SEC Suspends Corporate Lawyer Over Ponzi Scheme
The U.S. Securities and Exchange Commission has suspended corporate lawyer Fredric Aaron from practicing before the agency for five years, citing his role in companies that allegedly operated a Ponzi scheme that bilked investors out of $26 million.
The SEC complaint said that Aaron, 49, of Plainview, N.Y., participated in multiple offerings by the PermaPave Entities, a group of related companies. Aaron, who didn’t immediately return messages seeking comment, neither admitted nor denied the SEC charges.
The complaint [PDF] alleged that Aaron conceived several of the group’s offerings, drafted offering documents that contained misstatements, made misstatements to investors in group solicitation meetings and was involved in drafting a false Form 8-K filed by one of the companies.
Aaron, who currently has a private practice in Plainview, served as counsel to the six companies and to the group’s chief executive. He also served as secretary and a director for two of the companies, according to the complaint.
Most of the companies claimed to sell water-filtering natural stone pavers. Some of the investors’ proceeds were used to buy another company dealing in wireless devices, the SEC said, and for which Aaron falsified information about a nonexistent $6 billion investor.
The SEC originally charged the operators of the Ponzi scheme, including Aaron, in October 2011. Last December the U.S. district court in Manhattan entered an order permanently enjoining Aaron, by consent, from future violations of the Securities and Exchange Act and from aiding and abetting violations of the act.
The original complaint said investors were told that the companies had “a tremendous backlog of orders for pavers imported from Australia, which could be sold in the U.S. at a substantial markup, yielding monthly returns to investors of 7.8 percent to 33 percent.”
In reality, the complaint states, there was little demand for the product, and the cost of the pavers far exceeded the revenue from sales.