Robert E. Cohen, Victor M. Caron, and James B. Yates, Jr.

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

Litigation Release No. 16583 / June 5, 2000

Securities and Exchange Commission v. Robert E. Cohen, Victor M. Caron and James B. Yates, Jr., Civ. Action No. 99-CIV-5822 NRB (S.D.N.Y.)

COURT ENJOINS THREE IN SCHEME TO SELL UNREGISTERED MICROCAP STOCK THROUGH SHAM SALES TO LIBERIANS

The Securities and Exchange Commission announced the settlement of charges against three New York area men in a scheme to sell unregistered microcap stock into the United States market through a series of intermediate sham sales to purported residents of Liberia. The defendants are Robert E. Cohen, of New York, New York; Victor M. Caron, of New Rochelle, New York; and James B. Yates, Jr., of Staten Island, New York. The Commission previously had barred Cohen from the securities industry in In the Matter of Robert E. Cohen, Admin. Proc. File No. 3-7700, Rel. No. 34-30543 (April 1, 1992).

The Commission's complaint charged that Cohen and Yates used two nominees to orchestrate the illegal sale of 2.5 million shares of unregistered stock in a now defunct New York computer retailer named Blue Chip Computerware, Inc. The Commission charged that from 1993 through 1995 Cohen and Yates received more than $1.3 million in illegal profits from their scheme.

According to the Commission's complaint, Cohen, who was a paid consultant to the company, arranged 18 transactions in which millions of shares of unregistered Blue Chip stock were sold to two purported residents of Liberia. The shares were later all sold into the United States market. Yates assisted in the sales to the Liberians, who are his father and sister. The Commission charged that Caron, who was the president and a director of Blue Chip, signed agreements on behalf of Blue Chip in order to effect stock sales despite having reason to believe that Blue Chip shares were being sold out of nominee brokerage accounts and into the United States market. The stock in question was ostensibly sold to the Liberians in compliance with Regulation S under the Securities Act of 1933.

The Commission charged that Cohen concealed from Blue Chip and its management that the purported Liberian purchasers were merely nominees being used by Cohen and Yates. Cohen also concealed that he was arranging for the nominee sales at steeply discounted prices, and that he and Yates were profiting when the stock was sold to domestic broker-dealers at higher prices.

According to the Commission's complaint, no money to pay for any of the shares came from overseas or from the nominees. At least six of the purchases were not paid in full at the time of the sales to the nominees, and virtually all of the stock was paid for with the proceeds of the sale of the stock into the United States market. Neither of the nominees used an overseas brokerage account, and certificates for the Blue Chip shares were never sent overseas. In virtually every instance the stock was resold to a domestic broker-dealer within months after it had been issued.

The nominees received no money from their purported investments. Cohen and Yates, however, received more than $1.3 million from the scheme. Caron also received $400,000 when he sold shares he owned to one of the nominees.

On April 18, 2000, The Honorable Naomi Reice Buchwald, Judge of the United States District Court for the Southern District of New York, issued judgments against all three defendants. Each defendant consented to the judgment against him without admitting or denying the allegations in the Commission's complaint.

Cohen consented to the entry of a judgment which (a) permanently enjoins him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b), 15(b)(6)(B), and 15(c)(1) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5 and 15c1-2 thereunder; (b) commands Cohen, pursuant to Section 21(e) of the Exchange Act, to comply with the prior Commission order against him; (c) imposes $1,265,153.77 in disgorgement and prejudgment interest but waives payment of all but $30,000 of that amount based on Cohen's demonstrated inability to pay; and (d) does not impose civil penalties based on Cohen's demonstrated inability to pay.

Yates consented to the entry of a judgment which (a) permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act; (b) imposes $809,759.08 in disgorgement and prejudgment interest but waives payment of that amount based on Yates's demonstrated inability to pay; and (c) does not impose civil penalties based on Yates's demonstrated inability to pay.

Caron consented to the entry of a judgment which (a) permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act; (b) imposes $620,352.44 in disgorgement and prejudgment interest but waives payment of that amount based on Caron's demonstrated inability to pay; and (c) does not impose civil penalties based upon Caron's demonstrated inability to pay.