[ By Howard Haykin ] The SEC on Wednesday charged a Hawaii resident and 2 firms he used to 'orchestrated' a scheme in which he covertly founded small companies, installed management, and recruited overseas boiler rooms that pressured investors into buying their stock.  Along the way, he earned over $2 million in consulting fees from proceeds of the fraudulent stock sales. SEC Findings and Allegations. Nicholas Louis Geranio and a principal associate, Keith Michael Field of Sherman Oaks, CA, were charged with operating the boiler room scheme. 

• Geranio served as "Mr. Inside," allegedly creating 8 U.S.-based companies that were used to raise money through the sale of Reg. S stock - exempt from SEC registration under securities laws if offered solely to investors located outside the U.S.

• Geranio handpicked the management for the companies, primarily installing Keith Field, who served as an officer, director, or investor relations representative for each company.

• Geranio set up consulting arrangements through his firms - The Good One Inc. and Kaleidoscope Real Estate Inc. - so he could instruct management on how to run the companies and raise money offshore.  For his efforts, Geranio extracted consulting fees from the companies, which generally had few or no employees, little or no office space, and no sales or customers.

• The scheme lasted 2-1/2 years - from April 2007 to September 2009.

• Geranio located and acquired shell companies to create the 8 issuers used in the scheme:  (i) Blu Vu Deep Oil & Gas Exploration Inc.;  (ii) Green Energy Live Inc.;  (iii) Microresearch Corp.;  (iv) Mundus Group Inc.;  (v) Power Nanotech Inc.;  (vi) Spectrum Acquisition Holdings Inc.;  (vii) United States Oil & Gas Corp.; and, (viii) Wyncrest Group Inc.

• Behind the scenes, Geranio oversaw the pricing of the companies’ publicly-traded shares.  He kept them conducive to the boiler room sales, by directing Field, personal friends, and others to open accounts and buy or sell shares in at least 5 of the companies as part of matched orders and manipulative trades that created the false impression of active trading and market value in these stocks.  The manipulative trades allowed the boiler rooms to sell the Regulation S shares to overseas investors at higher prices.

• Boiler room tactics allegedly included promising immediate and substantial investment returns, convincing investors that they needed to purchase the shares immediately or miss the grand opportunity altogether, and threatening legal action if an investor did not agree to purchase shares that the reps believed the investor had already agreed to purchase.

• The boiler rooms also used “advance fee” solicitations, telling investors that only if they purchased shares in one of these companies would the boiler room agree to sell their other shares. Many of the investors were elderly and living in the United Kingdom.

Field, "Mr. Outside," allegedly drafted misleading business plans, marketing materials, and website information about the companies that were provided to investors as part of fraudulent solicitation efforts by teams of telemarketers operating in boiler rooms that Geranio recruited, primarily in Spain. As is common with boiler rooms, the telemarketers used high-pressure sales tactics and false statements about the companies to raise more than $35 million from investors. Meanwhile, Geranio instructed Field and others to buy and sell shares in some of the companies to create an illusion of trading activity and manipulate upwards the price of the publicly-traded stock.

"Geranio covertly set up companies and manipulated the market for their stock to profit from aggressive offshore boiler room activity.  Geranio pulled the strings while Field scripted the show for the boiler rooms to bring a payday to everyone but the investors." -- Stephen Cohen, Assoc. Director in SEC Enforcement.

Geranio Had Prior Record. According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, Geranio was the subject of a previous SEC enforcement action in 2000.  He concealed his role from investors and the public at all times, however, by acting through the 2 companies. SEC Charges. The SEC charges that the operation the named participants violated Sections 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. Field also allegedly violated Section 17(a)(2) of the Securities Act and aided and abetted the companies’ violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and Geranio is liable as a control person of The Good One and Kaleidoscope under Exchange Act Section 20(a). The SEC seeks financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, penny stock bars, and permanent injunctions against all of the defendants, as well as officer and director bars against Geranio and Field. The complaint seeks disgorgement and prejudgment interest against relief defendant BWRE Hawaii LLC based on its alleged receipt of investor funds. SEC Staff Credits.   The investigation, which continues, was conducted by: Ricky Sachar, Carolyn Kurr, and Wendy Kong, and supervised by Josh Felker and Jim Daly in the Office of International Affairs.  Richard Simpson will lead the litigation. »  For further details, go to:  [SEC PR 12-93, 5/16/12] and [SEC Complaint]. »  For more info about boiler room schemes, go to:  [SEC Investor Guide]. »  For a list of unregistered soliciting entities that have been the subject of investor complaints, go to:   [SEC PAUSE List].