Papashon Eatery Owners Settle SEC Fraud Charges

A California restaurateur agreed to settle federal charges that he and the other owners of four Papashon restaurants in the Los Angeles area fraudulently sold $21.6 million of stock to more than a thousand investors, regulators said.

The Securities and Exchange Commission alleged Jonathan C. Papa of Calabasas, Papa Holdings Inc. and four of its subsidiaries used as many as 30 salespeople to illegally offer and sell unregistered stock in the companies from November 1995 to January 1999.

The SEC said the defendants told investors their money would be used to develop and run new Papashon restaurants. The small restaurant chain features California cuisine. But the funds were used to pay for existing restaurants’ expenses and for sales commissions to Papa Holdings’ employees and agents who sold the shares, the SEC said in its complaint filed in a Los Angeles federal court.

Papa and Papa Holdings, which controlled the Papashon restaurant in Long Beach and recently closed Papashon restaurants in Beverly Hills, Pasadena and Encino, agreed to repay ill-gotten gains plus interest to settle the fraud charges, the SEC said. Papa also agreed to pay a civil penalty. The SEC said the amounts of restitution and fines will be set later by the court.

All the defendants also agreed to be subject to stiffer sanctions for future violations of securities laws, the commission said. They admitted no wrongdoing in settling the allegations.