The SEC charged Daniel 'Rudy' Ruettiger and 12 others with deceiving investors into buying stock in Rudy Nutrition, a sports drink company that sought to capitalize on the 1993 motion picture "Rudy," that Ruettiger had inspired. According to the SEC's complaint, filed in federal court in Las Vegas, Ruettiger founded the company to compete with Gatorade.  Rudy Nutrition produced and sold modest amounts of the sports drink, "Rudy" with the tagline: "Dream Big!  Never Quit!"  Unfortunately, "Rudy" failed to threaten Gatorade's market share, and the "Dream" never panned out. However, Ruettiger and associates "Never Quit" and, in 2008, began using the company primarily as a vehicle for a pump-and-dump scheme.  That business proved a success - and generated over $11 million in illicit profits. SEC Findings and Allegations. It's alleged that investors were provided false and misleading statements about the company in press releases, SEC filings, and promotional materials. Examples:

• a promotional mailer to potential investors falsely claimed that in "a major southwest test, Rudy outsold Gatorade 2 to 1!"
• a promotional e-mail falsely boasted that in "several blind taste tests, Rudy outperformed Gatorade and Powerade by 2:1."
• promoters manipulated trading to artificially inflate the price of Rudy Nutrition stock while selling unregistered shares to investors.

Ruettiger was the principal founder and namesake of a company called Rudy Beverage Inc. that he and a college friend ran out of South Bend, Ind.  until October 2007, when Rocky Brandonisio took over as president and ran day-to-day operations;  Ruettiger remained CEO.  Rocky moved the company's operations to Las Vegas, where he and Ruettiger live.  During this time, the company struggled financially with few customers, few assets, and no profits. The SEC suspended trading and later revoked registration of the stock in late 2008.  Rudy Nutrition is no longer in business. 

"Investors were lured into the scheme by Mr. Ruettiger's well-known, feel-good story but found themselves in a situation that did not have a happy ending." -- Scott Friestad, Associate Director of SEC Enforcement.

Switch to Plan B - Penny Stock Promoter. Ruettiger and Brandonisio ("Rudy" and "Rocky") brought in experienced penny stock promoter, Stephen DeCesare, to orchestrate a public distribution of company stock in late 2007.  DeCesare was given sufficient control to turn Rudy Beverage into a publicly traded company - he also became the primary organizer of the resulting pump-and-dump scheme. DeCesare allegedly identified a shell corporation on the Pink Sheets and began arranging for a reverse merger.  He hired business consultant Kevin Quinn to execute the merger and to work with the company's transfer agent to issue purportedly unrestricted stock. On 2/11/08, they acquired the shell company in a reverse merger and changed its name to "Rudy Nutrition."  Ruettiger authorized his signature to be placed electronically on an SEC filing 4 days later and, by 2/21/08, Rudy Nutrition began to be quoted on the Pink Sheets - ticker symbol RUNU. DeCesare and consultant Quinn - a disbarred California lawyer - arranged for 3 billion RUNU shares to be issued to nominee entities, which sold almost 1 billion shares to unsuspecting investors in the public market during the scheme.  DeCesare then allegedly organized efforts to pump RUNU stock. He accomplished this goal by partnering with other penny stock promoters to inflate the price and volume.  They issued a series of false or misleading statements about RUNU to the public in mailers sent to millions of U.S. investors, in messages posted in Internet chat rooms dedicated to penny stocks, and in videos placed on the Internet for public viewing. They also issued false and misleading press releases about the company and in filings with the SEC. In less than a month, RUNU went from trading 720 shares to more than 3 million shares.  Within 2 weeks, RUNU shares jumped from 25 cents to $1.05.  After 3/12/08, RUNU stock began a roller coaster ride as inside participants sold off millions of RUNU shares to the market amid their simultaneous efforts to pump the stock. The scheme eventually ended when the SEC issued a trading suspension against RUNU - 6 months later, on 9/12/08 - for delinquent periodic filings.  Only days before the trading suspension, the company was preparing to issue another 2 billion shares to dump on the market by the end of September 2008. On 11/14/08, the SEC revoked the registration of Rudy Nutrition securities. Participants in the Scheme. In addition to Ruettiger, Brandonisio, DeCesare, and Quinn, the SEC's complaint named these other participants:

Pawel Dynkowski - stock promoter who manipulated the price of Rudy Nutrition stock using wash sales, matched orders, and other trading coordinated with the issuance of false company press releases.

Kevin Kaplan CFO of Rudy Nutrition, who authorized the issuance of company shares to nominee accounts used by others to sell the unregistered stock.

Gregg Mulholland - stock promoter who made false statements about the company in mailers sent to two million households. He controlled nominee accounts that sold shares in the scheme.

Mehmet Mustafoglu - consultant to Rudy Nutrition who sold unregistered shares of Rudy Nutrition.

Joseph Padilla - stock promoter and former RR at broker-dealer Scottsdale Capital Advisors.  He sold unregistered shares of Rudy Nutrition.

Angelo Panetta - stock promoter who made false statements about the company on an Internet radio show and in an Internet chat room.

Andrea Ritchie - RR at Scottsdale Capital Advisors, who sold Rudy Nutrition shares for others without conducting a reasonable inquiry into the registration status of the shares.

Chad Smanjak - stock promoter who directed Dynkowski's manipulative trading and controlled a series of Panamanian companies that sold shares during the scheme.

Gary Yocom - RR at broker-dealer Thomas Anthony & Associates, who sold Rudy Nutrition shares for others without conducting a reasonable inquiry into the registration status of the shares.

Fines and Sanctions. Ruettiger and 10 of the scheme's other participants agreed to settle the SEC charges without admitting or denying the allegations.  All settlements, which are subject to court approval, impose penny stock bars and officer-and-director bars, as appropriate.  Ruettiger agreed to pay $383,000, while other participants consented to final judgments that involved disgorgement, prejudgment interest, and financial penalties. Charges against Dynkowski and Smanjak are not settled, and litigation against them continues. For further details, go to:   [SEC PR 11-268, 12/16/11]   [SEC Litigation Release 22198]