Ponzi Scheme – High Yield Promissory Notes

Securities Fraud and Misrepresentation Litigation and FINRA Attorney, Russell L. Forkey, Esq.

June, 2012:

SEC v. Jeffrey L. Mowen, Thomas R. Fry, Bevan J. Wilde, Gary W. Hansen, Michael G. Butcher, James B. Mooring, David G. Bartholomew, and Michael W. Averett, Case No. 2:09-cv-00786-DB/PMW (D. Utah)

Promoters of Convicted Ponzi Scheme Operator Jeffrey L. Mowen Ordered to Pay Over $20 Million in Disgorgement and Civil Penalties

The Securities and Exchange Commission recently announced that on June 11, 2012, the United States District Court for the District of Utah granted its motion for entry of final judgment against Thomas R. Fry, Bevan J. Wilde, Gary W. Hansen, Michael G. Butcher, James B. Mooring, and Michael W. Averett ordering disgorgement and civil penalties totaling over $20 million. Previously, pursuant to stipulation, the court entered permanent injunctions against these defendants enjoining them from future violations of the federal securities laws. The SEC Complaint alleged that these defendants acted as promoters for a Ponzi scheme operated by Jeffrey L. Mowen, who is currently serving a 10-year prison term for his actions. The Complaint alleged that the promoters raised millions of dollars through the unregistered offer and sale of high-yield promissory notes to over 150 investors in several states. The funds raised were then funneled to Mowen through Thomas Fry, who used the funds for his personal benefit, misappropriating over $8 million.

The Court ordered that the defendants disgorge the following amounts of ill-gotten gains and civil penalties, respectively: Thomas Fry – $16,751,439.94 and $250,000; Bevan Wilde – $1,326,241.77 and $130,000; James Mooring – $505,521.84 and $130,000; Michael Averett – $774,936.02 and $130,000; Gary Hansen – $349,481.33 and $130,000; Michael Butcher – $201,278.11 and $130,000.

The Court also granted, in part, the Commission’s motion for summary judgment against defendant and promoter David G. Bartholomew. The Court granted summary judgment against Bartholomew for violations of Sections 5(a) and 5(c) of the Securities Act of 1933 for the offer and sale of unregistered securities and of Section 15(a) of the Securities Exchange Act of 1934 for acting as an unregistered broker-dealer. The Court found issues of material fact concerning materiality and scienter as to misrepresentations Bartholomew made to investors and thus denied summary judgment for violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Those claims should be scheduled for trial later this year.