According to the complaint (opens to PDF), from February 2010 to February 2011 Geoffrey H. Lunn, Darlene A. Bishop, and Vincent G. Curry raised $5.77 million in an "investment scheme [through] Dresdner Financial, a fictitious financial services company." Lunn allegedly attracted investors by posing as the vice-president of Dresdner and telling investors that "Dresdner's principals had connections to Dresdner Bank." According to the SEC, Bishop and Curry acted as marketers for the scheme and lured investors in by promising "100% guaranteed rates of return." Lunn allegedly did not invest any of the investors' funds, but instead used them for personal expenses including paying "at least $848,500 to Las Vegas call girls," paying "over $1.3 million to marketers," and paying $1 million to Dresdner's creator, "a one-eyed man who used the alias "Robert Perello.'" Lunn, Bishop, and Curry have been charged with violating sections of the Securities Act and the Exchange Act. The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and civil penalties.
District Court Orders More Than $3 Million in Remedies, Grants Motions for Disgorgement, Civil Penalties and Officer-and-Director Bars Against Timothy Huff, Lawrence Lynch, Joseph J. Monterosso, Luis Vargas, October 18, 2012, (Litigation Release No. 22513)
According to the May 24, 2012 complaint (opens to PDF), James B. Catledge, Derek F. C. Elliott, EMI Resorts Inc., EMI Sun Village, Inc. and Sun Village Juan Dolio made "material misrepresentations to investors in connection with the unregistered sale of interest in two resorts in the Dominican Republican." A final judgment has been entered against Elliott which "waives disgorgement and authorizes the Commission to seek a civil penalty of not more than $250,000 by subsequent motion."
This Thursday the Court granted the SEC's "motions for disgorgement, civil penalties, and officer-and-director bars against" Timothy Huff, Lawrence Lynch, Joseph J. Monterosso, and Luis Vargas for their involvement in a scheme involving GlobeTel Communications Corp. (now World Surveillance Group Inc.) from 2002 to 2006. According to the original complaint, "GlobeTel reported millions of dollars in telecommunications revenue...that was fake." Huff and former GlobeTel chief financial officer, Thomas Jimenez, were sentenced to prison in parallel criminal prosecutions: U.S. v. Huff and U.S. v. Jimenez. Huff allegedly created the scheme that made it look from 2002 to 2004 that GlobeTel "bought and sold telecom 'minutes' with other companies in Mexico, Brazil and the Philippines." However, the complaint claims that in reality there were no transactions and Huff and Jimenez "created false invoices and technical documents and lied to auditors" to support their claims. Monterosso and Vargas also allegedly created "hundreds of false invoices from 2004 to 2006 that made it appear that GlobeTel's three wholly-owned subsidiaries, Centerline Communications, LLC, Volta Communications, LLC, and Lonestar Communications, LLC bought and sold telecom 'minutes' with other wholesale telecom companies." According to the SEC, in reality there were no transactions. Volta and Lonestar allegedly "did no business." The reported millions of dollars in business between Centerline and "Monterosso's and Vargas' own private company, Carrier Services Inc." allegedly did not occur as well. Lynch, who was aware that Monterosso and Vargus had submitted fake invoices, allegedly "made and approved journal entries in GlobeTel's financial records to record revenue and concealed that GlobeTel and its supposed counter-parties were not paying their bills."
In earlier judgments, Lynch received an officer and director bar for five years and Huff received a permanent officer and director bar. In Thursday's ruling, Huff was ordered to pay over $2.71 million in penalties and disgorgement, plus prejudgment interest; Lynch was ordered to pay a $780,000 civil penalty; Monterosso was ordered to pay (jointly and severally with Vargus) $975,000 in penalties and disgorgement plus prejudgment interest; and Vargas was ordered to pay (jointly and severally with Monterosso) $825,000 in penalties and disgorgement plus prejudgment interest. Monterosso and Vargus also received a ten year officer and director bar.
Defendant in SEC Action Charged by United States Attorney's Office for the District of Massachusetts, October 18, 2012, (Litigation Release No. 22512)
This Thursday the United States Attorney's Office for the District of Massachusetts charged Arnett L. Waters (who is also a defendant in an action filed by the SEC this past May) with "multiple schemes to defraud investors and business clients, as well as with obstruction of justice." Specfically, Waters has been charged with "sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice." From 2007 through 2012, Waters allegedly raised at least $839,000 "using fictitious investment-related partnerships to draw in investors," including his church which gave him $500,000 in March 2012. In another scheme, Water allegedly defrauded clients "out of as much as $7.8 million" of his rare coins business "using interstate commerce and the mails." Furthermore, Waters also allegedly "engaged in money laundering through two transactions totaling $77,000." The criminal information claims that Waters "made mutliple misrepresentations to Commission staff...to conceal...that investor money was misappropraited in a fraudulent scheme." In August, the Attorney's office filed a separate criminal information charging Waters with two counts of criminal contempt due to an undisclosed bank account to which Waters allegedly transferred funds.
SEC Charges Arizona Man with Acting as an Unregistered Broker and Unlawful Touting, October 17, 2012, (Litigation Release No. 22511)
According to the complaint (opens to PDF), from 2007 to 2011 Michael J. Southworth and his entity, The Investors Registry, LLC, (TIR) violated the broker-dealer registration provisions of the federal securities laws. In addition, Southworth also allegedly violated the anti-touting provisions. During this time frame, Southworth allegedly acted as an unregistered broker through TIR in regards "to the profiling of five issuers by soliciting TIR members to invest" in these "pre-IPO" issuers, and by "negotiating with the issuers regarding certain terms of their offering to TIR members." Additionally, "Southworth touted the same five issuers without adequate disclosure of the consideration that he received from them." Southworth and TIR have agreed to permanent enjoinments as well has a three year penny stock bar and to over $200,000 in disgorgement plus prejudgment interest. However, a waiver of payment of all but $100,000 has been given due to Southworth's financial condition.
SEC Charges Hedge Fund Adviser and Two Executives with Fraud, October 17, 2012, (Litigation Release No. 22510)
According to the complaint (opens to PDF), Yorkville Advisers LLC, its founder and president Mark Angelo, and its chief financial officer Edward Schinik used false information to entice "pension funds and other investors to invest in their [two] hedge funds" YA Global Investments (US) LP and YA Offshore Global Investments Ltd. They allegedly misrepresented the safety and liquidity of the investments made by the hedge funds, and charged at least "$10 million in excess fees based on the inflated values of Yorkville's assets under management." In addition, the SEC charges that the defendants "failed to adhere to Yorkville's stated valuation policies, ignored negative information about certain investments by the funds, withheld adverse information about fund investments from Yorkville's auditor [...and] misled investors about the [...] collateral underlying the investments and Yorkville's use of a third-party valuation firm." The complaint charges the defendants with violating sections of the Securities Act, Exchange Act, and Investment Advisers Act.
SEC v. James B. Catledge et al., October 15, 2012, (Litigation Release No. 22509a)