UNITED STATES SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 48302 / August 8, 2003
INVESTMENT ADVISERS ACT OF 1940
NO. 2156 / August 8, 2003
FILE NO. 3-11210
COMMISSION ISSUES ORDER ALLEGING THAT BROKER VIOLATED THE SECURITIES LAWS BY PARTICIPATING IN FRAUDULENT STOCK OFFERINGS
The Securities and Exchange Commission issued an Order Instituting Public Administrative Proceedings and Notice of Hearing Pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Darius L. Lee ("Lee"). In the Order, the staff alleges that Lee is enjoined from future violations of the antifraud and registration provisions of the securities laws resulting from his participation, from at least May 1997 to at least October 1999, in the fraudulent offering of securities of three related companies, JB Stanley Group, LP ("JB Stanley"), Cambridge Capital Holdings Management ("Cambridge"), and Union Transfer and Cargo Corporation ("UTC") (collectively "Offerings"), and that Lee received at least $8,050 in proceeds from the fraudulent Offerings.
The Commission instituted this administrative proceeding after a district court in the Southern District of New York found Lee liable, on June 25, 2003, for his role in the Offerings and granted the Commission's motion for summary judgment, concluding that Lee violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder ("Injunctive Action"). As a result of its findings, the Court permanently enjoined Lee from future violations of the antifraud and registration provisions of the securities laws, ordered Lee to disgorge $8,050 of ill-gotten gains derived from his fraudulent conduct, plus $2,641.13 in pre-judgment interest, and ordered Lee to pay a civil penalty of $25,000. SEC v. Jean Pierre, et al., 02 Civ. 253 (S.D.N.Y.) (SWK).
The judgment in the Injunctive Action found that Lee made a series of oral misrepresentations and misstatements to investors concerning the Offerings, including that: (a) JB Stanley and Cambridge would conduct an initial public offering ("IPO"), at a specific price, with JB Stanley investors being able to sell their shares for a profit; (b) another defendant had consistently achieved a 50% return from other funds that he managed; and (c) JB Stanley is a hedge fund and money or asset management firm that pooled investor funds to purchase and sell securities.
The judgment in the Injunctive Action also determined that Lee sent investors documents and other materials concerning the Offerings that contained false and misleading statements without investigating the truthfulness of the representations contained therein. These materials falsely stated, inter alia, that: (a) false account statements to investors that overstated the performance of the JB Stanley fund; (b) misstatements in a JB Stanley brochure regarding the experience of its employees and its prominence as an asset management firm; (c) misstatements in the April 1999 Cambridge quarterly report regarding the structure of UTC's business and a proposed merger with another company; and (d) misrepresentations in a 1999 letter sent to JB Stanley investors soliciting investments in UTC.
In the Order, the Commission deems that it is in the public interest to institute public administrative proceedings to determine whether the allegations in the Order are true and what, if any, remedial sanctions against Lee are appropriate in the public interest pursuant to Section 15(b) of the Exchange Act and Section 203(f) of the Advisers Act.