SEC Whacks Laidlaw Energy but Good

MANHATTAN (CN) – Laidlaw Energy Group sold 2 billion unregistered shares at 50 percent discount, making $1.3 million from it, and its CEO Michael Bartoszek made $318,000 from inside trading in company shares, the SEC claims in court.
     The SEC sued Laidlaw Energy Group and CEO Michael B. Bartoszek, in Federal Court.
     Bartoszek, of Hoboken, N.J., is the founder, president, CEO and sole director of Laidlaw, which he claimed would try to produce energy by burning biomass.
     The SEC wastes no time getting down to specifics in its lawsuit: “Between August 2006 and January 2010, Laidlaw and its chief executive officer and sole director Bartoszek conducted a single consolidated illegal offering of over 2 billion shares of Laidlaw’s common stock without complying with the registration provisions of the federal securities laws. Laidlaw sold the shares, representing over 80 percent of the Company’s outstanding common stock, in 35 unregistered tranches to three commonly-controlled entities (collectively, the ‘Purchasing Entities’).
     “The Purchasing Entities bought each tranche of Laidlaw common stock at about a 50 percent discount, on average, from market price. The Purchasing Entities then quickly resold the tranche to the public in a series of small transactions at the prevailing market price for a sizeable and virtually guaranteed profit. The Purchasing Entities generally sold out each tranche of Laidlaw common stock before acquiring the next tranche. Bartoszek knew about, and facilitated, the Purchasing Entities’ Laidlaw common stock resales.
     “Laidlaw realized proceeds of$1,259,550 from the illegal offering to the Purchasing Entities, which constituted nearly all of its income from August 2006 to January 2010. Laidlaw and Bartoszek used the money to fund the Company’s operations, including to pay for Bartoszek’s salary, which had risen to $200,000 by 2010, as well as miscellaneous perks and expenses for Bartoszek.
     “Although Laidlaw and Bartoszek purported to conduct the 35 share issuances pursuant to Rule 504(b)(l)(iii) of Regulation D (‘Rule 504(b)(1)(iii)’) [17 C.F.R. § 230.504(b)(l)(iii)], the transactions did not qualify for any exemptions from registration. Rule 504 of Regulation D [17 C.F.R. § 230.504] exempts from registration certain limited offerings of $1,000,000 or less. The 35 tranches were, in reality, a single, integrated offering that raised $1,259,550 for Laidlaw and, therefore, exceeded the $1 million limit under Rule 504.” (Parentheses and brackets in complaint.)
     Also, the SEC claims: “On January 9, 2012, Laidlaw and Bartoszek falsely presented the Purchasing Entities as the current ‘beneficial owner’ of over 80 percent of the Company’s common stock in its 2 Form 10 General Form for Registration of Securities Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, filed with the Commission (‘Form 10’) and again in its Form S-1 Registration Statement under the Securities Act of 1933, filed with the Commission on April 30,2012 (‘Form S-1′). Bartoszek signed the Form 10 and Form S-1 as the chief executive officer of Laidlaw, even though he knew that the representation concerning the Purchasing Entities’ ownership was false.
     “Between December 2009 and June 2011, Bartoszek also violated the anti-fraud provisions of the federal securities laws by insider trading, specifically by selling over 118 million Laidlaw shares for proceeds of over $318,000 while in the possession of material nonpublic information. On June 7, 2011, the Commission suspended trading in Laidlaw’s common stock under Section 12(k) of the Securities Exchange Act of 1934 (‘Exchange Act’) [15 U.S.C. 781(k)], effectively ending Bartoszek’s illegal stock sales.”
     The SEC seeks disgorgement, penalties and an injunction.

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