The SEC settled charges with Warren Heminger, the ex-president of Orex Gold Mines Corporation, and a pair of one-time boiler-room operators, Robert Vitale and Sal Puccio. The SEC brought charges against them for a pump-and-dump scheme that sold more than $6 million in unregistered securities between March and July 1999.

Heminger agreed to a 10-year bar from acting as the director of a public company and to pay $18,000 in disgorgement and $7,000 in civil penalties. But Heminger’s civil penalty would not exceed $7,000 due to his sworn financial statement of poverty. The settlement also permanently bars Heminger, Vitale, and Puccio from participating in penny-stock offerings.

The boiler-room boys received heftier fines. Vitale and Puccio each agreed to pay $40,025 in disgorgement and $60,000 in civil penalties, respectively. In addition, the two agreed to permanent bars from associating with any registered broker or dealer.

These settlements are just the latest in the Commission’s complaint against those responsible for the manipulation of Orex Gold Mines’ stock. In July, the court granted the SEC’s motion for a summary judgment against John Surgent, the alleged primary architect of the Orex scheme. The court found Surgent liable for securities fraud, permanently barred him from participating in a penny-stock offering and from acting as an officer or director of any public company. The court reserved determination of monetary sanctions against Surgent for a later hearing.

Surgent, a 60-year-old recidivist securities law violator and disbarred lawyer, was already convicted in a related criminal proceeding. For securities fraud and money laundering, a judge sentenced Surgent to 14 years in prison and ordered him to pay $1.7 million in restitution.

When the SEC first filed its complaint, in April 2004, it settled charges against three other schemers. Barry Abrams, Orex’s de facto officer, consented to a permanent injunction from future violations, permanent bars from involvement in penny-stock offerings and a bar from acting as an officer or director of a public company. Hev also agreed to pay $50,000 in disgorgement.

At that time the SEC also settled charges against Scott Piccininni and Paul Tahan, managers of the Pompano Beach branch of Preferred Securities Group, Inc. that was acting as a boiler room to push Orex stocks. The two managers consented to the Commission’s order of a permanent bar from associating with any registered broker or dealer.

In related criminal proceedings, Piccininni and Tahan were convicted and received jail time, and also ordered to pay approximately $5 million each in restitution. The Commission said that it would not seek further disgorgement or civil penalties from Piccininni and Tahan in light of the criminal sentences.

According to the Commission’s complaint, Surgent, Heminger, and the others associated with the scheme used false promotional materials and high-pressure sales tactics to sell Orex’ unregistered securities.

Surgent, who controlled the majority of Orex stock, and Heminger, the company’s nominal president, allegedly worked together to create and distribute the promotional materials. Those materials portrayed Orex as an established and active mining company with a revolutionary gold extraction process. But Orex neither owned mines nor possessed mining equipment and the gold extraction process that formed the cornerstone of the Orex promotional campaign had never been tested.

The Commission’s complaint further alleged that the Preferred Securities Group brokers agreed to sell Surgent's Orex stock to unsuspecting investors through their branch office in exchange for a share of the profits. To do so, the brokers resorted to abusive sales practices and fraudulent misrepresentations to pressure customers to purchase Orex. Victor Lessinger, Preferred's president, opened the Pompano Beach branch office, authorized the his brokers to solicit transactions in Orex, and personally approved numerous transactions in Orex securities.

The brokers also routinely violated federal securities laws by failing to provide customers with the disclosures and documents required by the penny stock disclosure rules of the Securities Exchange Act of 1934. Then, after selling the Orex stock, the brokers ultimately sold approximately $3 million in unregistered Orex securities. Transactions in Orex stock grew to account for at least 50% of the business of the entire Pompano Beach branch office.

The scheme drove the price of Orex stock from $1.50 per share to more than $7.50 per share over the course of three months, after which the price abruptly collapsed to just pennies a share, the SEC said. Between the Preferred boiler room and other means, Surgent sold over 1 million Orex shares for a total gross profit of approximately $6 million.

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