UNITED STATES OF AMERICA
|In the Matter of||: ORDER INSTITUTING PROCEEDINGS,|
|:MAKING FINDINGS AND IMPOSING|
|Donald G. Brooks,||: REMEDIAL SANCTION|
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest, for the protection of investors, that public administrative proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act"), and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Donald G. Brooks ("Brooks").
In anticipation of the institution of these proceedings, Brooks has submitted an Offer of Settlement ("Offer") to the Commission, which the Commission has determined to accept.
Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except those contained in paragraphs II.A., II.B and II.C., and the jurisdiction of the Commission over him and the subject matter of these proceedings, Brooks consents to the issuance of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions, and to the entry of the findings set forth below.
On the basis of this Order and the Offer submitted by Brooks, the Commission finds that:
A. Donald G. Brooks, age 64 and a resident of Garland, Texas, from May 1990 through April 1999, was a registered representative with one or more broker-dealers registered with the Commission.
B. Brooks Financial Planning, Inc. ("BFP"), a Texas corporation with its principal place of business in Dallas, Texas was incorporated on or about October 24, 1988. BFP's corporate charter lapsed in February 1997 due to its failure to pay franchise taxes. Brooks was the president and only known shareholder of BFP. Brooks and BFP provided financial planning advice to their clients and took compensation from their clients' funds and, therefore, acted as an investment adviser.
C. On March 24, 2000, a Final Judgment was entered by consent against Brooks and BFP, in the United States District Court for the Northern District of Texas (Dallas Division). Brooks and BFP were permanently enjoined from violations of Sections 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. SEC v. Donald G. Brooks, et al. 3:99-CV-1326-D.
D. The Commission's Amended Complaint ("Complaint") against Brooks and BFP alleged that starting in 1989 and continuing until April 1999, Brooks, a part-time education minister and Bible study teacher, and BFP, a Texas corporation owned and controlled by Brooks, fraudulently raised and misappropriated at least $1.7 million from numerous elderly victims through sales of fictitious church bonds and interests in a fictitious "Interim Church Loan Fund" ("Church Fund").
E. The Complaint further alleged that although Brooks and BFP promised investors annual returns of eleven percent (11%) or more from these "investments," Brooks, in fact, misappropriated victims' investments to make "Ponzi" payments to investors, to operate BFP's business and subsidize his extravagant personal living expenses.
F. The Complaint also alleged that Brooks and BFP encouraged prospective investors to liquidate legitimate, conservative investments to obtain funds to invest in the fictitious Church Fund. Brooks falsely assured investors of the safety of the fund and made various claims that no one had ever lost money and that the obligations were secured by church property. Brooks and BFP promised investors semi-annual or other periodic "interest" payments.
G. In addition, the Complaint alleged that as Brooks' scheme progressed, he re-named the investment the "Interim Church Loan Fund," which made it appear like a church-related mutual fund and which cloaked his scheme with what appeared to be the imprimatur of organized religion. To some investors, he even claimed that the Church Fund was "no load" like the mutual funds they were familiar with from prior investments.
H. Further, the Complaint alleged that after Brooks failed to make scheduled "interest" payments to investors in March 1999, he ceased paying rent for BFP's offices, and abruptly abandoned them. He subsequently failed to contact his investors and made no additional payments to them.
I. Based on the above conduct, Brooks willfully violated Sections 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act.
In view of the foregoing, the Commission deems it appropriate in the public interest, for the protection of investors, to impose the sanction that is set forth in the Offer submitted by Brooks.
Accordingly, IT IS ORDERED that:
A. Brooks be, and hereby is, barred from association with any broker, dealer or investment adviser.
By the Commission.
Jonathan G. Katz
|Home | Previous Page||