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IN THE MATTER OF: POINT STRATFORD HECTOR NATERA (Collectively "Respondents") * * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-11-7743-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”). |
| 2. |
Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if Respondents had violated, are violating or are about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. | As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. |
As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the Act.
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| 5. |
As a result of the Investigation, the Commissioner has the authority to impose a fine against Respondents pursuant to Section 36b-27(d) of the Act. |
II. RESPONDENTS
| 6. | Point Stratford Development, LLC is a Connecticut limited liability company with its principal place of business last known to the Commissioner at 550 Main Street, Stratford, Connecticut 06615. On January 22, 2010, Point Stratford Development, LLC changed its name from Hollywood East/Area 51, LLC (hereinafter Point Stratford Development, LLC will be referred to as “Hollywood East”). Hollywood East is or was purported to be a digital media and real estate development company seeking investment capital to acquire a former military aircraft assembly plant in Stratford, Connecticut, that was being auctioned off by the U.S. General Services Administration. |
| 7. | Natera is an individual whose address last known to the Commissioner is 1944 Boston Avenue, Bridgeport, Connecticut 06610. From at least October 2007 to April 2008, Natera was a member and managing member of Hollywood East. |
| 8. |
Cuccaro is an individual whose address last known to the Commissioner is 1298 Hartford Turnpike, North Haven, Connecticut 06473. |
III. STATEMENT OF FACTS
| 9. | From at least December 14, 2007 to the present, Hollywood East has been an issuer of securities in the form of stock and interests in a limited liability company (“Hollywood East Securities”). |
| 10. | Specifically, from December 14, 2007 to March 2008, Natera, both individually and on one occasion jointly with Cuccaro, offered and sold Hollywood East Securities in the form of stock on behalf of Hollywood East in or from Connecticut to at least 13 investors. From April 2008 to the present, Hollywood East offered and sold new securities in the form of limited liability company interests in or from Connecticut to two previous Hollywood East investors. |
| 11. | The Hollywood East Securities offered and sold by Respondents were never registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status, including, without limitation, the private placement exemption in Section 36b-21(b)(10) of the Act and the notice filing provisions governing Regulation D Rule 506 offerings in 36b-21(e) of the Act. |
| 12. | Neither Natera nor Cuccaro have ever been registered in Connecticut as an agent of Hollywood East, nor were either of them an associated person. |
| 13. |
In connection with the offer and sale of the Hollywood East stock that was offered and sold from December 14, 2007 to March 2008, Hollywood East and Natera provided the investors with a document for signature entitled “Subscription Agreement” (“Subscription Agreement”) and a document entitled “Hollywood East/Area 51 LLC Executive Summary” (“Executive Summary”) (collectively “Offering Documents”). The Subscription Agreement recited that the Hollywood East stock was being offered “pursuant to an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended . . . and Regulation D . . . thereof to a limited number of ‘accredited investors’ (as that term is defined by Rule 501(a) of Regulation D.” The Executive Summary indicated that Hollywood East was seeking investment capital to acquire Connecticut land and property to develop and operate world-class motion picture, television and digital media production facilities. The Executive Summary included anticipated cash flows, and indicated that the property would qualify for sizeable transferrable tax credits. |
| 14. | The Offering Documents failed to disclose, inter alia: any financial information about Respondents; that none of the agents of Hollywood East were registered to sell securities in Connecticut; that the Hollywood East stock would be sold to individuals that were not accredited investors; the estimated cash proceeds of the Hollywood East stock offering; any specific risk factors related to the investment and acquisition of the proposed site from the federal government, including the acquisition, remediation and re-development of a Brownfield site and establishing a profitable business; the risk of failing to obtain approval of an economic development bond to fund the project; the risk that Hollywood East’s bid for the property and deposit would be submitted in the name of an entity unrelated to Hollywood East; and the risk that if Hollywood East was successful in the bid for the property, that it would be unable to secure the funds for the full purchase price, default on the bid, and forfeit the entire one million dollar deposit. Each of these omitted items was material to investors and prospective Hollywood East investors. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities
| 15. | Paragraphs 1 through 14, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 16. |
Respondents offered and sold unregistered securities in or from Connecticut, as more fully described in paragraphs 9 and 10, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 11. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, and for the imposition of a fine against Respondents under Section 36b-27(d) of the Act. |
b. Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security
| 17. | Paragraphs 1 through 16, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 18. | The conduct of Hollywood East and Natera, as more fully described in paragraphs 9 through 14, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person. Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Hollywood East and Natera under Section 36b-27(a) of the Act, and for the imposition of a fine against Hollywood East and Natera under Section 36b-27(d) of the Act. |
c. Violation of Section 36b-6 of the Act –
Unregistered Agent Activity
| 19. | Paragraphs 1 through 18, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 20. | Natera and Cuccaro transacted business as agents of issuer in this state absent registration, as more fully described in paragraphs 9 through 12, inclusive. Such conduct constitutes a violation of Section 36b-6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Natera and Cuccaro under Section 36b-27(a) of the Act, and for the imposition of a fine against Natera and Cuccaro under Section 36b-27(d) of the Act. |
| 21. | Hollywood East employed Natera and Cuccaro as unregistered agents of issuer in this state, as more fully described in paragraphs 9 through 12, inclusive. Such conduct constitutes a violation of Section 36b-6(b) of the Act, which forms a basis for an order to cease and desist to be issued against Hollywood East under Section 36b-27(a) of the Act, and for the imposition of a fine against Hollywood East under Section 36b-27(d) of the Act. |
V. ORDER TO CEASE AND DESIST, NOTICE OF INTENT TO FINE
AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Hollywood East has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(b) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Natera has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Cuccaro has committed at least one violation of Section 36b-16 of the Act, and at least one violation of Section 36b-6(a) of the Act;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist and the imposition of a fine against Respondents is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation against Respondents;
WHEREAS, the Commissioner ORDERS that Point Stratford Development, LLC f/k/a Hollywood East/Area 51, LLC CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person, and (3) employing an agent of issuer in this state absent registration;
WHEREAS, the Commissioner ORDERS that Hector Natera CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person, and (3) acting as an agent of issuer in this state absent registration;
WHEREAS, the Commissioner ORDERS that Yvette Cuccaro CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, and (2) acting as an agent of issuer in this state absent registration;
THE COMMISSIONER FURTHER ORDERS THAT, pursuant Section 36b-27 of the Act, each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on January 31, 2012 at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, each Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
This Order to Cease and Desist shall remain in effect and become permanent against any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
The Commissioner may order that the maximum fine be imposed upon any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
| Dated at Hartford, Connecticut, | ________/s/________ | |
| this 12th day of December 2011. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 12th day of December 2011, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Point Stratford Development, LLC f/k/a Hollywood East/Area 51, LLC at 550 Main Street, Stratford, Connecticut 06615, certified mail no. 7010 1870 0001 3619 4882; P.O. Box 1853, New Haven, Connecticut 06508, certified mail no. 7010 1870 0001 3619 4899 ; and c/o Willinger, Willinger & Bucci, P.C., Agent, 855 Main Street, Bridgeport, Connecticut 06604, certified mail no. 7010 1870 0001 3619 4905; Hector Natera, 1944 Boston Avenue, Bridgeport, Connecticut 06610, certified mail no. 7010 1870 0001 3619 4912; and Yvette Cuccaro, 1298 Hartford Turnpike, North Haven, Connecticut 06473, certified mail no. 7010 1870 0001 3619 4929.
_______/s/_________
Paul A. Bobruff
Prosecuting Attorney