SEC Charges Lawyers in Pump-and-Dump Scheme

The Securities and Exchange Commission on Tuesday charged two California-based attorneys with executing fraudulent legal opinions in a pump-and-dump scheme. Albert Rasch Jr. and Kathleen Novinger, of Albert J. Rasch & Associates, allegedly executed at least 24 bogus opinion letters, effectively lifting restrictive legends on unregistered shares of Mobile Ready Entertainment Corp. and allowing the sale of more than 22 million shares of the company's stock in violation of rules governing the conversion of restricted stock.

Joe Palazzolo

The National Law Journal

2009-05-06 12:00:00 AM

The Securities and Exchange Commission on Tuesday charged two California-based lawyers with executing fraudulent legal opinions in a pump-and-dump scheme.

Lawyers Albert Rasch Jr., 63, and Kathleen Novinger, 38, of Albert J. Rasch & Associates in Costa Mesa, Calif., executed at least 24 bogus legal opinion letters, effectively lifting restrictive legends on unregistered shares of Mobile Ready Entertainment Corp., according to the SEC complaint. (Mobile Ready markets software applications for mobile devices.) Sandra Masino and her company 144 Opinions are charged with preparing the letters.

The SEC alleges that the opinions allowed the sale of more than 22 million shares of Mobile Ready in violation of Rule 144, which governs the conversion of restricted stock that otherwise cannot be publicly sold.

"The market relies on lawyers to act as gatekeepers who exercise their function in good faith," said Katherine Addleman, director of the SEC's Atlanta Regional Office, in a statement. "These defendants disregarded the investing public by operating a legal opinion mill of fraudulent letters that misrepresented critical facts and cited to non-existent documents."

The opinions contained false statements about the securities' origins, the company and agreements between the company and the shareholders, among other things, according to the complaint, which was filed in U.S. District Court for the Northern District of Georgia.

Rasch and Novinger could not immediately be reached for comment. According to the firm's Web site, Albert J. Rasch & Associates specializes in legal, wealth planning, tax, financial, insurance and investment management services. Darryl Sheetz, a solo practitioner based in Tustin, Calif., is representing Rasch; Thomas Gourde, of Ray & Gourde, also in Tustin, is representing Novinger; Sheldon Jaffe, a solo practitioner in Los Angeles, is representing Masino and 144 Opinions. Sheetz, Gourde and Jaffe declined to comment.

The SEC previously charged Mobile Ready and two of its officers in connection with the pump-and-dump scheme. In the most recent complaint, the SEC is seeking disgorgement of ill-gotten gains, pre- and post-judgement interest, civil monetary penalties, penny stock bars and a permanent injunction against future violations.

This article first appeared on The BLT: The Blog of Legal Times.