UNITED STATES OF AMERICA
In the Matter of
VAN R. LEWIS III
|ORDER ENTERING DEFAULT, |
MAKING FINDINGS, AND
The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) on May 3, 2001. On June 5, 2001, the Division of Enforcement (Division) filed a declaration from Respondent, in which Respondent acknowledged receipt of the OIP on May 8, 2001. Respondent's declaration also acknowledged that his answer to the OIP was due within twenty days after May 8, 2001. As of today, no answer has been received.
On June 14, 2001, the Division moved for the entry of an order finding Respondent in default, deeming the allegations in the OIP to be true, and barring Respondent from association with any broker or dealer. As of today, no opposition to the Division's motion has been received.
As provided by Rules 155(a)(2) and 220(f) of the Commission's Rules of Practice, 17 C.F.R. §§ 201.155(a)(2) and 201.220(f), Respondent is in default because he has failed to answer the OIP and because he has failed to respond to a dispositive motion.
Accordingly, I find that the allegations in the OIP are true:
From 1988 through at least May 3, 2001, Van R. Lewis, III (Lewis), a Longview, Texas resident, had been a registered representative and principal associated with Sunpoint Securities, Inc. (Sunpoint), a broker-dealer registered with the Commission pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act). Lewis was also the chief executive officer and majority shareholder of Sunpoint until November 1999, when Sunpoint was placed under the control of a bankruptcy trustee as a result of actions taken by the Commission and the Securities Investor Protection Corporation.
On May 9, 2000, a permanent injunction was entered against Lewis in the United States District Court for the Eastern District of Texas (Tyler Division). Lewis was permanently enjoined from violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 15(c)(1), 15(c)(3), 17(a), and 17(e) of the Exchange Act and Rules 10b-5, 15c1-2, 15c3-1, 17a-3, and 17a-5 thereunder. SEC v. Sunpoint Sec., Inc., No. 6:99CV667 (E.D. Tex. May 9, 2000).
The Commission's Complaint (Complaint) alleged, among other things, that from approximately December 1997 through November 19, 1999, Sunpoint, Lewis, and Sunpoint's chief financial officer (CFO) engaged in a securities fraud scheme by diverting approximately $25 million of customer funds.
The Complaint further alleged that in December 1997, when Sunpoint's auditors discovered that the firm was operating with a net capital deficiency, Lewis attempted to cover this deficiency by diverting approximately $1.7 million of customer funds. In addition, beginning in approximately December 1997, acting pursuant to a directive from Lewis, Sunpoint's CFO began directing a subordinate to adjust the amount of money transferred between Sunpoint's omnibus money market and clearing accounts. Most of these monies were periodically diverted to bank accounts controlled by Sunpoint and/or Lewis. The net result of these adjustments was to lower substantially the balance in the omnibus money market account so that by the end of October 1999, it had only $12 million of customer monies-when it should have held approximately $37 million for customers. Despite these adjustments, Sunpoint misrepresented the true value of the money market funds held for its customers on their monthly customer account statements.
According to the Complaint, as a result of this scheme to divert customer funds, between December 1997 and November 19, 1999, Sunpoint, aided and abetted by Lewis and its CFO, misrepresented its net capital position in filings with regulators, maintained insufficient net capital and customer reserves, and failed accurately to maintain its books and records.
In view of the foregoing, and pursuant to Sections 15(b) and 19(h) of the Exchange Act, I find it in the public interest and necessary for the protection of investors to order that Lewis be barred from association with any broker or dealer.
Accordingly, it is ORDERED that Van R. Lewis III is barred from association with any broker or dealer.
James T. Kelly
Administrative Law Judge
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