No, Rudy!

I can’t count how many times I have watched the movie “Rudy”. Whenever “Rudy” appears in the DIRECTV guide, a few of my family members moan because they think that I might watch it yet again.

If you’re not familiar with this movie, it is based on the inspirational story of Daniel Ruettiger, a “5 foot nothin’, 100 and nothin'” football player with “barely a speck of athletic ability” who realized his dream of playing football for Notre Dame. He graduated from the University of Notre Dame in 1976.

Great movie. Great story.

Fast forward to yesterday…

SEC Charges Rudy Ruettiger and Others in Penny Stock Manipulation Scheme

The Securities and Exchange Commission announced charges today against Daniel “Rudy” Ruettiger and twelve other individuals who participated in a pump-and-dump scheme involving the stock of Rudy Nutrition, a now defunct Nevada corporation. […]

The complaint alleges that the scheme generated more than $11 million in illicit profits. […]

Without admitting or denying the allegations in the complaint, nine of the defendants – Ruettiger, Brandonisio, DeCesare, Kaplan, Mustafoglu, Padilla, Panetta, Quinn, and Yocom – have agreed to final judgments, which are subject to Court approval:

Ruettiger has consented to a final judgment that orders disgorgement of $185,750, prejudgment interest of $11,366, and a civil penalty of $185,750… link

I checked out the “Official Rudy Ruettiger web site” today, and read his inspirational messages. One stood out:

Insight #6

Follow your passion instead of the dollar. “There’s nothing wrong with making money … but, it’s important to focus on your passion instead of the dollar. For me, decisions based on my passion brought me closer to my Dream, while decisions based only on money took me further away. If you focus on what really fulfills you, you will have success. The dollar alone does not bring happiness.” link

Maybe Rudy was following his passion but got caught up in an alleged scheme orchestrated by others:

According to the SEC’s complaint, Ruettiger was the principal founder and namesake of a company called Rudy Beverage Inc. that he and a college friend ran out of South Bend, Ind. until October 2007, when Rocky Brandonisio became the company’s president and day-to-day business manager. He moved the company’s operations to Las Vegas, where he and Ruettiger live. Ruettiger remained CEO. During this time, the company struggled financially with few customers, few assets, and no profits.

The SEC alleges that Ruettiger and Brandonisio brought in an experienced penny stock promoter named Stephen DeCesare to orchestrate a public distribution of company stock in late 2007. Ruettiger knew DeCesare from previous business dealings, and they were neighbors in Las Vegas. Ruettiger and Brandonisio gave DeCesare sufficient control to turn Rudy Beverage into a publicly traded company. DeCesare became the primary organizer of the resulting pump-and-dump scheme. link (emphasis added)

Then again, the SEC alleges that Ruettiger and his company did receive some of the proceeds:

88. DeCesare told Dynkowski and Smanjak that they would need to put capital into RUNU to keep it alive. Ruettiger and Brandonisio wanted $800,000. While Smanjak and Dynkowski were not willing to pay RUNU before the second phase of the scheme began, they agreed to pay the company from the proceeds of the first set of stock sales by Smanjak’s dump accounts. […]

96. In reality, the money (which was actually in the amount of $797,500) was the payment from Dynkowski and Smanjak, described above, which they generated from the sales of unregistered shares of RUNU stock through the Panamanian entities. RUNU used most of the money to payoff outstanding debts, including $85,750 allegedly owed to Ruettiger. […]

113. DeCesare received $1.2 million of this money, from which he paid Quinn (approximately $200,000) and Ruettiger ($50,000). DeCesare’s total illicit proceeds from both rounds of the scheme were $1,341,366.

114. Quinn generated $21,035 from selling RUNU in his own account during the second phase of the scheme, and he separately paid Ruettiger $50,000. Quinn’s total illicit proceeds from both rounds of the scheme were $197,286. link

The SEC also alleges that Ruettiger knew or was reckless in not knowing that numerous press releases and filings were false, misleading or contained misstatements:

46. Ruettiger, Brandonisio, Kaplan, DeCesare, and Quinn knew or were reckless in not knowing that the purpose of RUNU issuing such stock was to distribute it into the public market in violation of the federal securities laws. […]

73. Ruettiger, Brandonisio, DeCesare, and Quinn knew or were reckless in not knowing that the statements about Canteen and Vistar in the press releases were materially false.

74. RUNU repeated the false or misleading claim that it had signed a “national distribution agreement” with Vistar in its Forms 8-K and 10-K filed with the Commission respectively on February 15 and October 14,2008. Defendants Ruettiger and Brandonisio signed the Form lO-K, and Ruettiger signed the Form 8-K. They knew or were reckless in not knowing that no such agreement with Vistar existed. […]

84. Ruettiger, Brandonisio, and Kaplan knew or were reckless in not knowing that RUNU had made material omissions in its filings with the Commission by not reporting the issuances of RUNU stock to entities controlled by Mulholland, Padilla, DeCesare, and Quinn between February and April 2008. […]

97. Ruettiger, Brandonisio, DeCesare, Dynkowski, Kaplan, and Quinn knew or were reckless in not knowing that the May 29,2008 press release was false and misleading. […]

109. This was a false statement. In reality, RUNU issued 301 million shares of purportedly unrestricted stock during this period to third parties (mostly to Smanjak’s entities). Ruettiger and Brandonisio knew or were reckless in not knowing that RUNU had made a material misstatement in its filing with the Commission. link

I hope that Rudy reads his Insight #6 again.

I still love the movie.