Forest Resources Management Corp., et al.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21531 / May 25, 2010

SEC v. Forest Resources Management Corp., et al., Civil Action 09 Civ. 903 (JSR) (SDNY)

Court Orders Chaim Justman, Pinchus Gold, and William J. Reilly to Disgorge Proceeds of Fraud and to Pay Civil Penalties

The Securities and Exchange Commission announced that on May 19, 2010, the United States District Court for the Southern District of New York entered a judgment ordering Chaim Justman, of Brooklyn, New York, Pinchus Gold, also of Brooklyn, New York, and William J. Reilly, of Boca Raton, Florida, an attorney admitted to practice in New York. The judgment ordered the defendants to disgorge their ill-gotten gains and prejudgment interest, and ordered each to pay a third tier civil penalty.

In imposing the judgment, Judge Jed S. Rakoff found that Justman, Gold, and Reilly had "engaged in an elaborate fraudulent scheme over the course of six months that manipulated a publicly traded stock, resulting in the eventual collapse of the stock price," and which "which resulted in hundreds of thousand dollars of ill-gotten gains for the individual defendants [and] risked and, in fact, caused 'substantial' losses to others."

The Commission's complaint alleged that Justman, Gold, and Reilly made material misrepresentations concerning Forest Resources Management Corp. to Forest's transfer agent in order to obtain millions of restricted shares without the required restricted legend. Justman, Gold, Reilly, and their nominees then sold these unlegended shares on the open market, falsely holding them out to the investing public as free-trading shares, when in fact they were restricted stock. In addition, Forest, Justman, Gold, and Reilly made materially false statements and failed to disclose material facts to investors. Justman, Gold, and Reilly previously consented to the entry of judgments, according to which the Commission's allegations were neither admitted nor denied, and which enjoined each of them from future violations of the federal securities laws. Justman and Reilly were also barred from serving as officers or directors of any public company, and all three defendants were barred from participating in the sale of any penny stock.

Justman was ordered to disgorge the profits from the sale of his shares of Forest of $219,199.69 together with $41,919.49 in prejudgment interest, for a total of $261,119.18. Gold was ordered to disgorge his profits of $654,887.93 and $127,158.83 in prejudgment interest, for a total of $782,046.75. Reilly was ordered to disgorge his profits of $84,512.73 and prejudgment interest of $18,456.62, for a total of $102,969.35. In addition, Judge Rakoff imposed a third-tier civil penalty of $130,000 on each individual defendant.

For further information, see Litigation Release No. 20878 (Feb. 2, 2009), Litigation Release No. 20980 (Mar. 31, 2009), Litigation Release No. 21080 (June 11, 2009), and Litigation Release No. 21252 (Oct. 16, 2009).