Home Banking & Finance Threat of jail might motivate Ossining penny stock schemer to pay $12M...

Threat of jail might motivate Ossining penny stock schemer to pay $12M penalty

Penny stock schemer Edward Bronson has agreed to pay more than $12.1 million to the U.S. Securities and Exchange Commission — with the threat of jail time hanging over him if he fails once again to satisfy the four-year obligation.

Bronson, of Ossining, who ran the scheme through E-Lionheart Associates and Fairhills Capital Inc., agreed to make eleven, $1.1 million monthly installments beginning in August, according to a July 9 court order issued by U.S. District Judge Kenneth M. Karas, and a final payment based on accrued interest.

If he fails to pay in full, Karas ruled, a hearing will be held to determine the appropriate sanctions.

“The court’s patience is at an end,” Karas had stated in a Jan. 19 order, finding Bronson in contempt for flouting court orders for three years. He ordered Bronson to negotiate a payment plan with the SEC.

Bronson had targeted small companies in need of capital, bought their securities at a steep discount, and then quickly sold them for a steep profit from 2009 to 2011.

The SEC sued Bronson and his companies in 2012 for selling unregistered securities and depriving investors of basic financial information. Karas issued a summary judgment against them in 2017, but ever since Bronson has avoided paying any of the $12.3 million award.

He claimed he was unable to pay the penalty, according to court records, but the SEC argued that he was living a lavish lifestyle, concealing his income, shielding assets and withholding information from the government.

In 2017, for instance, Bronson and his wife, Dawn, showed $932,000 in income on their joint tax return from Voice2IP Inc., a business registered to his wife that invests funds for clients.

Bronson claimed that he received no salary for his work for the company and that his wife was the sole operator of Voice2IP and the sole breadwinner.

But the evidence, Karas ruled in January, shows that Bronson corresponded with the clients, worked on deals to build a hotel and airport in the Turks and Caicos Islands, oversaw the receipt and disbursement of funds, and coordinated bookkeeping with the company’s accountant.

“In short, Bronson indisputably is running the show. It is telling indeed that Bronson cannot name a single substantive role his wife performs,” Karas found. “Put more bluntly, Ms. Bronson’s role is the ruse Bronson is using to avoid compliance with the court’s orders.”

Imposing escalating fines on a defendant who brazenly refuses to pay a large judgment would be an empty gesture, Karas noted in the January contempt order. Only imprisonment, “the most powerful coercive sanction, offers any prospect of producing compliance.”

But the judge gave Bronson another chance, ordering him to immediately make a $25,000 good-faith payment, produce all financial records demanded by the SEC, negotiate a long-term payment plan and submit a detailed accounting of his finances in support of the plan.

If he violates anything in the order, Karas ruled, “Mr. Bronson should not presume he will avoid prison.”

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