The U.S. Securities and Exchange Commission filed a civil action today against a New York firm and four individuals involved in an ongoing fraudulent scheme to exploit fear of anthrax and bio-terrorism.

The SEC’s complaint alleges manipulation of the stock of a publicly traded shell company, Spectrum Brands Corp.


According to the complaint, on or before November 5, Spectrum Brands posted on its Web site that it had a hand-held device called the “DeGERMinator” capable of “wip[ing] out surface germs in less than 5 seconds, including anthrax.”

The closing price of Spectrum Brands’ common stock tripled on this news, shooting up from approximately $4 on November 1, to $7 on November 2, to $11.75 on November 5, with an intra- day high of $14 on November 5.

The complaint alleges that Spectrum Brands, nominally of Hauppauge, New York, is secretly owned and controlled by a group of stock promoters located in Hicksville, New York. Unbeknownst to the investing public, Spectrum Brands continues to be owned and operated in secret by convicted felons.

These undisclosed principals include two individuals-Saverio (Sammy) Galasso III and David Hutter (a/k/a David Green)-who recently pled guilty to unrelated felony charges and are awaiting sentencing, and an associate, Charlie Dilluvio. Also charged was the sole officer and director of Spectrum Brands, Michael Burns. All four individuals (Galasso III, Hutter, Dilluvio and Burns) were arrested today on criminal charges relating to the Spectrum Brands stock fraud.

According to the complaint, the Hicksville promoters engaged in a series of transactions designed to create artificial volume in the market for Spectrum Brands securities and sold stock into the inflated market. The company has made certain corrective disclosures on its website, but continues to tout in recent press releases and spam e-mails its supposed progress in combating “bio-terrorism” and “cyber-terrorism.”

The commission seeks permanent injunctions, restitution, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties from all defendants and an officer and director bar against Burns.

Thomas Newkirk, associate director of the Division of Enforcement, said, “Using bogus anti-terrorism claims to defraud investors is unconscionable. This case gives clear warning that we and the Department of Justice will act promptly and decisively to halt these schemes and punish the schemers.”

http://www.sec.gov