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Securities and Exchange Commission v. Jovanovich

United States District Court, Seventh Circuit

August 16, 2013

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
NENAD JOVANOVICH ET AL., Defendants.

Daniel J. Hayes, John E. Birkenheier, Paul M. G. Helms, Kathryn A. Pyszka, U.S. Securities and Exchange Commission, Chicago, Illinois, Attorneys for Plaintiff U.S. Securities and Exchange Commission.

UNOPPOSED MOTION FOR ENTRY OF FINAL JUDGMENT AS TO DEFENDANT SKY'S THE LIMIT CONSULTING, LLC

Defendant Sky's the Limit Consulting, LLC ("Sky's the Limit Consulting") agreed to settle this matter with the Securities and Exchange Commission ("SEC" or the "Commission"). Accordingly, the Commission respectfully moves this Court for entry of the proposed final judgment attached as Exhibit 2 ("Proposed Judgment"). As reflected in Exhibit 1, Defendant Sky's the Limit Consulting consents to the entry of the Proposed Judgment. In support of the Motion, the SEC states as follows:

1. On August 1, 2013, the Commission filed a complaint against Defendants Nenad Jovanovich ("Jovanovich"), Accelerated Innovations, LLC ("Accelerated Innovations"), Kymberly A. Nelson ("Nelson"), Sky's the Limit Consulting, LLC ("Sky's the Limit Consulting"), Javorka L. Gasic ("J. Gasic"), Diana Bozovic ("Bozovic"), Dale J. Baeten ("Baeten"), Investing in Stock Market, Inc. ("Investing in Stock Market"), Midwest Stock Consulting, Inc. ("Midwest Stock Consulting"), Charles C. Bennett ("Bennett"), and George E. Bowker, III ("Bowker") and Relief Defendant Vertical Group Holdings, LLC ("Relief Defendant" or "Vertical Group") for violation of the federal securities laws.[1]

2. In the Complaint, the Commission alleges that Defendants participated in a pump-and-dump scheme orchestrated by Bosko R. Gasich ("Gasich"), one of the founders and principal shareholders of Zenergy International, Inc. ("Zenergy"). Zenergy is a company headquartered in Chicago, Illinois that purported to be in the business of selling and producing biofuels. Zenergy's stock is quoted on the over-the-counter market.

3. According to the Complaint, in June 2009, Gasich caused Zenergy to enter into a reverse merger with Paradigm Tactical Products, Inc. ("Paradigm"), a publicly traded shell entity. Shortly before the merger, Gasich prepared a backdated convertible note for a $30, 000 debt purportedly owed to him by Zenergy. Paradigm agreed to assume this debt and to issue shares of its common stock to settle the debt as partial consideration for the reverse merger.

4. The Commission further alleges that Gasich then assigned this purported debt to his family and friends, Defendants Jovanovich, Nelson, J. Gasic, and Bozovic; stock promoters, including Scott H. Wilding; associates of Paradigm; and counsel, Diane D. Dalmy ("Dalmy"); and caused Paradigm to issue 300 million shares of purportedly unrestricted stock to these assignees.

5. In the Complaint, the Commission also alleges that Dalmy, who served as transaction counsel for the reverse merger and sold shares herself, issued opinion letters to transfer agents and others that improperly concluded that these shares were unrestricted and could be sold immediately.

6. The Commission further alleges that Gasich and the promoters then conducted two promotional campaigns to generate investor interest in Zenergy. The campaigns used misleading press releases and financial disclosures reviewed and approved by Gasich and Zenergy's Chief Executive Officer, Robert J. Luiten ("Luiten"), and touts by individuals who failed to disclose the compensation received for promoting Zenergy stock, including Defendants Baeten, Bennett, and Bowker and Ronald Martino. The promotional activity induced members of the investing public to buy Zenergy stock and increased Zenergy's share price.

7. According to the Complaint, Gasich, his assignees, and their associates then sold their shares into the public market for illicit profits totaling at least $4.4 million.

8. Finally, the Complaint alleges that Market Ideas, Inc., an entity controlled by Gasich, and Relief Defendant Vertical Group, received or benefited from the registration violations and fraudulent conduct described above and that the funds are the proceeds, or are traceable to the proceeds, of the unlawful activity alleged above.

9. As a result of the conduct described in the Complaint, the Commission alleges that Defendants Jovanovich, Accelerated Innovations, Nelson, Sky's the Limit Consulting, J. Gasic, Bozovic, Baeten, Investing in Stock Market, Midwest Stock Consulting, and Bennett violated Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77(e)(a), 77(e)(c).[2]

10. In addition, the Commission alleges that Defendants Baeten, Investing in Stock Market, Midwest Stock Consulting, Bennett, and Bowker violated Section 17(b) of the Securities Act, 15 U.S.C. § 77q(b).

11. The Complaint also advances a claim against Relief Defendant Vertical Group seeking ill-gotten gains.

12. The Complaint seeks orders of permanent injunction, disgorgement and prejudgment interest, civil monetary penalties, and penny stock bars against Defendants and an order of disgorgement and prejudgment interest against Relief Defendant.

13. Prior to the filing of the Complaint, Defendant Sky's the Limit Consulting agreed to resolve this matter with the SEC by agreeing to the relief requested in the Proposed Judgment, attached as Exhibit 2.

14. Defendant Sky's the Limit Consulting waived service of a summons and the complaint in this action and admitted the Court's jurisdiction over it and over the subject matter of this action. Ex. 1, Sky's the Limit Consent ¶ 1.

15. The Proposed Judgment against Sky's the Limit Consulting permanently enjoins it from violations of Section 5 of the Securities Act; orders, jointly and severally with Defendant Kymberly A. Nelson ("Nelson"), disgorgement of $436, 835 and prejudgment interest of $28, 625, but waives payment of all but $18, 594 and does not impose a civil penalty based upon the sworn representations in Defendant Nelson's Statement of Financial Condition dated December 20, 2012 and other documents and information submitted to the Commission; and imposes penny stock bars.

16. As reflected in Exhibit 1, the Proposed Judgment has been reviewed by Defendant Sky's the Limit Consulting and its counsel.

17. Without admitting or denying the factual allegations, except jurisdiction, which they admit, Defendant Sky's the Limit Consulting does not oppose this motion.

WHEREFORE, the SEC respectfully moves this Court to enter the Proposed Judgment as to Defendant Sky's the Limit Consulting.

Grant such other and further relief as the Court deems just and appropriate.

Exhibit 1

CONSENT OF DEFENDANT SKY'S THE LIMIT CONSULTING, LLC

1. Defendant Sky's the Limit Consulting, LLC ("Defendant") waives service of a summons and the complaint in this action, enters a general appearance, and admits the Court's jurisdiction over Defendant and over the subject matter of this action.

2. Without admitting or denying the allegations of the complaint (except as to personal and subject matter jurisdiction, which Defendant admits), Defendant hereby consents to the entry of the final Judgment in the form attached hereto (the "Final Judgment") and incorporated by reference herein, which, among other things:

(a) permanently restrains and enjoins Defendant from violation of Section 5 of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77e];
(b) orders Defendant to pay, jointly and severally with Defendant Kymberly A. Nelson ("Nelson"), disgorgement in the amount of $436, 835, plus prejudgment interest thereon in the amount of $28, 625, for a total of $465, 460, but waives payment of all but $18, 594 of the disgorgement, waives prejudgment interest, and does not impose a civil penalty based upon the sworn representations in Defendant Nelson's Statement of Financial Condition dated December 20, 2012 and other documents and information submitted to the Commission; and
(d) prohibits Defendant from participating in an offering of penny stock under Section 20(g) of the Securities Act [15 U.S.C. § 77t] and 21(d)(6) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78u].

3. Defendant acknowledges that the Court is not imposing a civil penalty or requiring payment of all but $18, 594 of disgorgement and prejudgment interest based on Defendant Nelson's sworn representations in her Statement of Financial Condition dated December 20, 2012 and other documents and information submitted to the Commission. Defendant further consents that if at any time following the entry of the Final Judgment the Commission obtains information indicating that the representations to the Commission concerning Defendant's assets, income, liabilities, or net worth were fraudulent, misleading, inaccurate, or incomplete in any material respect as of the time such representations were made, the Commission may, at its sole discretion and without prior notice to Defendant, petition the Court for an order requiring Defendant to pay the unpaid portion of the disgorgement, prejudgment and post-judgment interest thereon, and the maximum civil penalty allowable under the law. In connection with any such petition, the only issue shall be whether the financial information provided by Defendant Nelson was fraudulent, misleading, inaccurate, or incomplete in any material respect as of the time such representations were made. In any such petition, the Commission may move the Court to consider all available remedies, including but not limited to ordering Defendant to pay funds or assets, directing the forfeiture of any assets, or sanctions for contempt of the Court's Final Judgment. The Commission may also request additional discovery. Defendant may not, by way of defense to such petition: (1) challenge the validity of this Consent or the Final Judgment; (2) contest the allegations in the complaint; (3) assert that payment of disgorgement, prejudgment or post-judgment interest, or a civil penalty should not be ordered; (4) contest the amount of disgorgement or prejudgment or post-judgment interest; (5) contest the imposition of the maximum civil penalty allowable under the law; or (6) assert any defense to liability or remedy, including but not limited to any statute of limitations defense.

4. Defendant waives the entry of findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

5. Defendant waives the right, if any, to a jury trial and to appeal from the entry of the Final Judgment.

6. Defendant enters into this Consent voluntarily and represents that no threats, offers, promises, or inducements of any kind have been made by the Commission or any member, officer, employee, agent, or representative of the Commission to induce Defendant to enter into this Consent.

7. Defendant agrees that this Consent shall be incorporated into the Final Judgment with the same force and effect as if fully set forth therein.

8. Defendant will not oppose the enforcement of the Final Judgment on the ground, if any exists, that it fails to comply with Rule 65(d) of the Federal Rules of Civil Procedure, and hereby waives any objection based thereon.

9. Defendant waives service of the Final Judgment and agrees that entry of the Final Judgment by the Court and filing with the Clerk of the Court will constitute notice to Defendant of its terms and conditions. Defendant further agrees to provide counsel for the Commission, within thirty (30) days after the Final Judgment is filed with the Clerk of the Court, with an affidavit or declaration stating that Defendant has received and read a copy of the Final Judgment.

10. Consistent with 17 C.F.R. 202.5(f), this Consent resolves only the claims asserted against Defendant in this civil proceeding. Defendant acknowledges that no promise or representation has been made by the Commission or any member, officer, employee, agent, or representative of the Commission with regard to any criminal liability that may have arisen or may arise from the facts underlying this action or immunity from any such criminal liability. Defendant waives any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein. Defendant further acknowledges that the Court's entry of a permanent injunction may have collateral consequences under federal or state law and the rules and regulations of self-regulatory organizations, licensing boards, and other regulatory organizations. Such collateral consequences include, but are not limited to, a statutory disqualification with respect to membership or participation in, or association with a member of, a self-regulatory organization. This statutory disqualification has consequences that are separate from any sanction imposed in an administrative proceeding. In addition, in any disciplinary proceeding before the Commission based on the entry of the injunction in this action, Defendant understands that she shall not be permitted to contest the factual allegations of the complaint in this action.

11. Defendant understands and agrees to comply with the terms of 17 C.F.R. § 202.5(e), which provides in part that it is the Commission's policy "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings, " and "a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations." As part of Defendant's agreement to comply with the terms of Section 202.5(e), Defendant: (i) will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis; (ii) will not make or permit to be made any public statement to the effect that Defendant does not admit the allegations of the complaint, or that this Consent contains no admission of the allegations, without also stating that Defendant does not deny the allegations; and (iii) upon the filing of this Consent, Defendant hereby withdraws any papers filed in this action to the extent that they deny any allegation in the complaint. If Defendant breaches this agreement, the Commission may petition the Court to vacate the Final Judgment and restore this action to its active docket. Nothing in this paragraph affects Defendant's: (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party.

12. Defendant hereby waives any rights under the Equal Access to Justice Act, the Small Business Regulatory Enforcement Fairness Act of 1996, or any other provision of law to seek from the United States, or any agency, or any official of the United States acting in his or her official capacity, directly or indirectly, reimbursement of attorney's fees or other fees, expenses, or costs expended by Defendant to defend against this action. For these purposes, Defendant agrees that Defendant is not the prevailing party in this action since the parties have reached a good faith settlement.

13. Defendant agrees that the Commission may present the Final Judgment to the Court for signature and entry without further notice.

14. Defendant agrees that this Court retain jurisdiction over this matter for the purpose of enforcing the terms of the Final Judgment.

Exhibit 2

FINAL JUDGMENT AS TO DEFENDANT SKY'S THE LIMIT CONSULTING, LLC

The Securities and Exchange Commission having filed a Complaint and Defendant Sky's the Limit Consulting, LLC ("Defendant") having entered a general appearance; consented to the Court's jurisdiction over Defendant and the subject matter of this action; consented to entry of this Final Judgment without admitting or denying the allegations of the Complaint (except as to jurisdiction); waived findings of fact and conclusions of law; and waived any right to appeal from this Final Judgment:

I.

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant and Defendant's agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Final Judgment by personal service or otherwise are permanently restrained and enjoined from violating Section 5 of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77e] by, directly or indirectly, in the absence of any applicable exemption:

(a) Unless a registration statement is in effect as to a security, making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise;
(b) Unless a registration statement is in effect as to a security, carrying or causing to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale; or
(c) Making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed with the Commission as to such security, or while the registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under Section 8 of the Securities Act [15 U.S.C. § 77h].

II.

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is permanently barred from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. A penny stock is any equity security that has a price of less than five dollars, except as provided in Rule 3a51-1 under the Exchange Act [17 C.F.R. 240.3a51-1].

III.

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable, jointly and severally with Defendant Kymberly A. Nelson ("Nelson"), for disgorgement of $436, 835, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $28, 625, for a total of $465, 460. Based on Defendant Nelson's sworn representations in her Statement of Financial Condition dated December 20, 2012, and other documents and information submitted to the Commission, however, the Court is not ordering Defendant to pay a civil penalty and payment of all but $18, 594 of the disgorgement and prejudgment interest thereon is waived. Defendant shall satisfy this obligation by paying $18, 594 to the Securities and Exchange Commission within fourteen (14) days after entry of this Final Judgment.

The determination not to impose a civil penalty and to waive payment of all but $18, 594 of the disgorgement and prejudgment interest is contingent upon the accuracy and completeness of Defendant Nelson's Statement of Financial Condition. If at any time following the entry of this Final Judgment the Commission obtains information indicating that Defendant Nelson's representations to the Commission concerning her assets, income, liabilities, or net worth were fraudulent, misleading, inaccurate, or incomplete in any material respect as of the time such representations were made, the Commission may, at its sole discretion and without prior notice to Defendant, petition the Court for an order requiring Defendant to pay the unpaid portion of the disgorgement, prejudgment and post-judgment interest thereon, and the maximum civil penalty allowable under the law. In connection with any such petition, the only issue shall be whether the financial information provided by Defendant Nelson was fraudulent, misleading, inaccurate, or incomplete in any material respect as of the time such representations were made. In its petition, the Commission may move this Court to consider all available remedies, including, but not limited to, ordering Defendant to pay funds or assets, directing the forfeiture of any assets, or sanctions for contempt of this Final Judgment. The Commission may also request additional discovery. Defendant may not, by way of defense to such petition: (1) challenge the validity of the Consent or this Final Judgment; (2) contest the allegations in the Complaint filed by the Commission; (3) assert that payment of disgorgement, prejudgment and post-judgment interest or a civil penalty should not be ordered; (4) contest the amount of disgorgement and prejudgment and post-judgment interest; (5) contest the imposition of the maximum civil penalty allowable under the law; or (6) assert any defense to liability or remedy, including, but not limited to, any statute of limitations defense. Defendant shall also pay post-judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961.

IV.

Defendant may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request. Payment may also be made directly from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified check, bank cashier's check, or United States postal money order payable to the Securities and Exchange Commission, which shall be delivered or mailed to

and shall be accompanied by a letter identifying the case title, civil action number, and name of this Court; Sky's the Limit Consulting, LLC as a defendant in this action; and specifying that payment is made pursuant to this Final Judgment.

Defendant shall simultaneously transmit photocopies of evidence of payment and case identifying information to the Commission's counsel in this action. By making this payment, Defendant relinquishes all legal and equitable right, title, and interest in such funds and no part of the funds shall be returned to Defendant.

The Commission shall hold the funds (collectively, the "Fund") and may propose a plan to distribute the Fund subject to the Court's approval. The Court shall retain jurisdiction over the administration of any distribution of the Fund. If the Commission staff determines that the Fund will not be distributed, the Commission shall send the funds paid pursuant to this Final Judgment to the United States Treasury.

The Commission may enforce the Court's judgment for disgorgement and prejudgment interest by moving for civil contempt (and/or through other collection procedures authorized by law) at any time after fourteen (14) days following entry of this Final Judgment. Defendant shall pay post judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961.

V.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment.

VI.

There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice.


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