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ORDER TO MAKE RESTITUTION AND NOTICE OF RIGHT TO HEARING DOCKET NO. CRF-12-7892-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 Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act. |
| 2. | Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if Respondents have 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. |
| 5. |
As a result of the Investigation, the Commissioner has the authority to order that Respondents make restitution pursuant to Section 36b-27(b) of the Act. |
| 6. | As a result of the Investigation, the Commissioner has the authority to impose a fine upon Respondents pursuant to Section 36b-27(d) of the Act. |
II. RESPONDENTS
| 7. |
Stead-Fast Custom Linings, LLC (“Linings”) is a Connecticut limited liability company, with its principal place of business at 641 Main Street, East Haven, Connecticut 06512. Linings was organized on July 28, 1999 by two Connecticut residents. Lining’s core business is the sale and application of a spray-on truck-bed lining application. During the summer of 2007, Linings was acquired by Beere Financial Group, Inc. (“Beere”), a Nevada shell corporation listed on what was then the Pink OTC Markets, Inc. (“Pink Sheets”) (now referred to as the OTC Markets Group, Inc.). |
| 8. | Beere’s principal place of business is 641 Main Street, East Haven, Connecticut 06512. During the summer of 2007, in addition to acquiring Linings, Beere acquired Steadfast Automotive, Inc. (“Automotive”), a Florida corporation with a principal place of business of 625 N. Flagler Drive, Suite 509, West Palm Beach, Florida 33401. Automotive was created by John Calash (“J. Calash”), who served as Automotive’s President, Secretary, Treasurer and Director. |
| 9. | J. Calash and Susan Calash (“S. Calash”) (collectively “the Calashes”) are a married couple whose address last known to the Commissioner is 33 Blueberry Hill Road, Madison, Connecticut 06443. From approximately May 2006 through May 2007 the Calashes were minority owners of Linings. From approximately May 2007 through September 2007, the Calashes were majority owners of Linings. Neither J. Calash nor S. Calash has been registered under the Act in any capacity. |
| 10. | Christopher Borgo (“Borgo”) is an individual whose last known address to the Commissioner is 99 SE Mizner Boulevard #809, Boca Raton, Florida 33432. At all times relevant hereto, Borgo was employed by Northland Holdings, Inc., a Florida corporation. At various times from May 2, 1994 through October 15, 2004, Borgo was registered as a broker-dealer agent under the Act. |
III. STATEMENT OF FACTS
11.
In approximately January 2007, the Calashes began devising a plan to convert Linings into a public company which would sell shares to the public. The Calashes planned to become majority owners of Linings, merge Linings into an existing shell, and then sell shares of that entity to the public.
12.
On May 27, 2007, J. Calash became a majority owner of Linings by purchasing additional Linings membership interests.
13.
On or about July 2, 2007, J. Calash and Borgo offered and sold securities, in the form of Linings membership interests (“Linings Securities”), from Connecticut to at least one investor (the “Investor”) for $150,000, which securities were not 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.
14.
In connection with the offer and sale of Linings Securities to the Investor, Linings, J. Calash and/or Borgo did not provide the Investor will any offering document disclosing the risks associated with Linings or any material information regarding Linings. Specifically, Linings, J. Calash and/or Borgo failed to disclose to the Investor, inter alia, the risks related to the investment, how the proceeds from the sale of Linings Securities would be used, and any material transactions Linings was planning to enter into, including the imminent sale of Linings to Beere, a company listed on the Pink Sheets.
15.
During the month of September 2007, J. Calash, acting on behalf of Linings, was instrumental in the acquisition of Linings by Beere. Linings Securities were exchanged for shares of Beere, resulting in the Calashes gaining a controlling interest in Beere’s shares and voting power. On September 18, 2007, J. Calash was appointed Chairman and President of Beere, replacing Beere’s prior Chairman and President.
16.
On September 28, 2007, in his capacity as President of Beere, J. Calash changed Beere’s name to Steadfast Holdings Group, Inc. (“Holdings”). From approximately September 2007 through April 2011 the Calashes were majority owners of Holdings.
17.
Linings, J. Calash and/or Borgo failed to notify the Investor that Linings had been acquired by Beere and ultimately converted to Holdings.
18.
The Investor’s Linings Securities are currently worthless.
19.
At all times relevant hereto Holdings purported to be a green energy company that manufactured modular housing panels and modular buildings constructed from bio-friendly foam materials. However, Holdings did not have a viable operating business, other than the spray-on truck bed lining application business it conducted through Linings, which ceased in approximately the fall of 2009.
Holdings
| 20. | From approximately October 12, 2007 through approximately October 1, 2009, Holdings, J. Calash, and Borgo offered and sold shares of Holdings (“Holdings Securities”) to investors in the amount of approximately $767,500, which securities were not 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. |
| 21. | In connection with the offer and sale of Holdings Securities, Holdings, J. Calash and/or Borgo failed to disclose to investors the risks associated with purchasing Holdings Securities, including, inter alia: (a) that Holdings did not operate a viable green energy business; (b) that Holdings converted many of its debts to Holdings Securities, resulting in the dilution of Holding Shares’ value; and (c) that Holdings’ President and Chairman, J. Calash, had no experience managing and/or operating a public company. |
| 22. | On or about April 9, 2008, S. Calash was appointed Secretary of Holdings. |
| 23. | From approximately September 2007 through approximately April 2011, J. Calash, in his capacity as President and Chairman of Holdings and S. Calash, in her capacity as Secretary of Holdings, orchestrated and coordinated a scheme to issue to themselves thousands of Holdings Securities with the intention of diluting the remaining Holdings Securities and eventually selling their Holdings Securities for a profit. This scheme included, inter alia, the Calashes taking the following actions:
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| 24. | Neither J. Calash nor S. Calash disclosed to the investors of Holdings that they were taking steps that had the effect of diluting the value of the outstanding Holdings Securities. | |||||||||||||
| 25. | The investors’ Holdings Securities, in the amount of approximately $767,500, are now essentially worthless. |
ORDER TO MAKE RESTITUTION AND
ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act by Linings,
Holdings, J. Calash and Borgo -
Offer and Sale of Unregistered Securities
| 26. | Paragraphs 1 through 25, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 27. |
Linings, Holdings, J. Calash and Borgo offered and sold unregistered securities in or from Connecticut to at least one investor, as more fully described in paragraphs 13 and 20, which securities were not registered in Connecticut under the Act. 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 Linings, Holdings, J. Calash and Borgo under Section 36b-27(a) of the Act, an order that Linings, Holdings, J. Calash and Borgo make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Linings, Holdings, J. Calash and Borgo under Section 36b-27(d) of the Act. |
b. Violation of 36b-6(a) of the Act by J. Calash and Borgo –
Unregistered Agent of Issuer Activity
| 28. | Paragraphs 1 through 27, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 29. |
J. Calash and Borgo each transacted business as an agent of an issuer of Linings and Holdings in this state on at least one occasion absent registration, as more fully described in paragraphs 9, 10, 13 and 20. 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 J. Calash and Borgo under Section 36b-27(a) of the Act, and for the imposition of a fine upon J. Calash and Borgo under Section 36b-27(d) of the Act. |
c. Violation of Section 36b-6(b)of the Act by Linings and Holdings –
Engaging Unregistered Agents
| 30. | Paragraphs 1 through 29, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 31. |
Linings and Holdings engaged unregistered agents of issuer, as described more fully in paragraphs 9, 10, 13 and 20. 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 Linings and Holdings under Section 36b-27(a) of the Act, and for the imposition of a fine upon Linings and Holdings pursuant to Section 36b-27(d) of the Act. |
d. Violation of Section 36b-4(a) of the Act by Respondents –
Fraud in Connection with the Offer, Sale or Purchase of any Security
| 32. | Paragraphs 1 through 31, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 33. |
The conduct of Respondents, as more fully described in paragraphs 11 through 24, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making any untrue statements 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 any act, practice, or course of business which operates or would operate 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 Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act. |
V. ORDER TO CEASE AND DESIST,
ORDER TO MAKE RESTITUTION, 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, Linings has committed at least one violation of 36b-16 of the Act, at least one violation of Section 36b-6(b) of the Act, and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Holdings has committed at least one violation of 36b-16 of the Act, at least one violation of Section 36b-6(b) of the Act, and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, J. Calash has committed at least one violation of 36b-16 of the Act, at least one violation of Section 36b-6(a) of the Act, and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, S. Calash has committed at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Borgo has committed at least one violation of 36b-16 of the Act, at least one violation of Section 36b-6(a) of the Act, and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist, Order to Make Restitution, and the imposition of a fine upon 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 each Respondent that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation upon each Respondent;
WHEREAS, the Commissioner ORDERS that LININGS 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) engaging an unregistered agent of issuer; (3) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making any untrue statements 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 any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that HOLDINGS 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) engaging an unregistered agent of issuer; and (3) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making any untrue statements 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 any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that J. CALASH 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) acting as an agent of issuer absent registration; and (3) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making any untrue statements 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 any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that S. CALASH CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making any untrue statements 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 any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that BORGO 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) acting as an agent of issuer absent registration; and (3) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making any untrue statements 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 any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that RESPONDENTS MAKE RESTITUTION of any sums obtained as a result of Respondents’ violations of Sections 36b-16 and 36b-4(a) of the Act, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut. Specifically, the Commissioner ORDERS that:
| 1. | Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with a written disclosure which contains (a) the name and address of the investor who purchased Linings Securities through J. Calash and/or Borgo on July 2, 2007, and of each investor who purchased Holdings Securities through J. Calash and/or Borgo in a private placement offering during the period from October 2007 through October 2009, (b) the amount Respondents collected from each investor, (c) the date of each investment, and (d) the amount of any refunds of principal or purported interest payments Respondents made to each investor; |
| 2. | Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondents shall reimburse each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to all transactions effected from July 2, 2007 through the date this Order to Make Restitution becomes permanent. Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected investor; and |
| 3. | Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondents have reimbursed each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to all transactions effected from July 2, 2007 through the date this Order to Make Restitution becomes permanent. |
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 February 25, 2013, 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.
This Order to Make Restitution 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 17th day of December 2012. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 17th day of December 2012, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to: Stead-Fast Custom Linings, LLC, 641 Main Street, East Haven, Connecticut 06512, certified mail no. 7011 0470 0002 2573 4711; Steadfast Holdings Group, Inc., f/k/a Beere Financial Group, Inc., 641 Main Street, East Haven, Connecticut 06512, certified mail no. 7011 0470 0002 2573 4728; Steadfast Holdings Group, Inc., f/k/a Beere Financial Group, Inc., n/k/a Scorpex, Inc., 10300 West Charleston Boulevard 13-160, Las Vegas, Nevada 89135, certified mail no. 7011 0470 0002 2573 4735; John Calash, 33 Blueberry Hill Road, Madison, Connecticut 06443, certified mail no. 7011 0470 0002 2573 4742; Susan Calash, 33 Blueberry Hill Road, Madison, Connecticut 06443, certified mail no. 7011 0470 0002 2573 4759; and Christopher Borgo, 99 SE Mizner Boulevard #809, Boca Raton, Florida 33432, certified mail no. 7011 0470 0002 2573 4766.
____/s/___________
Elena Zweifler
Prosecuting Attorney