SEC ENFORCEMENT PREVAILS AT TRIAL AGAIN
SEC Enforcement won another favorable verdict following a five-day bench trial in SEC v. U.S. Pension Trust Corp., Civil Action No. 07-22570 (S.D. Fla. Filed Sept. 28, 2007). The court found defendants U.S. Pension Trust Corp., U.S. College Trust Corp., Iliana Maceiras, Leonardo Maceiras Jr. and Nildo Verdeja liable for violating Exchange Act Sections 10(b) and 15(a) and Securities Act Section 17(a) based on a multiyear fraud.
The Commission’s complaint alleged that USPT operated as an unregistered broker dealer and that defendants defrauded about 14,000 investors beginning as early as late 1995. Specifically, the complaint alleged that investors were charged exorbitant, undisclosed commissions and fees in connection with the sale of mutual funds in violation of the registration and antifraud provisions. Defendants employed a network of independent sales representatives primarily in Latin America. Investors were solicited to purchase what were touted as high quality U.S. mutual funds through one of several plans. What investors were not told was that as much as 85% of their contribution was taken as fees under some plans.
Following trial, the court issued an opinion finding that the companies had in fact acted as unregistered broker dealers. The court also concluded that the individual defendants aided and abetted those violations. Investor funds, according to the court’s findings, were put into various mutual funds. The written materials furnished to potential investors, as well as the oral discussions with sales representatives, failed to inform potential purchasers about the very substantial commissions. In some instances those commissions were up to 85% of the first year contributions, according to the opinion. The defendants also misled investors about the registration of the investments with the Commission, the Federal Reserve Bank and the Office of the Comptroller of the Currency.
The Court order the companies to pay disgorgement of $62.6 million based on investor contributions that were fraudulently raised from 1995 through 2008. Those companies were also directed to pay a $50 million civil penalty. The individuals were ordered to pay disgorgement which ranged from $674,567 to $1,093,364, representing the salaries they paid themselves during the time period. Each individual was also ordered to pay a $200,000 civil penalty. See also Litig. Rel. 21680 (Oct. 4, 2010).
Program: Fifth Annual Securities Fraud National Institute, October 7-8, 2010 in New Orleans. For further information on this excellent program please click here: http://www.abanet.org/cle/programs/securitiesfraud/