In its complaint, the SEC alleges that Tarrytown, N.Y.-based Beaufort Capital Partners and its principal, Robert Marino, unlawfully sold Mainstream shares acquired from Martin in unregistered transactions.
“Mr. Marino and his company have always worked to conduct themselves lawfully and in good faith," said Kevin Galbraith, his attorney. "We strongly disagree with the complaint’s allegations against my clients, and will contest this matter vigorously.”
The SEC also alleges that Harold Swart Jr., of Kissimmee, Fla., unlawfully publicly sold Mainstream shares based on false statements to his broker-dealer. Swart, and his firm, Swart Baumruk & Co., are also alleged to have violated an SEC order suspending them from appearing or practicing before the SEC as accountants based on the accounting work they performed for Mainstream.
In its action, the SEC also charged six entities as relief defendants for the purpose of recovering illegal proceeds.
The SEC seeks permanent injunctions and disgorgement with interest against all defendants, civil penalties and penny stock bars against all but Swart Baumruk, and an officer-and-director bar against Martin.
Swart and Swart Baumruk consented to an entry of final judgment, paying more than $69,000 in combined disgorgement and prejudgment interest. Swart agreed to a penny stock bar and a $41,946 civil penalty.
In separate orders, the SEC has instituted administrative proceedings against Karen Aalders of Orlando, Fla., and Sterling Craig Barton of Pearland, Texas, for their alleged role in the scheme.
According to the SEC, Barton assisted the Mainstream scheme by designing a sham contract to give the shell company the appearance of having revenue and operations. Barton is alleged to have sold Mainstream shares based on false statements to his broker-dealer.
Aalders allegedly acted as a nominee officer and director of Mainstream, forging a series of corporate documents and making false statements to accountants, a transfer agent and the SEC.
Aalders and Barton each agreed to cease-and-desist orders and penny stock bars without admitting or denying the SEC’s findings. The pair paid approximately $61,000 in combined disgorgement. In addition, Aalders received an officer-and-director bar, while Barton was ordered to pay $100,000 in civil penalties.
Correction: An earlier headline said all eight defendants in the case were charged with fraud. Robert Marino and Beaufort Capital Partners were not charged with fraud.