OF NEUROTECH TO PAY OVER $314,000
On April 1, 2011 The Securities and Exchange Commission announced that U.S. District Court Judge Thomas C. Platt adopted a Magistrate Judge’s previously-issued Report and Recommendation against Neurotech Development Corporation’s (“Neurotech”) sole officers, the father-son management team of Bernard Artz (chairman, chief executive officer and chief financial officer) and Lawrence Artz (vice president). Pursuant to the March 23rd Order, Bernard Artz must pay a total of over $173,000, and Lawrence Artz must pay a total of over $141,000, in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
The Commission originally filed its action against Neurotech, Bernard Artz and Lawrence Artz in October 2004. The complaint alleged that, between at least 1999 and 2003, Neurotech falsely claimed in Commission filings and press releases that it had: (1) sold and built prefabricated hospitals in China and Indonesia, and (2) entered into billions of dollars of overseas construction contracts. The Commission’s complaint also alleged that the company made false public statements about possessing fraudulent “bank guarantees” it could purportedly use to finance the building of hospitals. The Commission also alleged that Bernard Artz and Lawrence Artz sold the company’s common stock into the market for illicit gains.
In April 2010, Neurotech reached a settlement with the Commission under which Bernard Artz and Lawrence Artz agreed to partial settlements with the Commission. Bernard and Lawrence Artz consented to entry of judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder (antifraud provisions), Section 16(a) of the Exchange Act (failure to make change of beneficial ownership filings), and aiding and abetting Neurotech’s violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder (reporting provisions). In addition, Bernard Artz consented to an injunction from violating Exchange Act Rule 13a-14 (false certification of Commission filings). Both individual defendants also consented to five-year officer and director and penny stock bars, and left disgorgement, prejudgment interest, and civil penalties to be decided by the Court.
The order issued on March 23, 2011, requires Bernard Artz to pay $131,414, plus prejudgment interest of $32,017.42, and pay a civil penalty of $10,000. Similarly, Lawrence Artz must disgorge $57,129.73, plus prejudgment interest of $79,846.92, and pay a civil penalty of $5,000. The Magistrate Judge stated that the recommended civil penalties were “third tier” penalties and that he considered the defendants’ financial conditions in his decision to not recommend higher penalty amounts. Under the Exchange Act, a “third tier” penalty is one where the violation involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement, and such violation directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons.
Phil Robertson, Editor