United States Securities and Exchange Commission v. Ruettiger et al
Filing
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FINAL JUDGMENT in favor of United States Securities and Exchange Commission against Pawel Dynkowski. Defendant shall satisfy this obligation by paying the total final judgment amount of $4,487,880.88 to the Securities and Exchange Commission within 14 days after entry of this Final Judgment. Signed by Judge Jennifer A. Dorsey on 11/12/14. (Copies have been distributed pursuant to the NEF - MMM)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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United States Securities and Exchange
Commission,
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Plaintiff,
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Case No.: 2:11-cv-2011-JAD-VCF
v.
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Final Judgment as to Defendant
Pawel P. Dynkowski [Doc. 48]
Rocco Brandonisio, Jr., et al.,
Defendants.
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This securities fraud action involves a scheme to “pump-and-dump” the stock of Rudy
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Nutrition (RUNU), the details of which were described in my prior order granting in part the
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Securities and Exchange Commission’s request for a default judgment against defendant
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Pawel P. Dynkowski and one of his co-defendants, Chad P. Smanjak.1 At that time, I found
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default judgment was appropriate against Dynkowski and Smanjak, and that both should be
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(1) permanently enjoined from further violating 15 U.S.C. §§ 77e(a), 77e(c), 77q(a) 78j(b),
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and 17 C.F.R. § 240.10b-5; and (2) barred from participating in penny-stock offerings under
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15 U.S.C. §§ 77t(g), 78u(d)(6). Doc. 39 at 18. I also found Dynkowski and Smanjak liable
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for disgorgement, prejudgment interest, and third-tier civil penalties. See id. at 13-17.
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However, I also concluded that the SEC had not supplied adequate evidence of how it arrived
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at its requested $4.2 million disgorgement amount and thus denied this portion of the SEC’s
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motion without prejudice. Id. at 13-17. All that remains in the SEC’s case against these two
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defendants is to determine the amount of disgorgement, prejudgment interest, and third-tier
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civil penalties, and to enter a final judgment for damages and injunctive relief. This is the
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subject of the SEC’s current motion, which it brings against Dynkowski only.2
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I incorporate these details by reference. See Doc. 39 at 1-6.
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I find this motion suitable for disposition without a hearing. Nev. L.R. 78-2.
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The SEC requests that Dynkowski be ordered to disgorge $2,010,286 and pay
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$467,308.88 in prejudgment interest and a third-tier civil penalty of $2,010,286—equal to his
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gross pecuniary gain—for a total liability of $4,487.880.88. See Doc. 48 at 2. To prove the
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disgorgement and prejudgment interest amounts, the SEC offers the Declaration of Anthony
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Richard Petrilla, the primary investigator of the RUNU pump-and-dump scheme. Doc. 48-1
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at 1. Petrilla affirms that he received financial documents from Penson Financial Services,
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the clearing broker-dealer for the trades Dynkowski directed. Id. at 2. The monthly
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statements indicate that the total sales of the RUNU stock for which Dynkowski was
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involved were $6,018,073.43. Docs. 48-1 at 4; see Doc. 48-2. Of these proceeds, RUNU
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received $797,500; co-defendant Steven DeCesare received $1.2 million; Dynkowski and
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Smanjak split the remaining $4,020,573.43. Doc. 48-1 at 4. Petrilla also affirms that he
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calculated prejudgment interest on these amounts using the IRS tax underpayment rate in 26
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U.S.C. § 6621(a)(2), and has provided a breakdown of the prejudgment interest calculations.
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Id. at 4-5. Based on this detailed and comprehensive evidentiary support, and I grant the
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SEC’s motion for $2,010,286 in disgorgement and $467,308.88 in prejudgment interest
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against Dynkowski in full.
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As to civil penalties, I previously concluded that the seriousness of Dynkowski’s
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conduct “weigh[s] heavily in favor of imposing a substantial penalty,” and I incorporate my
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prior discussion of Dynkowski’s culpability for civil penalties herein by reference. Doc. 39
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at 15-16. In a separate order I also previously concluded that another defendant in this
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scheme, Gregg Mulholland, is liable for a third-tier civil penalty in an amount equal to his
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gross pecuniary gain, a discussion I also incorporate by reference. See Doc. 41 at 15-16.
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Dynkowski’s involvement in and culpability for the scheme was more comprehensive than
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Mulholland’s, see Docs. 39, 41, and I have little difficulty concluding that he, like
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Mulholland, should also be assessed a civil penalty equal to his gross pecuniary gain.3
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Therefore, I grant the SEC’s motion for a $2,010,286 civil penalty against Dynkowski in full.
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See, Security Exchange Commission v. CMKM Diamonds, Inc., 635 F. Supp. 2d 1185, 1192-93 (D. Nev.
2009) (imposing third-tier penalty equal to disgorgement amount).
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Conclusion
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Accordingly, and based on the foregoing analysis, IT IS HEREBY ORDERED,
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ADJUDGED, AND DECREED that Defendant Pawel P. Dynkowski and his agents,
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servants, employees, attorneys, and all persons in active concert or participation with him
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who receive actual notice of this Final Judgment by personal service or otherwise are
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permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of
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the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] and Rule
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10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using any means or
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instrumentality of interstate commerce, or of the mails, or of any facility of any national
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securities exchange, in connection with the purchase or sale of any security:
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(a)
to employ any device, scheme, or artifice to defraud;
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(b)
to make any untrue statement of a material fact or to omit to state a material
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fact necessary in order to make the statements made, in the light of the
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circumstances under which they were made, not misleading; or
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(c)
to engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person.
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IT IS FURTHER ORDERED,
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ADJUDGED, AND DECREED that Defendant Dynkowski and his agents, servants,
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employees, attorneys, and all persons in active concert or participation with him who receive
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actual notice of this Final Judgment by personal service or otherwise are permanently
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restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 (the
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“Securities Act”) [15 U.S.C. § 77q(a)] in the offer or sale of any security by the use of any
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means or instruments of transportation or communication in interstate commerce or by use of
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the mails, directly or indirectly:
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(a)
to employ any device, scheme, or artifice to defraud;
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(b)
to obtain money or property by means of any untrue statement of a material
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fact
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or any omission of a material fact necessary in order to make the statements
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made, in light of the circumstances under which they were made, not
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misleading; or
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(c)
would operate as a fraud or deceit upon the purchaser.
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to engage in any transaction, practice, or course of business which operates or
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant
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Dynkowski and his agents, servants, employees, attorneys, and all persons in active concert
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or participation with him who receive actual notice of this Final Judgment by personal
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service or otherwise are permanently restrained and enjoined from violating Section 5 of the
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Securities Act [15 U.S.C. § 77e] by, directly or indirectly, in the absence of any applicable
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exemption:
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(a)
Unless a registration statement is in effect as to a security, making use of any
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means or instruments of transportation or communication in interstate
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commerce or of the mails to sell such security through the use or medium of
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any prospectus or otherwise;
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(c)
Making use of any means or instruments of transportation or communication in
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interstate commerce or of the mails to offer to sell or offer to buy through the
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use or medium of any prospectus or otherwise any security, unless a
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registration statement has been filed with the Commission as to such security,
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or while the registration statement is the subject of a refusal order or stop order
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or (prior to the effective date of the registration statement) any public
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proceeding or examination under Section 8 of the Securities Act [15 U.S.C. §
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77h].
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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant
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Dynkowski is permanently barred from participating in an offering of penny stock, including
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engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or
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inducing or attempting to induce the purchase or sale of any penny stock. A penny stock is
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any equity security that has a price of less than five dollars, except as provided in Rule
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3a51-1 under the Exchange Act [17 C.F.R. 240.3a51-1].
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IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that judgment is
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entered against Defendant Dynkowski for disgorgement of $2,010,286 representing profits
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gained as a result of the conduct alleged in the Complaint, together with prejudgment interest
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thereon in the amount of $467,308.88, and a civil penalty in the amount of $2,010,286,
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pursuant to Section 21(d)(3)(B) of the Securities Exchange Act of 1934 [15 U.S.C. §
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78u(d)(3)(B)] and Section 20(d) of the Securities Act of 1933 [15 U.S.C. § 77t(d)].
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Defendant shall satisfy this obligation by paying the total final judgment amount of
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$4,487,880.88 to the Securities and Exchange Commission within 14 days after entry of this
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Final Judgment. Defendant may transmit payment electronically to the Commission, which
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will provide detailed ACH transfer/Fedwire instructions upon request. Payment may also be
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made directly from a bank account via Pay.gov through the SEC website at
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http://www.sec.gov/about/ offices/ofm.htm. Defendant also may pay by certified check,
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bank cashier’s check, or United States postal money order payable to the Securities and
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Exchange Commission, which shall be delivered or mailed to:
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Enterprise Services Center
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Accounts Receivable Branch
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6500 South MacArthur Boulevard
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Oklahoma City, OK 73169
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and shall be accompanied by a letter identifying the case title, civil action number, and name
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of this Court; Pawel P. Dynkowski as a defendant in this action; and specifying that payment
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is made pursuant to this Final Judgment. Defendant shall simultaneously transmit
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photocopies of evidence of payment and case identifying information to the Commission’s
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counsel in this action. By making this payment, Defendant relinquishes all legal and
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equitable right, title, and interest in such funds and no part of the funds shall be returned to
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Defendant. The Commission shall send the funds paid pursuant to this Final Judgment to the
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United States Treasury. The Commission may enforce the Court’s judgment for
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disgorgement and prejudgment interest by moving for civil contempt (and/or through other
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collection procedures authorized by law) at any time after 14 days following entry of this
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Final Judgment. Defendant shall pay post-judgment interest on any delinquent amounts
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pursuant to 28 U.S.C. § 1961.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall
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retain jurisdiction of this matter for the purposes of enforcing the terms of this Final
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Judgment. There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules
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of Civil Procedure, the Clerk is directed to enter this Final Judgment forthwith and without
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further notice.
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DATED: November 12, 2014.
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Jennifer A. Dorsey
United States District Judge
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