A federal court in Florida has all but closed down the operations of OpenReq and its parent company, eCareer Holdings, after the Securities and Exchange Commission charged the firm and its principals with fraud and securities violations.
The court issued a temporary injunction freezing the company’s assets, and those of its chairman and principal shareholder, Joseph J. Azzata, who is also temporarily prohibited from serving as a company officer or director.
When contacted by the South Florida Business Journal, Azzata’s attorney declined to comment.
The civil suit, filed earlier this month, accuses the firm and Azzata of using a boiler room operation to sell unregistered shares in the company and defrauding investors. The lawsuit says investors, many of them elderly, some between 85 and 98, were told the funds would be used as working capital to build eCareer Holdings’ online job board and staffing business.
OpenReq, a job site for HR, staffing and recruiting, positions, was the first of three planned sites.
What they weren’t told, the SEC says, is that 30 percent of the capital raised by the operation was paid in fees and commissions to the brokers who ran the boiler room and to the stock sellers. Over the more than four years of the operation, some $11 million was invested by more than 400 individuals. The sales fees came to about $3.5 million, says the SEC suit.
In addition, Azzata diverted $650,000 to his personal use to pay his wife’s shopping bills, children’s school tuition, and to support his motorsports hobby.
None of this was disclosed to investors or in filings with the SEC.
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“Contrary to statements in sales pitches and eCareer’s corporate filings that the company would use proceeds to grow its business, we allege that Azzata and the barred brokers he hired to sell the stock lined their own pockets at the expense of investors,” said Glenn S. Gordon, associate director of the SEC’s Miami Regional Office.
The brokers hired by Azzata — Dean A. Esposito of Boca Raton, Fla., Joseph DeVito of Brooklyn, and Frederick Birks of Orlando — had previously run afoul of the SEC and were barred from selling or participating in any offering of a penny stock, which was the type offered by eCareer Holdings. In the lawsuit, the SEC said the three men had “significant disciplinary histories,” which they concealed from investors.
DeVito and Esposito were directors of eCareerHoldings for at least some period of time beginning in 2010. Birks carried business cards that listed him as a director. Azzata and and the three men had previously run afoul of state securities regulators for selling unregistered stock in Medical Connections, an online staffing service.
The SEC lawsuit says the eCareer Holdings stock was sold at various price points ranging from 10 cents to a dollar a share, with potential investors told it “was a profitable investment that was raising investor funds to develop and grow its online medical staffing business.” Potential buyers were told the price could go to $6 or $8, even as high as $30 in no time.
The stock, now suspended from trading, was last listed at 6 cents a share.