SACRAMENTO (CN) - The two principals of Gendarme Capital Corp. sold more than 15 billion of shares of unregistered stock, under misrepresentations, reaping more than $1.6 million in illegal gains, the SEC says in Federal Court. It sued Gendarme and its principals Ian Lamphere and Ezat Rahimi, and an attorney who represented Gendarme in acquisitions of stocks that the company resold.
CEO Rahimi, 26, of Elk Grove, Calif., controls the company with vice president Lamphere, 33, of Lawrenceville, Vt.
Cassandra Armento, 40, of Greenwich, N.Y., is licensed to practice in Vermont and Massachusetts. "Armento represented Gendarme in its acquisitions of stock from companies quoted on the Pink Sheets," according to the complaint.
"Since early 2008, defendant Gendarme Capital Corporation ('Gendarme'), through its principals Ezat Rahimi and Ian Lamphere, has engaged in an illegal stock distribution scheme," the complaint states. "The defendants have illegally sold to the public billions of shares of stock without registering the transactions or having a valid exemption to registration, as the federal securities laws require. Gendarme acquired the stock from small public companies at 30-50% discounts to the market price in transactions where it falsely represented to the issuers that it purchased the shares for investment purposes only (not for the purpose of resale). Typically within days or weeks of acquiring the shares, Gendarme resold most of the stock in the public markets. Gendarme profited more than $1.6 million on its unregistered and illegal public distributions of stock.
Gendarme typically bought shares from companies whose stock price was quoted by Pink OTC Markets, Inc. ('Pink Sheets'), a private electronic inter-dealer quotation and trading system used in the over-the-counter market. Companies quoted on the Pink Sheets are not required to file periodic financial and disclosure statements with the Commission. Thus, when distributions are unregistered, little or no disclosure about the company may exist. In acting as a conduit to dump shares of Pink Sheets companies on the public markets, Gendarme engaged in a lucrative end-run around an important disclosure policy underlying the securities laws.
"Gendarme's outside counsel for its stock acquisition transactions was Cassandra Armento. Since early 2008, Armento has issued more than 50 opinion letters to stock transfer agents for Pink Sheets companies whose stock Gendarme purchased. The opinion letters falsely claimed that Gendarme was not an 'underwriter,' and thus did not intend to distribute the shares. The letters were required for Gendarme to obtain the stock without restrictions on the stock certificates, which allowed Gendarme to easily sell the shares on the public markets. Armento played a necessary and substantial role in Gendarme's scheme, and thus also violated the securities laws."
The SEC seeks injunctions, accounting, disgorgement and civil penalties.
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