Tuesday, July 9, 2013

SEC Obtains Final Judgment Against Miami Attorney for preparing and presenting False Attorney Letters on behalf of issuer.

SEC Litigation Release No. 22746
July 9, 2013
SEC v. Merkin

On July 1, 2013, a District Judge for the Southern District of Florida, signed a final judgment against defendant Stewart A. Merkin (“Merkin”) in a civil action originally filed by the SEC on October 3, 2011.  The Defendant is an attorney in Miami, Florida.  

The alleged violations include Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder.  The Defendant wrote four attorney representation letters for posting on the website of Pink Sheets LLC and its successor, Pink OTC Markets, Inc.  Therein, he disclaimed knowledge of any investigation into possible violations of the securities laws by StratoComm or any of its officers or directors. However, the SEC’s complaint also alleges that the Defendant was representing StratoComm and several individuals in connection with the SEC’s investigation at the time. Nevertheless, in order that StratoComm’s shares would continue to be quoted, the SEC’s complaint alleges that Defendant falsely stated that to his knowledge StratoComm was not under investigation.

On October 3, 2012, the Court granted the Commission’s motion for summary judgment with respect to liability, finding that the Defendant made false statements of material fact, with scienter, in connection with the purchase or sale of securities.  Defendant subsequently consented to the entry of a final judgment that: (i) orders him liable to pay a total of $125,000 in disgorgement, prejudgment interest and a civil penalty; (ii) imposes a permanent injunction against future violations of Section 10(b) and Rule 10b-5 of the Exchange Act by making false or misleading statements; and (iii) permanently bars Merkin from participating in an offering of penny stock.  In consenting to these remedies, Merkin retained his right to appeal from the Court’s ruling on summary judgment with respect to liability. 


  1. Someday attorneys will realize that the SEC is watching their actions with regards to securities opinions very closely AND are going after them for fraud. More importantly is legal opinions that allowing a Rule 405 shell company to get unregistered securities released into the market. They take the company's word that they are not a Rule 405 shell because of the check mark on the 10Qs and the fact they get paid big money for writing them. The are just as guilty as the seller of the unregistered securities into the market, maybe even more so.

    1. Ted, Have you seen any instance of regulatory action against attorneys or issuers for misreporting shell status and subsequently relying 144 to issue and ultimately sell restricted stock as though free-trading? Thanks for commenting.

    2. This comment has been removed by the author.

    3. Here's one:
      SEC v. Alternative Green Technologies, Inc., Mitchell Segal, et al.

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