Washington, D.C., May 11, 2011 – The Securities and Exchange Commission today charged the co-founders of a New York-based beverage and food carrier company with orchestrating an $8 million securities fraud and spending at least half of investor money for their personal use.
The SEC alleges that Angelo Cuomo of Staten Island and George Garcy of Aventura, Fla., fraudulently obtained investments in E-Z Media Inc. while falsely telling investors that their company owned several patents for beverage and food carriers and had contracts to sell its carriers to such major companies as Heineken, Anheuser Busch, and Aramark Corporation. They also misrepresented their plans to conduct an initial public offering (IPO), their use of offering proceeds, and the projected share price. E-Z Media never actually had any contracts or other agreements to sell its carriers to any major company, including the brand-name companies that Cuomo and Garcy touted to investors. E-Z Media never took even the basic steps to prepare for a purported IPO.
“Garcy and Cuomo conducted an offering fraud that was rife with false statements and omissions to entice unsuspecting investors,” said George S. Canellos, Director of the SEC’s New York Regional Office. “Instead of using the offering proceeds to develop their business, Garcy and Cuomo treated E-Z Media’s bank account as a personal slush fund and diverted millions of dollars to line their pockets.”
According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, E-Z Media designs carriers for use at concession stands at stadiums, arenas, movie theaters, and similar venues. E-Z Media is not registered nor does it file reports with the SEC.
The SEC alleges that Cuomo and Garcy (also known as Jorge Garcia) conducted their scheme from at least 2003 to 2009, making false statements and omissions about their company’s business prospects, assets, and liabilities. E-Z Media never disclosed that its claimed ownership of its main asset – certain patents for the carriers – was contingent on E-Z Media’s payment of $14.5 million to Cuomo, or that E-Z Media’s ownership of those patents may not have been valid in the first place.
The SEC further alleges that E-Z Media also had no reasonable basis for the post-IPO price projections that Garcy and Cuomo presented to investors, because the company had no significant assets or revenues and had substantial liabilities. They never told investors that the SEC sanctioned Garcy in 1997 for improperly offering and selling stock of another company to the public.
According to the SEC’s complaint, Garcy and Cuomo misappropriated and diverted at least $4 million of funds obtained from investors to make payments on personal loans, private school tuition, and rent and mortgages as well as other personal uses. The SEC’s complaint also names four relief defendants for the purposes of recovering fraudulently transferred assets: Cuomo’s sons Ralph Cuomo and Vincent Cuomo, Cuomo’s sister Judith Guido, and New York-based attorney Joseph Lively.
The SEC’s complaint seeks a final judgment permanently enjoining Garcy and Cuomo from future violations of the federal securities laws, barring Garcy and Cuomo from acting as officers and directors of any public company, requiring Garcy and Cuomo to pay financial penalties, and requiring the defendants and relief defendants to disgorge all ill-gotten gains plus prejudgment interest, among other relief.
The SEC’s investigation was conducted by Ken C. Joseph and Christopher M. Castano of the New York Regional Office. Richard Primoff and Mr. Castano will lead the SEC’s litigation effort. The SEC thanks the U.S. Attorney’s Office for the Eastern District of New York and the Internal Revenue Service for their assistance in this matter.
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For more information about this enforcement action, contact:
Associate Director, SEC’s New York Regional Office
Ken C. Joseph
Assistant Director, SEC’s New York Regional Office
(212) 336-0097List your legal jobs on the LawFuel Network