U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19388 / September 22, 2005
SEC V. HERMAN'S WORLD OF SPORTS, INC., THOMAS J. DZWILEWSKI, MICHAEL EISEMANN, AND LOUIS MONTAINO, 05 Civ. 438 (I.L.G.) (R.L.M.) (E.D.N.Y.)
SEC Obtains Civil Penalties, Disgorgement, and Permanent Injunctions Against Participants in Fraudulent Offering of Herman's World of Sports, Inc.
On September 14, 2005, Judge I. Leo Glasser of the United States District Court for the Eastern District of New York, entered final judgments against Michael Eisemann ("Eisemann"), the former Vice President for Investor Relations of Herman's World of Sports, Inc. ("Herman's Sports"), and Louis Montaino ("Montaino"), a former registered representative retained by Herman's Sports to solicit investors, who, according to the Commission's complaint, perpetrated a fraudulent unregistered stock offering. The Court imposed a civil penalty of $40,000 on Eisemann and $37,500 on Montaino and, pursuant to Section 308 of the Sarbanes-Oxley Act of 2002, ordered that the civil penalties be paid to the court registry for the benefit of investors. The court further ordered Eisemann to pay $84,434.10 and Montaino to pay $66,177.12, representing disgorgement of all their ill-gotten gains derived from their conduct plus pre-judgment interest. The court also permanently enjoined Eisemann and Montano from future violations of the antifraud, registration, and broker-dealer provisions of the securities law and permanently barred each of them from participating in the offering of a penny stock. Both Eisemann and Montaino consented to the entry of their judgments without admitting or denying the allegations in the Commission's complaint.
In its complaint, filed on January 26, 2005, the Commission charged Eisemann and Montaino, along with Herman's Sports and Thomas Dzwilewski ("Dzwilewski"), Herman's Sports' former President and CEO, with participating in the fraudulent offering and selling of unregistered shares of Herman's Sports. Through the scheme, the defendants raised at least $641,500 from at least 59 investors, with Eisemann receiving at least $76,200 from the offering proceeds and Montaino receiving at least $62,500 from the offering proceeds. According to the complaint, from at least February 2001 through at least March 2003, Eisemann and Montaino solicited investors by making a series of false or misleading statements including, among other things, that Herman's Sports would be imminently conducting an initial public offering with the assistance of investment banks, at prices well above the price offered in the Herman's Sports private placement. In addition, Eisemann sent investors versions of a private placement memorandum and other documents containing misrepresentations about the Herman's Sports offering, materials which Montaino knew, or was reckless in not knowing, were being sent. Furthermore, neither Eisemann nor Montaino were registered as, or affiliated with, a broker-dealer at the time they sold shares of Herman's Sports.
The Court permanently enjoined Eisemann and Montaino from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder, and barred them from participating in an offering of penny stock pursuant to Section 21(d)(6)(A) of the Exchange Act. In addition, the Court ordered Eisemann to pay disgorgement and pre-judgment interest of $84,434.10 and ordered Montaino to pay disgorgement and pre-judgment interest of $66,177.12. Finally, pursuant to Section 20(d) of the Securities Act and Section 21(d) of the Exchange Act, the Court imposed a $40,000 civil penalty on Eisemann and a $37,500 civil penalty on Montaino.
Previously, on February 2, 2005, the Court ordered final judgments against Herman's Sports and Dzwilewski, permanently enjoining them from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, ordering them to pay disgorgement, jointly and severally, of $641,500, which constitutes the entire proceeds of the fraudulent offering, plus pre-judgment interest of $22,185.65, for a total of $663,685.65, plus post-judgment interest thereon, and ordering Dzwilewski to pay a civil penalty of $30,000. Both Herman's Sports and Dzwilewski also consented to the entry of the judgments without admitting or denying the allegations in the Commission's complaint.
See also Lit. Rel. No. 19052 (January 26, 2005)