NEWARK
– Following a trial before the Honorable
Thomas P. Olivieri, New Jersey Superior Court
Judge, the Court found that the head of two
businesses, represented to be involved in
developing and manufacturing specialty peanut
butter, committed 160 violations of state
securities laws, and ordered payment of $269,750
in civil penalties and restitution for defrauded
investors.
Defendant
Zoltan A. Phillips, 69, raised $109,750
from three investors and their spouses,
as well as additional funds from 15 other
investors and couples. The investors bought
promissory notes in his two companies, Peanut
Butter Better Company and ZAP Products Corporation.
In violation of state securities laws, however,
neither Phillips nor the promissory notes
he sold were registered with the New Jersey
Bureau of Securities.
At
trial, Deputy Attorneys General from the
Affirmative Civil Enforcement litigation
group (“ACE”), within the Division
of Law, along with investigators from the
Bureau of Securities (“BOS”),
within the Division of Consumer Affairs,
further demonstrated that rather than using
the investor funds for the development and
manufacture of peanut butter, Phillips fraudulently
diverted almost all of the money for his
own personal enrichment and for that of
two other individuals – his wife and
ex-wife.
“Through
the outstanding investigation and prosecution
by our Bureau of Securities and Affirmative
Civil Enforcement team, the fraud that defendant
Phillips perpetrated on investors became
clear,” Attorney General Jeffrey S.
Chiesa said. “Now, we will direct
our efforts to enforce the court’s
order and ensure the defendant lives up
to his payment obligations to the victims
and to the Bureau of Securities.”
The
Bureau of Securities is taking steps to
place a lien in the amount of the judgment
on real property that Mr. Phillips or his
companies may own in New Jersey, among other
efforts to collect the judgment.
Peanut Butter Better Co. was initially based
in Weehawken and incorporated in November
2005. It later operated out of Atlantic
City and Brigantine. Its corporate charter
was revoked in June 2008 after failure to
file annual reports for two years. ZAP Products
Corp., also led by Phillips, was incorporated
in August 2008 and functioned as a successor
company. ZAP Products Corp. maintained locations
in Atlantic City and Brigantine.
The
Court found that the two companies and Phillips
had deceived investors by misrepresenting
that investor funds would be used to develop
peanut butter products, when in fact almost
all of the money went to the personal benefit
of Phillips and the other individuals.
“Mr.
Phillips fraudulently enticed investors
through the offer of getting in on the ground
floor of a company with a supposedly bright
future. No matter how powerful the lure,
we always caution investors to step back
and perform their due diligence,”
said Thomas R. Calcagni, Director of the
N.J. Division of Consumer Affairs.
“Investors
should always verify that the person offering
a security, and the security itself, are
both registered with us,” said Abbe
R. Tiger, Chief of the N.J. Bureau of Securities.
“We stand ready as a resource that
investors can use, and our investigators
are ready to act upon complaints received
from investors.”
The Bureau of Securities can be contacted
toll-free within New Jersey at 1-866-I-INVEST
(1-866-446-8378) or from outside New Jersey
at 973-504-3600. The Bureau's
website is located at www.njsecurities.gov
.
Deputy
Attorneys General Elizabeth Lash and Anna
Lascurain of the Affirmative Civil Enforcement’s
Securities Fraud Prosecution Section represented
the Bureau of Securities and Bureau Chief
in this case. Leon C. Martin, Supervising
Investigator, and Investigators Isaac Reyes
and Michael LaChapelle in the Bureau of
Securities conducted the investigation.