United States District Court, S.D. New York
Megan R. Genet, Esq., Todd D. Brody, Esq., U.S. Securities and Exchange Commission, New York, New York, for the SEC.
Eric M. Creizman, Esq., Creizman PLLC, New York City, New York, for AGTI, Segal, Sierra Range, Senior Capital, and Law Offices.
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
In December 2011, the Securities and Exchange Commission CSEC") brought this civil enforcement action against, among others, Alternative Green Technologies, Inc. ("AGTI") and Mitchell Segal (collectively, the "Named Defendants") alleging various securities violations arising from "a scheme by [AGTI, Segal, and others] to issue and illegally sell purportedly unrestricted securities of AGTI by defrauding a transfer agent." On April 2, 2012, the Named Defendants consented to the entry of partial judgment against them (the "Partial Judgment"). The Partial Judgment orders the Named Defendants to "pay disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty pursuant to Section 20(d) of the Securities Act [of 1933]... and Section 21(d)(3) of the [Securities] Exchange Act [of 1934]." The Partial Judgment further provides that "[t]he Court shall determine the amounts of the disgorgement and civil penalty upon motion of the [SEC]."
The SEC now moves for the entry of final judgment. In so moving, the SEC seeks disgorgement and prejudgment interest from the Named Defendants. The SEC also seeks disgorgement and prejudgment interest from relief defendants, Sierra Range Holdings, Inc. ("Sierra Range"), Senior Capital Services, Inc. ("Senior Capital"), and Law Offices of Mitchell Segal ("Law Offices") (collectively, the "Relief Defendants"). Lastly, the SEC seeks maximum civil penalties against the Named Defendants.
For the reasons that follow, the SEC's motion for final judgment is GRANTED. The Named Defendants are jointly and severally liable for $195, 944 (the "Total Amount"), which consists of $165, 003 in disgorgement of ill-gotten gains and $30, 941 in prejudgment interest. The Total Amount shall be paid in the following manner:
(1) The Named Defendants, along with Law Offices, are jointly and severally liable for up to the Total Amount, which consists of $165, 003 in disgorgement of ill-gotten gains and $30, 941 in prejudgment interest;
(2) Sierra Range, along with the Named Defendants, is jointly and severally liable for up to $15, 990.74 of the Total Amount, which consists of $13, 500 in disgorgement of ill-gotten gains and $2, 490.74 in prejudgment interest; and
(3) Senior Capital, along with the Named Defendants, is jointly and severally liable for up to $23, 867.67 of the Total Amount, which consists of $20, 150 in disgorgement of ill-gotten gains and $3, 717.67 in prejudgment interest.
Additionally, AGTI is liable for a civil penalty in the amount of $650, 000, and Segal is liable for a civil penalty in the amount of $130, 000.
AGTI is a publicly traded company with its headquarters in New York. Segal is the CEO and sole director of AGTI. Segal is also a licensed attorney in New York. From September 2008 through September 2009, AGTI and Segal "obtain[ed] and furnish[ed] false documents (including a sham assignment of debt and a fabricated and backdated corporate resolution and convertible note), to support a legal opinion letter that was provided to AGTI's transfer agent so that the transfer agent would issue millions of shares of purportedly unrestricted stock in an unregistered offering." Other defendants in this action assisted AGTI and Segal in the execution of this scheme. The activities of AGTI and Segal constituted violations of (1) sections 5(a) and 5(c) of the Securities Act of 1933 (the "Securities Act"); and (2) section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Rule 10b-5(a) and (c) thereunder.
A. Distribution of the Ill-Gotten Gains
The total proceeds from the sale to the public of the issued AGTI shares was $317, 256.77. Of this total, Law Offices collected $242, 353, Sierra Range collected $13, 500, Senior Capital collected $20, 150, and Segal, personally, collected $8, 500. Thereafter, Segal, who is the president and sole shareholder of both Sierra Range and Senior Capital,  paid $119, 500 to defendant Belmont Partners, LLC ("Belmont").
B. The Partial Judgment
Five months after the SEC instituted this action, the Named Defendants consented to entry of the Partial Judgment. By consenting to the terms of the Partial Judgment, the Named Defendants neither admitted nor denied the allegations in the Complaint. However, in relation to the SEC's present motion, the Partial Judgment requires the Named Defendants to accept as true all of the allegations in the Complaint, which thereby precludes the Named Defendants from arguing that they did not violate the securities laws.
C. Segal's Lack of Cooperation
Despite settling with the SEC and despite this being his first securities violation,  Segal remained uncooperative. Segal refused to be deposed and asserted his Fifth ...