The Securities and Exchange Commission, said yesterday that it had filed civil charges against five individuals who allegedly sold unregistered stock in "shell" companies with little or no assets at grossly inflated prices.
The defendants made several hundred thousand dollars over a period of approximately nine months ending in June 1981, according to the SEC. Four of five individuals have signed consent decrees enjoining them from securities law violations. The investigation is part of what the SEC called a crackdown on illegal "shell corporation" schemes that flourished in the go-go stock markets of the 1960s and are now making a comeback.
According to the SEC, Jack R. Coombs and LeAnna Mortensen of Salt Lake City, Ramon N. D'Onofrio of Laguna Hills, Cal., Barry M. Woodland of Los Angeles and Lester P. Steiner of Miami violated anti-fraud law through Total Investment Co., a shell corporation that had only minimal assets and a few public shareholders. By merging Total with a private company--also with few assets--the defendants were able to sell stock in the interstate over-the-counter market at prices inflated by false and misleading shareholder communications, the SEC said.
D'Onofrio, who controlled a slot machine distribution business called Lyn-Jay Coin Inc., merged it with Total. According to SEC lawyers, D'Onofrio has a criminal record for stock manipulation and bankruptcy fraud. Shareholders, asked to vote on the merger, received a materially false proxy statement, the complaint said.
All the defendants except Mortensen have signed a consent decree enjoining them from further securities violations. D'Onofrio has agreed not to serve as an officer of any public company for five years and to report annually to the SEC on his activities.