In New Jersey, Securities Fraud

SEC.GOV, Dec 28, 2005

SEC Files Fraud Action Against Mark Cocchiola And Steven Venechanos, The Former CEO And CFO Of Suprema Specialties, Inc.

U.S. Attorney's Office For The District Of New Jersey Indicts Cocchiola And Venechanos

On July 11, 2005, the Securities and Exchange Commission filed a civil complaint in the United States District Court for the District of New Jersey charging the former CEO, president and chairman of the board of directors, Mark Cocchiola, and the former CFO, secretary and director, Steven Venechanos, of Suprema Specialties, Inc. ("Suprema"), with violating the antifraud and other provisions of the federal securities laws in connection with their participation in a multi-year fraud orchestrated by Suprema's senior management. Prior to its delisting in early 2002, Suprema -- a Paterson, New Jersey-based cheese manufacturer -- was a public company whose securities traded on the Nasdaq National Market System.

In its complaint, the Commission alleges that Suprema engaged in fraudulent "round-tripping" transactions that resulted in total misstatements of Suprema's reported revenue of between approximately 35% and over 60% in each of the 1999, 2000 and 2001 fiscal years, and in the first quarter of fiscal year 2002. The complaint further alleges that the scheme resulted in total misstatements of Suprema's reported accounts receivable of 60% or more in each of the 1999, 2000 and 2001 fiscal years.

According to the complaint, the "round-tripping" transactions were effectuated through "circles" of entities, each of which included Suprema, a third-party "customer," and a related "vendor." As the complaint alleges, the customer and vendor in each circle tended to have a common owner. The complaint alleges that false paperwork was created documenting the fictitious transactions, and checks were circulated in purported payment for the transactions. Participants allegedly received a kick-back or "commission" on each transaction, the funds for which were generally drawn from Suprema's line of credit, which increased as Suprema's accounts receivable grew. With rare exceptions, the complaint alleges, no goods were actually sold, purchased, or exchanged in these transactions.

Also today, the United States Attorney for the District of New Jersey announced the indictment of Cocchiola and Venechanos on 38 felony counts of conspiracy, bank fraud, securities fraud, mail fraud and wire fraud.