By: Mark Tarallo
On July 16, 2014, the United States Securities and Exchange Commission (“SEC”) brought an action against Natural Blue Resources, Inc. (“Natural Blue”), James E. Cohen (“Cohen”) and Joseph A. Corazzi (“Corazzi”)(Natural Blue, Cohen and Corazzi are referred to collectively as the “Respondents”). The SEC is seeking a cease-and-desist order against the Respondents, alleging among other items that Cohen and Corazzi acted as the de facto executive management of Natural Blue, while failing to make any of the disclosures required of executive officers of a public company.
Natural Blue was a privately-held corporation based in Nevada that went public in August, 2009 via a reverse merger with Datameg Corporation. In November 2009, Natural Blue entered into a consulting agreement with JEC Corp. (“JEC”) a corporation owned by Cohen’s family. Cohen was the President of JEC, and Corazzi was employed by JEC. Cohen and Corazzi each had extensive disciplinary histories that would have prevented them from serving as an executive officer of Natural Blue.
From the time that Natural Blue went public in 2009 through the end of 2011, Cohen and Corazzi exercised a significant degree of control over Natural Blue through JEC. They recommended virtually all of the directors that served on the board of Natural Blue, and almost all of the key executive positions were filled by individuals with whom they had significant preexisting business or social relationships. Despite the fact that Natural Blue had a named CEO, Cohen and Corazzi controlled all of the key functions of Natural Blue, such as the accounting department (the CFO was an associate of Cohen’s with whom Cohen shared outside office space). Cohen and Corazzi dealt directly with third parties and purported to enter into agreements on behalf of Natural Blue. Despite the fact that the actions of Cohen and Corazzi did not actually generate any revenue for Natural Blue or its shareholders, they were paid significant amounts of cash and Natural Blue stock (which was sold at a profit) for their efforts.
The SEC’s action alleges among other things that the Respondents engaged in fraud by failing to accurately report the roles played by Cohen and Corazzi, and that those failures caused harm to investors. Given the disciplinary histories of Cohen and Corazzi, it is clear why they went to the lengths that they did to hide their actual roles. The SEC filing can be found here.
For more information on this topic, please feel free to contact Mark Tarallo.
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