The Securities and Exchange Commission has charged executives of StratoComm Corp. with selling investors about $3 million of worth of phony securities in a telecommunications that actually didn't produce anything.
The SEC alleges that between November 2007 and May 2009 Roger D. Shearer, CEO of StratoComm Corp., and Craig Danzig, the company's former director of investor relations, duped clients into buying securities in the phony company, with Shearer using much of the money for his own purposes, according to an SEC complaint filed Oct. 4 in U.S. District Court for the Northern District of New York.
The SEC also alleges that attorney Stewart A. Merkin, StratoComm's outside counsel, committed securities fraud by denying knowledge of any violations in a complaint filed Oct. 3 in U.S. District Court for the Southern District of Florida. StratoComm is listed as a Delaware corporation with offices in Albany, N.Y., and Eatontown, N.J.
StratoComm was incorporated in 1997 and was formerly know as U.S./African Ventures. StatroComm purported to be in the business of designing, manufacturing and selling telecommunications equipment.
During it period of operation StratoComm had not registered an offering of securities with the SEC or issued audited financial statements. From 2007 to January 2011, StratoComm's stock was quoted on the electronic quotation system operated by Pink Sheets LLC and its successor Pink OTC Markets, Inc. Pink Sheet ceased quoting the StratoComm's stock in January 2011.
Shearer, who founded StratoComm in 1997, was its CEO, sole director and largest beneficial shareholder. The SEC in 2001 issued Shearer an administrative order that he had violated the Securities Act by selling unregistered securities issued by two development stage companies: Priority Access, Inc., and Endpoint Technologies, Inc. In 2008 Shearer pleaded guilty to violating N.Y.'s Martin Act in connection with a fraudulent real estate scheme.
Shearer, of Latham, N.Y., and Danzig, of Boca Raton, Fla., issued public statements falsely portraying StratoComm as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa, according to the SEC. In truth, StratoComm didn't manufacture or sell any telecommunications products or have any revenue, the SEC alleges.
Shearer used money derived from the scam to, in part, pay a substantial part of restitution he owed in connection with his guilty plea in a prior criminal proceeding.
Prior to joining StratoComm in 2007, Danzig was a registered representative associated with with several broker-dealers. In 1996, the State of Delaware sanctioned Danzig in connection with unauthorized transactions in a customer's account. The same year he was barred from obtaining a license to sell securities in N.J. His securities license subsequently lapsed in 2000.
The SEC is seeking permanent injunctions, disgorgement of unlawful proceeds and prejudgment interest, and a financial penalty for all the defendants. It is also seeking an order prohibiting Shearer from serving as an officer or director of a public company and prohibiting Shearer and Danzig from participating in the offering of a penny stock.
The SEC alleges that Merkin wrote four attorney representation letters for posting on the Web site of Pink Sheets LLC and its successor, Pink OTC Markets Inc. In the letters, Merkin denied knowledge of any investigation into possible securities law violations by StratoComm or any of its officers or directors. However, the SEC claims that Merkin was representing StratoComm and several individuals in connection with the SEC's investigation at the time.