False Statements, Omissions Charges Hurled Against Two Businessmen
The Securities and Exchange Commission (SEC) has charged two businessmen with securities fraud after they made false statements in their business and defrauded investor money for personal gains.
Angelo Cuomo of Staten Island and George Garcy of Florida, co-founders of New York-based beverage and food carrier company E-Z Media Inc., allegedly orchestrated an $8 million securities fraud and spent at least half of investor money for their personal use.
The SEC recently filed similar charges of false statements and misrepresentations against three executives of Inofin Inc., a Massachusetts-based subprime auto loan servicer.
The SEC claimed in a complaint file before the U.S. District Court for the Eastern District of New York that Cuomo and Garcy made E-Z Media investors to believe that the company owned several patents for beverage and food carriers and had contracts to sell its carriers to major companies such as Heineken, Anheuser Busch, and Aramark Corporation.
They were accused of making false statements and omissions about their company’s business prospects, assets, and liabilities from 2003 to 2009.
According to the complaint, E-Z Media failed to disclose to investors that “its claimed ownership of its main asset…was contingent on E-Z Media’s payment of $14.5 million to Cuomo, or that E-Z Media’s ownership of those patents may not have been valid in the first place.”
The SEC added that the embattled businessmen allegedly misrepresented their plans to conduct an initial public offering, their use of offering proceeds, and the projected share price.
In reality, the beverage company never had such deals to sell its carriers to any company. According to the SEC, E-Z Media, is not registered with the commission and it never even took the basic steps in preparation for an offering.
George Canellos, Director of the SEC’s New York Regional Office, said in a statement that “Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”
Considering the “substantial liabilities” of E-Z Media and its lack of significant assets, the beverage company had no reason to make public offerings to investors, the SEC said.
In 1997, Garcy was sanctioned by the SEC “for improperly offering and selling stock of another company to the public,” a fact that was kept from the knowledge of investors.
Garcy and Cuomo allegedly funneled at least $4 million of investor money to pay for their personal loans, private school tuition, and rent and mortgages in addition to other personal uses.
Cuomo’s sons Ralph Cuomo and Vincent Cuomo, Cuomo’s sister Judith Guido, and New York-based attorney Joseph Lively who benefited from the illegal gains, were named relief defendants in the complaint.
The complaint seeks to bar Garcy and Cuomo from acting as officers and directors of any public company.
It further requires the two to pay financial penalties, while the relief defendants were ordered to disgorge all ill-gotten gains plus prejudgment interest, among other settlements.