed.2d 95 (1977).
Factors relevant to making such a finding include: (1) degree
of scienter; (2) sincerity of defendants' assurances against
further violations; (3) whether infraction was recurrent; (4)
defendants' recognition of the wrongfulness of their conduct;
and (5) likelihood that future violations may occur in light of
the defendants' occupations and expertise. See SEC v.
Foundation Hai, et al., Fed.Sec.L.Rep. (CCH) ¶ 94, 961
(S.D.N.Y. 1990) (citing SEC v. Champion Sports Management,
599 F. Supp. 527, 534 (S.D.N.Y. 1984)); accord SEC v. Commonwealth
Chemical Securities, Inc., 574 F.2d 90, 100 (2d Cir. 1978).
I find that Wellshire in hand with and through its
principals, Cohen and Martino, intended to encourage
investments based on misleading information contained in market
letters, phone, and mailed correspondences. Furthermore,
Jenkins, together with his assistant Braverman, acted in
knowing disregard for the securities laws. The SEC further
established that Cohen, Martino, Diamond, Jenkins, and
Braverman were integral players in bringing about the
manipulation effected by Wellshire brokers, and were not merely
negligent. Therefore, in light of Cohen's, Martino's,
Diamond's, and Jenkins' vast expertise in the securities
market, their reckless actions, the recurrent and patterned
nature of the infractions, and their awareness of their own
wrongdoing, the SEC established a likelihood of repetition.
Having found that a likelihood of repetition exists, the SEC
established the requisite elements for a preliminary injunction
sufficient to enjoin Wellshire, Cohen, Martino, Diamond and
Jenkins from further violations of the securities laws.
For the foregoing reasons, Wellshire, Ventura, Cohen,
Martino, Diamond, and Jenkins are preliminarily enjoined from
engaging in similar transactions, acts, practices and courses
of business which, as aforementioned, violated the antifraud
provisions of the securities laws. Wellshire assets will remain
frozen during the course of this action. Although the complaint
survives as against Braverman, no injunction can issue since
the order to show cause was untimely served. Winters and
Environmental Landfills have stipulated to permanent injunctive
relief. This motion for a preliminary injunction is denied as
against Beck and Sands, but the complaint survives as to them.