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 penalties.
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 previous scheme.
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.