Laidlaw Energy Group Inc. (LLEG:US) and Chief Executive Officer Michael Bartoszek were sued by the U.S. Securities and Exchange Commission and accused of making $1.26 million by selling more than 2 billion shares in an illegal stock offering.
In the complaint filed today in federal court in Manhattan, the SEC alleges that Laidlaw and Bartoszek sold the shares, representing more than 80 percent of the company’s outstanding common stock, in 35 unregistered tranches to three commonly controlled entities. Each tranche was bought at discount of about 50 percent then quickly and profitably resold to the public, according to the complaint.
Laidlaw, a New York-based power-plant developer, didn’t register the stock offering with the SEC, and Bartoszek knew the buyers were dumping the shares into the market, usually within days or weeks of the purchases, the SEC alleges.
“Registration violations are often at the core of microcap fraud and we will vigorously pursue these violations whenever we find them,” Andrew Calamari, director of the SEC’s New York office said in a statement.
The illegal offering provided the company (LLEG:US) with almost all its profit from August 2006 to January 2010, the government said. The defendants used the money to fund company operations, including Bartoszek’s salary, which reached $200,000 by 2010, the government said. The funds were also used for “miscellaneous perks and expenses” for Bartoszek, the SEC alleges.
Bartoszek, of Hoboken, New Jersey, is accused of violating civil insider-trading law by personally selling more than 100 million shares of Laidlaw common stock from December 2009 to June 2011, making more than $318,000 in profit.
The SEC alleges he made those trades based on his insider knowledge about the company’s poor financial condition and actions including what the SEC described as the “illegal fire sale” of more than 80 percent of its stock.
The SEC complaint includes claims of violations of U.S. securities law, and the agency seeks disgorgement of profits, financial penalties and a bar to Bartoszek’s acting as an officer or director.
“We’re in the process of reviewing the SEC’s complaint, and the company and Mr. Bartoszek look forward to addressing the allegations in court,” said Robert Heim, a lawyer for Laidlaw and Bartoszek.
The case is SEC v. Laidlaw Energy Group Inc., 13-cv-3837, U.S. District Court, Southern District of New York (Manhattan).
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