Initial Decision Release No. 1378

Initial Decision Release No. 1378

Administrative Proceeding

File No. 3-18481

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Angela Rubbo Beckcom Monaco

Appearances:

Initial Decision

May 30, 2019

Christine Nestor for the Division of Enforcement,

Securities and Exchange Commission

Angela Rubbo Beckcom Monaco, pro se

Before:

Brenda P. Murray, Chief Administrative Law Judge

Background

The Securities and Exchange Commission began this proceeding with an

order instituting proceedings (OIP) on May 15, 2018, pursuant to Section

15(b) of the Securities and Exchange Act of 1934. The OIP alleges that

Respondent Angela Rubbo Beckcom Monaco pleaded guilty to one count of

mail and wire fraud conspiracy and one count of engaging in a monetary

transaction in property derived from illegal activity before the United States

District Court for the District of Colorado.1

The OIP ordered this

administrative proceeding to determine the truth of that allegation and what,

if any, remedial action is appropriate and in the public interest.

This proceeding was originally assigned to a different administrative law

judge but little activity had occurred before it was stayed and reassigned to

me in light of the Supreme Court’s decision in Lucia v. SEC, 138 S. Ct. 2044

(2018); see Pending Admin. Proc., Securities Act of 1933 Release No. 10536,

1

See United States v. Monaco, No. 17-cr-417 (D. Colo.).

2018 SEC LEXIS 2058, at *2-3 (Aug. 22, 2018); Pending Admin. Proc.,

Admin. Proc. Rulings Release No. 5955, 2018 SEC LEXIS 2264, at *2, *4

(ALJ Sept. 12, 2018). After independently reviewing the record, I found that

Monaco had been served on June 15, 2018. Angela Rubbo Beckcom Monaco,

Admin. Proc. Rulings Release No. 6322, 2018 SEC LEXIS 3217 (Nov. 14,

2018). Monaco submitted a letter dated October 31, 2018, that I have

accepted as her answer to the OIP.

I held a prehearing conference on December 11, 2018, attended by

Monaco, who is representing herself, and counsel for the Division of

Enforcement. At the conference, I set a summary disposition briefing

schedule. The Division filed a motion for summary disposition on December

21, 2018. The Division seeks an order barring Monaco from associating with

six categories of securities industry registrants2 and from participating in an

offering of penny stock. Monaco submitted an opposition dated January 10,

2019. The Division filed a reply on February 1, 2019. The matter is ripe for

decision.

Summary Disposition Standard

Rule 250(b) governs summary disposition in cases designated by the

Commission as 75-day proceedings. See 17 C.F.R. § 201.250(b). Rule 250(b)

specifies that a motion for summary disposition may be granted if “there is no

genuine issue with regard to any material fact” and “the movant is entitled to

summary disposition as a matter of law.” Id. The facts on summary

disposition must be viewed in the light most favorable to the non-moving

party. Jay T. Comeaux, Securities Act Release No. 9633, 2014 SEC LEXIS

3001, at *8 (Aug. 21, 2014). A motion for summary disposition is generally

proper in “follow-on” proceedings like this one, where the administrative

proceeding is based on a criminal conviction or civil injunction, because

relitigation of “the factual findings or the legal conclusions” of the underlying

proceeding is precluded. Gary M. Kornman, Exchange Act Release No.

59403, 2009 SEC LEXIS 367, at *28 (Feb. 13, 2009), pet. denied, 592 F.3d 173

(D.C. Cir. 2010).

Those six categories are broker, dealer, investment adviser, municipal

securities dealer, municipal advisor, transfer agent, and nationally

recognized statistical rating organization. 15 U.S.C. § 78o(b)(6)(A).

2

2

Factual Findings

The findings and conclusions below are based on the record consisting of

exhibits attached to the Division’s motion,3 Monaco’s answer and other

submissions, and records of the underlying federal court proceedings, of

which I take official notice. 17 C.F.R. §§ 201.111(c), .250(b), .323. I apply

preponderance of the evidence as the standard of proof. See Steadman v.

SEC, 450 U.S. 91, 101-04 (1981). The findings and conclusions herein are

based on the entire record. I have considered and rejected all arguments

inconsistent with this initial decision. The findings that follow are based

primarily on the stipulation of facts Monaco agreed to in her plea agreement,

the accuracy of which cannot be challenged in this proceeding. Don Warner

Reinhard, Exchange Act Release No. 63720, 2011 SEC LEXIS 158, at *26 &

nn.32-33 (Jan. 14, 2011).

From 2012 to 2017, Monaco and others engaged in a conspiracy to

defraud investors in a series of companies, eventually causing investors to

lose more than $6 million. The main players in the conspiracy were Monaco,

her brothers Joseph Rubbo, Nicholas Rubbo, and Pasquale Rubbo, and an

associate, Steven Dykes. Div. Ex. 2, at 9. The conspirators solicited

investments in three affiliated companies, all of which were controlled by

Monaco or her siblings. Id. The companies included VIP Television, LLC,

where Monaco was president, and ANJ Productions, LLC, where she was

managing member. Id. at 9-10. The third company was called The

Spongebuddy, LLC, and the pitch to investors involved a cleaning glove called

the “Spongebuddy.” Id. at 9. Dykes was hired to find investors for the

Spongebuddy businesses. Id. at 10. He received commissions for the

investments he obtained. Id.

Thirty investors invested more than $6,000,000 in the Spongebuddy

businesses, but the majority, over $5,000,000, came from two brothers in

Colorado (the Colorado investors). Id. at 18, 21. Monaco, Dykes, and

Pasquale Rubbo repeatedly solicited investments from the Colorado

investors, who were in their eighties during the scheme. Id. at 10. The

Colorado investors were targeted for these solicitations because of their age.

Id. at 18.

The Division’s motion is accompanied by three exhibits. Exhibit 1 is

Monaco’s criminal indictment, filed in the District of Colorado. Exhibit 2 is

Monaco’s plea agreement. Exhibit 3 is the judgment of conviction issued by

the district court.

3

3

In January 2014, Dykes falsely told the Colorado investors that

Walgreens wanted to carry the Spongebuddy but more capital was needed to

produce the gloves to complete the deal. Id. at 11. The Colorado investors

sent a $600,000 check in return for 800,000 shares of VIP Television and a

$0.50 royalty for each glove sold. Id. at 12. Monaco sent the Colorado

investors a signed stock certificate and an addendum to a previous

investment agreement. Id.

In February 2014, Dykes again solicited money from the Colorado

investors. He falsely told them that another company was considering

acquiring VIP Television and that this merger could result in a $19,000,000

gain for the investors—but only if VIP had enough cash on hand. Id. The

Colorado investors sent a check for $650,000. Id. Monaco sent them another

investment agreement addendum and stock certificate, both of which she

signed. Id.

In February and March 2014, Dykes again told the Colorado investors

that more gloves needed to be manufactured to complete a deal. Id. This

time he said that Wal-Mart would soon be selling the gloves. Id. As with the

previous requests, this claim was false, but the Colorado investors sent two

more checks for a total of $550,000 for more shares of stock. Id. In

November 2014, Dykes approached the Colorado investors with another

fabricated story requiring immediate additional funding: now he claimed that

QVC was going to sell the Spongebuddy and they needed to manufacture two

million pairs. Id. at 13. The Colorado investors sent a check for $800,000 in

return for a stock grant. Id. Monaco sent another signed addendum to the

investment agreement. Id.

In April 2015, Monaco, Nicholas Rubbo, and an associate met the

Colorado investors at their home. Id. They asked the investors for a

$1,400,000 investment to take VIP public, but the investors refused. Id. at

14. They reduced their request to $600,000, but the investors again refused.

Id.

In May 2015, Dykes claimed that a company named Starz was interested

in merging with VIP, but it needed to see $1,000,000 in cash on VIP’s balance

sheet before completing the deal. Id. Unsurprisingly, this was also fictitious.

Dykes falsely asserted that he had another investor lined up for $500,000,

and he asked the Colorado investors for the remaining $500,000. Id. They

sent a check for $300,000. Id. The next month, Dykes told the investors that

VIP now needed to have $1,500,000 to complete the deal. Id. The investors

mailed an additional check for $700,000. Id.

4

In October 2015, Dykes once again falsely represented that more money

was needed—this time to produce 400,000 units of the Spongebuddy to be

sold on QVC. Id. The Colorado investors mailed a check for $175,000.

Monaco again sent an addendum to the investment agreement, which she

signed. Id.

In January 2016, Dykes falsely told the Colorado investors that a

company named Pandora was interested in acquiring VIP. Id. at 15.

Similarly to the claimed merger in 2015, Dykes said that Pandora needed to

see $1,000,000 in cash on VIP’s books before agreeing to the merger. Id. But

this time he added that the Colorado investors could trade one million shares

of VIP for half a million shares of Pandora. Id. The Colorado investors sent

two checks for a total of $225,000 and one million shares of VIP. Id. Monaco

once again sent a new addendum to the investment agreement. Id.

Of

course, there was never any agreement with Pandora, and the investors

never received the promised Pandora stock. Id.

In May and June 2016, Dykes and Pasquale Rubbo repeatedly told the

Colorado investors that a celebrity was investing $250,000 to market the

Spongebuddy on QVC. Id. at 16. This was false. Id. The celebrity was not

involved, and there was no agreement to sell the gloves through QVC. Id.

Nevertheless, Pasquale Rubbo assured the Colorado investors that there was

a contract with the celebrity. Id.

In August 2016, Monaco entered into a one-year marketing contract with

a product development agency to help launch the glove. Id. at 15-16. Up to

that point, no gloves had been manufactured outside of a few low-quality

prototypes. Id. at 13, 15. Monaco received an email from the product

development agency referencing the Spongebuddy and QVC. Id. at 17.

Monaco altered the email to make it seem like QVC was interested in the

gloves. Id. She then printed the fake email and mailed a hard copy to the

Colorado investors. Id. Dykes later used the same fake email to solicit

investors in 2017. Id.

Sometime in 2016, the Colorado investors learned of law enforcement

investigations into ANJ, VIP, and Spongebuddy. Id. at 15. In July 2016,

Pasquale Rubbo threatened to sue the Colorado investors if they spoke with

investigators about their investments in the Spongebuddy companies. Id. at

16.

The Colorado investors eventually ceased giving money to the

Spongebuddy companies. See id. at 19. In total, the Colorado investors

invested $5,195,000 with Monaco, Joseph Rubbo, Nicholas Rubbo, Pasquale

Rubbo, and Dykes. Id. at 18. The Colorado investors received ten purported

distributions or earnings from the conspirators totaling $56,244.47. Id. But

this money did not actually represent any earnings related to the

5

Spongebuddy and was only about one percent of what the Colorado investors

had invested.

After losing the Colorado investors, Monaco, Joseph Rubbo, Nicholas

Rubbo, Pasquale Rubbo, and Dykes sought investments from new investors.

Id. at 19. The pitches followed the same general pattern, with the

solicitations being aimed at mostly elderly investors. Id. From January to

July 2017, they received more than $400,000 in investments from seventeen

new investors. Id. The conspirators sent these investors promissory notes

purporting to secure the investments against $1,500,000 in nonexistent

inventory. Id. These new investors were again told various lies about deals

and potential deals to sell the gloves. Id. For example, Dykes falsely told one

investor that QVC planned a segment to sell the gloves once 500,000 units

were ready. Id. at 20.

Also in 2017, Monaco and the other conspirators became aware of

criminal and regulatory investigations into their practices. Id. As a result,

they created new entities and bank accounts in an attempt to evade

detection. The Spongebuddy was rebranded as the “Scrubbieglove,” and a

new entity, Magic Wand Brands LLC, was created to handle funds raised

from new investors. Id. at 9, 20. Monaco was the registered agent of Magic

Wand, and her husband was the manager. Id. at 20. In August and

September 2017, two new investors invested more than $200,000. Id. at 21.

In October and November 2017, three new investors gave $115,000. Id.

Monaco benefitted from the scheme. Between 2012 and 2017, Monaco

(or third parties for her benefit) received $603,765 in distributions from the

Spongebuddy companies. Id. at 22. These funds were transferred from the

companies’ accounts to Monaco’s personal accounts. Id. For example,

Monaco transferred $25,000 from ANJ’s account to her personal account in

February 2014 and another $20,000 in March 2014. Id.

As a result of this conduct, Monaco, Dykes, and Pasquale Rubbo were

indicted in the District of Colorado on November 7, 2017. Div. Ex. 1, at 1; see

United States v. Monaco, No. 17-cr-417 (D. Colo.). The indictment charged

the defendants with one count of conspiracy to commit mail and wire fraud,

eight counts of mail fraud, two counts of securities fraud, and seven counts of

engaging in monetary transactions in property derived from illegal activity.

Id. at 1-10. Monaco pleaded guilty to one count of conspiracy to commit fraud

in violation of 18 U.S.C. § 1349 and one count of engaging in monetary

transactions in property derived from illegal activity in violation of 18 U.S.C.

§ 1957. Div. Ex. 3, at 1. Monaco was sentenced to a term of imprisonment of

seventy-four months followed by three years of supervised release and

ordered to pay $6,011,900 in restitution, joint and several with her

6

codefendants and Joseph and Nicholas Rubbo, who were charged and

convicted in a separate criminal prosecution. Id. at 2, 3, 8; see United States

v. Rubbo, No. 17-cr-411 (D. Colo.).

Legal Conclusions

Exchange Act Section 15(b)(6)(A) empowers the Commission to bar

Monaco from participating in the securities industry or in an offering of

penny stock if, as relevant here, (1) she was associated with a broker or

dealer at the time of her misconduct, (2) she was convicted of an offense that

“involves” the violation of 18 U.S.C. § 1341, and (3) the sanction is in the

public interest. 15 U.S.C. §§ 78o(b)(4)(B)(iv), (6)(A)(ii).

Association with Broker or Dealer

A sanction under Section 15(b) can be imposed only if Monaco was

associated with a broker or dealer. Monaco was not associated with a

registered broker-dealer, but the statute also applies to unregistered brokerdealers. James S. Tagliaferri, Exchange Act Release No. 80047, 2017 SEC

LEXIS 481, at *12 (Feb. 15, 2017). A broker is “any person engaged in the

business of effecting transactions in securities for the account of others.” 15

U.S.C. § 78c(a)(4)(A). Being “engaged in the business” of effecting securities

transactions requires “more than a few isolated transactions” but does not

mean that securities transactions must be the person’s primary income

source or business. Anthony Fields, Exchange Act Release No. 74344, 2015

SEC LEXIS 662, at *75 (Feb. 20, 2015) (quoting Gordon Wesley Sodorff, Jr.,

Exchange Act Release No. 31134, 1992 SEC LEXIS 2190, at *15 (Sept. 2,

1992)). Some activities that the Commission considers indicative of being a

broker are “holding oneself out as a broker-dealer, recruiting or soliciting

potential investors, handling client funds and securities, negotiating with

issuers, and receiving transaction-based compensation.” Id.

Whether Monaco was a broker is a close question. While there is no

evidence that Monaco held herself out as a broker, Monaco’s conduct involved

several other indicative activities. She was engaged in recruiting and

soliciting potential investors. For example, she traveled to Colorado to solicit

funds from the Colorado investors in person. Her companies VIP and ANJ

received investor funds. And Monaco personally signed and sent stock

certificates and modified securities contracts. This activity was not limited to

a few transactions—there were thirty investors and numerous transactions

over five years.

The Division argues that the $603,765 distributed to Monaco was

transaction-based compensation. Div. Mot. at 10. Whether a particular

7

compensation arrangement is based on securities transactions “depends on

all of the particular facts and circumstances.” Persons Deemed Not To Be

Brokers, Exchange Act Release No. 20943, 1984 SEC LEXIS 1585, at *16

(May 9, 1984). On the current record, the facts and circumstances about

Monaco’s compensation are limited. We know that Monaco received $603,765

from the scheme—no gloves were ever manufactured or sold. We also know

that some of the distributions were closely connected in time to the receipt of

investor funds. For example, in February 2014, the Colorado investors send

a check for $650,000. That month, Monaco transferred $25,000 from ANJ to

her personal account. Then, in March 2014, the Colorado investors sent two

checks that totaled $550,000 and Monaco transferred $20,000 to herself. But

aside from proximity in time, there is no evidence that these two transfers

were tied to the successful completion of specific securities transactions.4 We

do not know the frequency of her compensation, and we do not know whether

it varied based on the value or the volume of transactions. Based on this

limited factual record and because I must view this evidence in the light most

favorable to Monaco, I do not find, as a factual matter, that these specific

transfers were transaction based.5

The Division also argues, as a legal matter, that “transaction-based

compensation can include investor funds misappropriated by a person

regularly involved in the active solicitation of investors.” Div. Mot. at 10; see

United States v. Elliott, 62 F.3d 1304, 1310 (11th Cir. 1995) (finding that

investment principal commingled with personal funds is a form of

transaction-based compensation for an investment adviser). While it may be

true that misappropriating funds can be a form of transaction-based

compensation, I would still need to find some evidence connecting Monaco’s

receipt of investment principal to specific transactions. I am unable to make

this finding on this record.

There is an additional complicating factor. All the securities in which

Monaco effected transactions were issued by companies that Monaco was an

officer of or otherwise associated with. By rule, the Commission deems

Cf. Order Exempting the Federal Reserve Bank of New York, Maiden

Lane LLC and the Maiden Lane Commercial Mortgage Backed Securities

Trust 2008-1 from Broker-Dealer Registration, Exchange Act Release No.

61884, 2010 SEC LEXIS 1085, at *7 (Apr. 9, 2010) (transaction-based

compensation means “compensation tied to the successful completion of a

securities transaction”).

4

This is in contrast to Dykes’s compensation, which was explicitly in the

form of commissions for each investment closed.

5

8

associated persons of an issuer not to be a broker “solely by reason of his

participation in the sale of the securities of such issuer” if four conditions are

met. 17 C.F.R. § 240.3a4-1. The first three conditions are that the associated

person is not (1) subject to a statutory disqualification, (2) receiving

transaction-based compensation, or (3) associated with a broker or dealer.

There is no evidence that Monaco was statutorily disqualified and, as

addressed above, I have not found that she received transaction-based

compensation or was associated with a registered broker or dealer.

That leaves the fourth condition of the safe harbor, which has three

alternatives. The first requires the associated person to restrict his or her

participation to offers and sales that are (A) directed to registered brokers or

dealers, investment companies, banks, or several other similar entities; (B)

exempted from registration under Securities Act Section 3(a)(7), (9), or (10);

(C) related to a reclassification, merger, or consolidation; or (D) related to

stock options or similar plans for employees of the issuer. 17 C.F.R.

§ 240.3a4-1(a)(4)(i). None of those was the case here, as the securities were

not exempted under Securities Act and Monaco and her coconspirators

specifically targeted elderly individual investors whom they considered easy

marks. The second alternative is not met because Monaco participated in

offering the securities more than once every twelve months. 17 C.F.R.

§ 240.3a4-1(a)(4)(ii)(C). And the third does not apply because Monaco

participated in an oral solicitation of potential purchasers. 17 C.F.R.

§ 240.3a4-1(a)(4)(iii)(A). For these reasons, I conclude that the safe harbor rule

does not apply and that Monaco may be considered a broker despite having

solely participated in the sale of securities of issuers with which she was

associated.

In her opposition, Monaco asserts that she never sold stocks, but the

facts in her plea agreement, which she cannot dispute in this proceeding,

establish the contrary. Although not every indication of being a broker is

present, on balance Monaco’s conduct shows that she regularly recruited

investors and transacted in securities for the account of others. See SEC v.

George, 426 F.3d 786, 797 (6th Cir. 2005) (finding that evidence of regular

involvement “in communications with and recruitment of investors for the

purchase of securities” was sufficient to qualify as a broker, even if no

compensation was received). Based on her activity, I conclude that Monaco

acted as an unregistered broker and was therefore associated with a broker

or dealer for the purposes of Section 15(b). See 15 U.S.C. § 78c(a)(18);

Tagliaferri, 2017 SEC LEXIS 481, at *17-18.

9

Conviction

Exchange Act Section 15(b) authorizes sanctions on a person associated

with a broker or dealer who has been convicted of a felony or misdemeanor

that “involves” the violation of 18 U.S.C. § 1341, the federal mail fraud

statute. 15 U.S.C. § 78o(b)(4)(B)(iv). Monaco’s conviction satisfies this

requirement. She pleaded guilty to conspiracy to commit fraud in violation of

18 U.S.C. § 1349.6 In her plea agreement, she admitted to conspiring to “use

the mails to defraud multiple investors of millions of dollars.” Div. Ex. 2, at

10. And Monaco’s overt conduct in furtherance of the conspiracy included

accepting checks mailed by investors, signing and mailing stock certificates

and investment agreements to investors, and falsifying an email that was

then printed out and mailed to investors.7

Monaco notes in her opposition that she is appealing her conviction and

sentence. But the pendency of an appeal does not limit the Commission’s

ability to impose an administrative sanction based on Monaco’s conviction.

Daniel Joseph Touizer, Exchange Act Release No. 85321, 2019 SEC LEXIS

472, at *3 (Mar. 14, 2019) (denying stay). If Monaco is successful in reversing

her conviction, however, she may apply for an order vacating any sanctions

ordered or dismissing the proceeding if it is still pending. See Evelyn Litwok,

Investment Advisers Act of 1940 Release No. 3438, 2012 SEC LEXIS 2328

(July 25, 2012) (dismissing proceeding).

Public Interest

That leaves the public interest as the final consideration in whether to

impose a sanction. To determine whether a sanction is in the public interest,

the Commission considers, among other things, the following factors: (1) the

egregiousness of the respondent’s actions; (2) the isolated or recurrent nature

of the infraction; (3) the degree of scienter involved; (4) the sincerity of the

respondent’s assurances against future violations; (5) the respondent’s

recognition of the wrongful nature of his conduct; and (6) the likelihood that

the respondent’s occupation will present opportunities for future violations.

This section provides that attempt and conspiracy to commit an offense

under chapter 63 of title 18, which includes mail fraud under 18 U.S.C.

§ 1341 and other fraud offenses, is subject to the same penalties as the

underlying offense.

6

Monaco’s conviction also satisfies at least one alternative basis under

Exchange Act 15(b)(4) as it was for a felony that “involve[d] the purchase or

sale of any security.” 15 U.S.C. § 78o(b)(4)(B)(i).

7

10

See Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979), aff’d on other

grounds, 450 U.S. 91 (1981). The Commission’s inquiry regarding the

appropriate sanction is flexible, and no one factor is dispositive. Kornman,

2009 SEC LEXIS 367, at *22. The Commission also considers the degree of

harm to investors and the marketplace resulting from the violation.

Marshall E. Melton, Exchange Act Release No. 48228, 2003 SEC LEXIS 1767,

at *5 (July 25, 2003). And, although not dispositive, both specific and general

deterrence are relevant considerations. Peter Siris, Exchange Act Release

No. 71068, 2013 SEC LEXIS 3924, at *48 n.72 (Dec. 12, 2013), pet. denied,

773 F.3d 89 (D.C. Cir. 2014). Each case should be reviewed “on its own facts”

to determine the respondent’s fitness to participate in the relevant industry

capacities before imposing a bar. Ross Mandell, Exchange Act Release No.

71668, 2014 SEC LEXIS 849, at *8 (Mar. 7, 2014) (quoting McCarthy v. SEC,

406 F.3d 179, 188 (2d Cir. 2005)), vacated in part on other grounds, Exchange

Act Release No. 77935, 2016 SEC LEXIS 1886 (May 26, 2016).

Egregiousness

The scheme that resulted in Monaco’s criminal conviction was egregious.

The conspirators victimized thirty investors. They specifically targeted

elderly investors. They went back to the Colorado investors with lie after lie

for years. They ultimately defrauded their victims of more than $6,000,000.

Monaco, in her opposition, minimizes her role in the scheme. She is in

this situation because she trusted her family and they used her name. She

never sold stocks and has “no knowledge of how it all works.” Opp’n at 1.

There may be some truth to this claim, as it is clear from the stipulation of

facts that others, particularly Dykes and Pasquale Rubbo, had a more active

role in soliciting investors and peddling falsehoods. But Monaco cannot

escape responsibility by claiming that others were merely using her name.

She admitted in federal court that she was a knowing and voluntary

participant in the conspiracy and that there was interdependence among the

members of the conspiracy. Div. Ex. 2, at 7. She met with her coconspirators

to discuss tactics. She signed and sent stock certificates and investment

contracts, while knowing that the Spongebuddy glove was never

manufactured and that no retailer had agreed to sell it. She repeatedly paid

herself from the funds invested by the victims.

The Commission has repeatedly emphasized that dishonest and

fraudulent conduct in the securities industry requires a severe sanction. See

Kornman, 2009 SEC LEXIS 367, at *23; Melton, 2003 SEC LEXIS 1767, at

*29-30. Monaco’s conduct was serious and wrongful.

11

Recurrence

The wrongful conduct was repeated. It started in 2012 and lasted until

2017. In fact, the scheme continued until law enforcement intervened. One

victim’s investment was deposited on November 1, 2017, just days before

Monaco was indicted. Div. Ex. 2, at 20. The Colorado investors sent at least

eleven checks to the conspirators. In total there were thirty victims.

Scienter

In the context of securities fraud, scienter is “a mental state embracing

intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425

U.S. 185, 193 n.12 (1976). Despite claiming to be the victim of trusting her

family and “having no knowledge of how it all works,” Opp’n at 1, Monaco

acted with scienter. Monaco’s guilty plea to a mail fraud conspiracy

establishes that she acted with scienter. See United States v. Kalu, 791 F.3d

1194, 1203-04 (10th Cir. 2015) (mail fraud requires specific intent); United

States v. Blair, 54 F.3d 639, 642 (10th Cir. 1995) (conspiracy requires specific

intent); 18 U.S.C. § 1341. Monaco’s scienter is further demonstrated by her

overt act of falsifying an email to make it appear that QVC was interested in

investing in the Spongebuddy glove. Div. Ex. 2, at 17.

Recognition of Wrongfulness

Monaco pleaded guilty, which shows at least some recognition that her

conduct was criminal. See Div. Ex. 2, at 23 (reflecting the agreement of

Monaco and the United States Attorney that the sentencing guideline range

be reduced for “acceptance of responsibility”). But in her answer and

opposition, she deflects blame and asserts that her family was using her

name. This factor does not weigh in her favor.

Harm to Investors

The harm to investors was considerable. Investors gave Monaco and her

coconspirators over $6,000,000. Of this, a small percentage was returned or

refunded. But the vast majority was never returned and was incorporated

into the restitution of $6,011,900 that the sentencing court imposed on

Monaco, joint and several with her coconspirators.

Given Monaco’s

substantial prison sentence, it is unclear when, if ever, the victims will

recover this money.

Other Factors

In her opposition, Monaco points to her seventy-four month prison

sentence and three-year period of supervised release to argue that she is not

a threat. She asks for leniency given the significant criminal punishment she

12

has already received. She states that she will never go into business with her

family again. And she asks how an associational bar against her serves the

public interest.

That is a valid question and at the heart of the analysis. The likelihood

that Monaco will commit future violations while incarcerated or on

supervised release is almost zero.8 And if Monaco attempted to engage in

fraudulent schemes after completing her sentence, an associational bar may

not completely prevent her from doing so. After all, Monaco was not

associated with a registered broker-dealer when she committed this offense

but was acting as an unregistered broker. Given her record, she is not likely

to be able to associate with a broker-dealer or any of the other registered

entities to which an associational bar applies, even without the imposition of

a bar.

Nevertheless, it has been the Commission’s practice to impose

associational bars when appropriate in cases of incarcerated respondents.

See Reinhard, 2011 SEC LEXIS 158, at *51 (“[W]e do not view [a fifty-onemonth] criminal sentence as mitigative of the appropriate sanction to be

imposed in the public interest in this administrative proceeding.”); Richard

N. Cea, Exchange Act Release No. 8662, 1969 SEC LEXIS 268, at *36 (Aug. 6,

1969) (stating that administrative and criminal proceedings are “parallel and

compatible procedures” for achieving the goals of the Exchange Act and that

“administrative and criminal remedies are designed to serve different

purposes”). Similarly, the Commission has found it appropriate to impose

associational bars on unregistered brokers. See, e.g., Vladislav Steven

Zubkis, Exchange Act Release No. 52876, 2005 SEC LEXIS 3125, at *28 (Dec.

2, 2005).

While the deterrence offered by an associational bar may be small

compared to the punishment Monaco has already received, a bar offers some

level of both specific and general deterrence. Given this and the seriousness

of the fraud, the repeated nature of the conduct, and the harm to the

investors, it is in the public interest to impose collateral associational and

penny stock bars.

Among the conditions of her supervision is a prohibition on any activity

in which she would solicit funds for investment and a requirement to give the

probation officer access to any financial information. All employment must

be approved by the probation officer, and she must document all income from

any source. Div. Ex. 3, at 5.

8

13

Order

Under Commission Rule of Practice 250(b), I GRANT the Division of

Enforcement’s motion for summary disposition and ORDER, pursuant to

Section 15(b) of the Securities Exchange Act of 1934, that Angela Rubbo

Beckcom Monaco is BARRED from associating with a broker, dealer,

investment adviser, municipal securities dealer, municipal advisor, transfer

agent, or nationally recognized statistical rating organization and from

participating in an offering of penny stock.9

This initial decision shall become effective in accordance with and

subject to the provisions of Commission Rule of Practice 360, 17 C.F.R.

§ 201.360. Pursuant to that rule, a party may file a petition for review of this

initial decision within twenty-one days after service of the initial decision. A

party may also file a motion to correct a manifest error of fact within ten days

of the initial decision, pursuant to Rule 111, 17 C.F.R. § 201.111. If a motion

to correct a manifest error of fact is filed by a party, then a party shall have

twenty-one days to file a petition for review from the date of the

undersigned’s order resolving such motion to correct a manifest error of fact.

The initial decision will not become final until the Commission enters an

order of finality. The Commission will enter an order of finality unless a

party files a petition for review or motion to correct a manifest error of fact or

the Commission determines on its own initiative to review the initial decision

as to a party. If any of these events occurs, the initial decision shall not

become final as to that party.

_______________________________

Brenda P. Murray

Chief Administrative Law Judge

Participating in an offering of penny stock includes “acting as any

promoter, finder, consultant, agent, or other person who engages in activities

with a broker, dealer, or issuer for purposes of the issuance or trading in any

penny stock, or inducing or attempting to induce the purchase or sale of any

penny stock.” 15 U.S.C. § 78o(b)(6)(C).

9

14