Ponzitracker

Recent filings by the SEC in the ongoing civil action against PermaPave Industries, LLC ("PermaPave") suggest that the company has been less than cooperative in the SEC's investigation as to whether PermaPave operated an alleged $26 million Ponzi scheme. Originally covered by Ponzitracker here, authorities filed both civil and criminal charges against PermaPave and several of its principals late last week. The SEC's recent Motion for Contempt illustrates the difficulty encountered thus far in the investigation.

The Motion for Contempt details the "repeated and flagrant attempts to flout" court-imposed discovery obligations on PermaPave. After apparently ignoring investigative subpoenas from the SEC, the motion alleges that even after a court order, PermaPave continued to ignore the SEC's requests. These included requests for:

Purchases and sales of PermaPave products from June 1, 2008 to present;
Documents reflecting compensation paid for the sale of securities;
Documents concerning entities that are controlled by Aronson and that received funds from accounts held by the PermaPave Entities containing investor funds;
Correspondence between a PermaPave Entity and investors; and
Emails sent or received by Aronson concerning dealings with investors or the possible sale of the PermaPave entities.

According to the SEC, after obtaining the court order directing compliance, PermaPave then produced duplicates of documents that had previously been produced in January 2011. Additionally, after acknowledging that audio copies of some correspondence with investors existed, PermaPave "produced a DVD containing audio files, most of which were either damaged or in a format that could not be played on any commonly used media player." Additional documents were then provided after the court-imposed deadline of August 9, 2011, in which the SEC again claimed were deficient due to PermaPave's failure to provide a list briefly describing each item. Counsel for PermaPave also later claimed that a delay in producing additional documents was the result of the landfall of Hurricane Irene in New York. Finally, in early September, PermaPave produced several hundred pages of documents, some of which included copies of computer screen shots reflecting file folders containing presumably responsive audio files. Yet this, according to the SEC, was irrelevant to the Subpoena requests, and was akin to "how a photo of a file cabinet would be irrelevant to a subpoena requesting documents contained in the cabinet."

The filing seeks to hold PermaPave in civil contempt, and requests the imposition of coercive and compensatory sanctions. These sanctions include the assessment of a daily fine, increasing by the week, for the continued non-compliance by the PermaPave entities, along with the award of nearly $10,000 in attorney's fees for the drafting of the filing.

A copy of the Motion for Contempt is here.