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U.S. Securities and Exchange Commission


Litigation Release No. 20256 / August 27, 2007

SEC v. Pittsford Capital Income Partners, L.L.C., et al., Civil Action No. CV 06-6353 T(P) (W.D.N.Y.)

Court Grants Summary Judgment Against Principals of Unregistered Offering Fraud Scheme Perpetrated on Senior Citizens

On August 23, 2007, the Honorable Michael A. Telesca, United States District Judge, Western District of New York, issued an order granting the Commission's motion for summary judgment against defendants Edward Tackaberry ("Tackaberry") and Mark Palazzo ("Palazzo"), the owners and managers of six real estate investment companies (the "Pittsford Issuers") that raised approximately $15 million from 275 investors, including many senior citizens. The Court permanently enjoined Tackaberry and Palazzo from future violations of the antifraud provisions of the federal securities laws. The Court also ordered Palazzo and Tackaberry to disgorge $11,725,294.82, plus prejudgment interest, and imposed civil penalties of $75,000 each.

In its Complaint, filed July 14, 2006, the Complaint alleged that from 1996 to 2004, Tackaberry and Palazzo raised, in unregistered transactions, more than $15 million from at least 275 investors, including many senior citizens, by issuing promissory notes in the Pittsford Issuers. Tackaberry and Palazzo owned and managed all of the Pittsford Issuers. The Complaint further alleged that the defendants were engaged in a fraudulent scheme, in which they made numerous misrepresentations and omissions to investors concerning their investments and the Pittsford Issuers' financial condition, including: (i) making, and failing to disclose, transfers of large amounts of money, including a $2.4 million payment to Communicate Wireless, an entity that Tackaberry and Palazzo had significant personal interests in; (ii) making, and failing to disclose, transfers of money to Palazzo; (iii) failing to disclose that that they commingled the Pittsford Issuers' assets in one bank account; and (iv) falsely claiming that certain of the Pittsford Issuers would retain an independent third-party agent to represent investors' interests in connection with the offerings. The Complaint charged Palazzo and Tackaberry with violating Section 17 (a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Following a hearing on July 24, 2006, Judge Telesca granted the Commission's request for a preliminary injunction, the appointment of a Receiver over the Pittsford Issuers, an asset freeze and other equitable relief to halt the ongoing scheme.

In his order granting summary judgment, Judge Telesca found that, of the $15.5 million raised in the offerings, Palazzo and Tackaberry distributed more than $4.4 million in a series of unauthorized and undisclosed loans that were not secured by mortgages and therefore contrary to the terms of the private placement memoranda. The Court also found that Palazzo and Tackaberry never disclosed that the separate bank accounts of the Pittsford Issuers had been closed and all funds commingled into a single account. Judge Telesca found that these and other misrepresentations and omissions were material, and that Palazzo and Tackaberry acted with a "high degree of scienter; they were trained securities professionals who repeatedly made materially false and misleading statements and omissions to investors in the Pittsford Issuers."

For additional information, please see Litigation Release No. 19761 (July 14, 2006).



Modified: 08/27/2007