People v. Lavrowsky

The defendants are charged with violation of section 352 of article 23-A of the General Business Law. Plaintiffs seek an injunction upon the grounds that the defendants have made fradulent representations in connection with the sale of stock and that defendants have failed to file a dealer’s statement as by law required and as particularly set forth in section 359-e of the General Business Law. During the course of an investigation into the activities of the defendants it became apparent -that the individual defendant had sold stock of the defendant corporation to upwards of 10 people. Defendant concedes that stock was sold to a few people. The *601affidavits of several of the purchasers of stock reveal that they relied upon representations made by the individual defendant who is also president of the corporate defendant, that the corporation had a contract with the Chrysler Corporation whereby it was to receive a substantial sum in advance and a royalty on each device manufactured by the Chrysler Corporation. This representation was made in connection with and as part of the method employed by the defendants to dispose of some stock. This representation was false and tended to deceive and mislead prospective purchasers into buying the stock. Defendant claims he is not making sales to the general public but merely to a few purchasers and that the stock is his personal stock. Some of the stock sold appeared to be in a nonexistent New York corporation and is explained by the defendant as a mistake and that the corporation was formed in New Jersey and defendant offers to exchange the stock. Whether defendants would have disposed of more stock were it not for the restraining order contained in the order to show cause is problematical. It is apparent, however, that whatever sales were made were negotiated and concluded on the misrepresentations of the Chrysler Corporation contract made at the time. Such sales, if allowed to continue, will actually deceive and defraud prospective purchasers. The purpose of the statute is to protect such purchasers and under section 352 of article 23-A a showing of a public offering is not necessary.

Motion granted.