SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
3 World Financial Center
New York, NY 1028 1-1022
(212) 336-0029
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
SMART ONLINE, INC., DENNIS MICHAEL N O W ,
REEZA ERIC NOURI, ANTHONY MARTIN,
JAMES DOOLAN, RUBEN SERRANO, AND
ALAIN LUSTIG,
07 Civ.
COMPLAINT
Defendants.
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PRELIMINARY STATEMENT
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against
defendants Smart Online, Inc. ("Smart Online"), Dennis Michael Nouri ("Michael Nouri"),
Reeza Eric Noun ("Eric Nouri"), Anthony Martin ("Martin"), James Doolan ("Doolan"), Ruben
Serrano ("Serrrano"), and Alain Lustig ("Lustig") (collectively, the "Defendants"), alleges as
follows:
1.
Smart Online stock began trading publicly on the OTC Bulletin Board in April
2005. Defendant Michael Nouri, the CEO of Smart Online, sought to qualify the company for
listing on the NASDAQ by increasing the number of shareholders and trading volume of Smart
Online stock.
2.
In order to do so, Michael Nouri began paying bribes to stock brokers to solicit
customers to purchase Smart Online stock. Michael Nouri paid bribes to Individual A,
Individual Byand defendants Martin, Doolan, Serrano and Lustig (all brokers at brokerage firms).
3.
In total, between May 2005 and January 2006, Michael Nouri paid over $170,000
to brokers who sold more than 267,000 shares of Smart Online stock (or approximately 10% of
the trading volume during the period) to investors. Michael Nouri concealed the bribes as
"consulting fees" paid pursuant to sham consulting agreements. The brokers did not disclose to
their customers that they were receiving bribes to sell Smart Online stock and Michael Nouri
understood that this would be concealed fiom the customers.
4.
During the scheme, Eric Nouri also negotiated bribe payments to Individual A and
directed I