(CN) - A consulting firm that inflated a client's stock price by touting a fictitious $25 million defense contract owes the Securities and Exchange Commission more than $1 million, a federal judge ruled.
MJMM Investments had agreed in 2005 to provide public-relations services for CyberKey Solutions, which dealt in flash memory drives and other electronic devices.
As payment for those services, CyberKey gave MJMM and its parent company, Big Apple Consulting USA millions of shares of CyberKey stock.
Big Apple and MJMM then began promoting CyberKey with announcements about the fictitious $25 million purchase order from the U.S. Department of Homeland Security that CyberKey claimed to have nabbed.
While Big Apple and MJMM were publicizing this sale, they were dumping their shares, ultimately raking in at least $9.6 million.
The SEC said that the companies kept more $7.5 million of that amount, and sent $2 million back to CyberKey.
It claimed that CyberKey and Plant engaged in the scheme about the fictitious order from late 2005 to March 2007. Plant faced a lawsuit from the SEC and a federal indictment for which he was ultimately sentenced to 97 months in prison.
In November 2009, several months after Plant's sentencing, the SEC sued Big Apple, MJMM and four individual officers.
Marc Jablon served as president and CEO of Big Apple; Matthew Maguire acted as its vice president; and Big Apple officer Mark Kaley served as a president of MJMM; Keith Jablon, who served as vice president for another Big Apple subsidiary, allegedly supervised much of the CyberKey account.
The SEC said at least 500 investors lost more than $3 million buying Cyberkey stock.
It said Big Apple and MJMM continued to promote and sell CyberKey stock despite evidence that CyberKey's purchase order was fictitious.
After a jury found that the defendants' actions violated various securities laws, U.S. District Judge John Antoon awarded the SEC civil monetary penalties, engorgement and injunctive relief in a judgment and final order last week.
Each defendant violated the Securities Act by committing fraud, acting as licensed dealers, and aiding and abetting securities fraud, according to the ruling. The SEC sought a "Tier III" penalty because those actions resulted in substantial losses to other persons.
Big Apple and MJMM must each pay a penalty of $1.13 million. Marc Jablon owes $213,000. Kaley's penalty is $156,500. Maguire owes $163,000. The order makes no mention of Keith Jablon, though his name is still listed in the case caption.
Marc Jablon now works for Boost Marketing, a company that provides similar services as MJMM, giving marketing services to penny-stock companies. The SEC has no evidence of Maguire's employment. Kaley is currently employed part time at Disney World.
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