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The Securities and Exchange Commission announced that
it had obtained a default judgment against PermaPave Industries, LLC and other
related entities that promised investors rich returns on water-filtering stone
pavers but in reality operated a Ponzi scheme that swindled investors out
of $26 million. The judgment, entered by United States District Judge Jed
S. Rakoff, prohibits future securities violations by the entities charged by
the SEC. The entities named as defendants and relief-defendants were also
ordered to pay disgorgement, prejudgment interest, and civil monetary
While the default judgment resolves the SEC's claims
against the PermaPave companies and other entities that received proceeds from
PermaPave's scheme, the charges remain against the individuals charged
by the SEC in October 2011. These defendants include Eric Aronson, Vicent
Buonauro, Jr., Robert Kondratick, and Frederic Aaron. Addtionally, the
wives of Buonauro and Aronson were charged as relief defendants as a result of
receiving ill-gotten gains from the scheme.
According to the SEC, Aronson controlled several entities
that operated as PermaPave Companies and held the operation out to investors as
a wildly successful business that had a substantial backlog of orders for
Australian pavers that could then be sold in the United States at a substantial
markup. In return for their contribution, potential investors were
promised monthly returns of 7.8% to 33%. In reality, there
was little demand for the pavers, and the cost far exceeded the revenue from
sales. When the scheme began to unravel and investors began clamoring for
the return of monies owed to them, Aronson accused them of committing a felony
by virtue of "loaning" money to PermaPave at usurious interest rates.
Aronson, along with his attorney Aaron, are also accused of pressuring
investors to convert their securities into debentures that would defer payment
for several years. In total, approximately 140 investors entrusted $26
million with Aronson and the PermaPave entities.
Rather than generate substantial profits, PermaPave
operated at a substantial loss with the little legitimate business it did
conduct, instead using new investor funds to make distributions masquerading as
interest payments to existing investors. A large amount of investor funds
were siphoned off for the personal use of PermaPave executives, who bought
luxury cars, travel to Las Vegas, and jewelry. Ironically, the SEC also
accuses Aronson of using investor funds to make court-ordered restitution
payments stemming from his conviction in 2000 of swindling victims in a
Criminal charges are also pending against Aronson and
several other PermaPave executives.
Previous Ponzitracker coverage is here.
A copy of the SEC Complaint is here.
For more news and analysis of Ponzi schemes, visit
Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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