UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 49975 / July 7, 2004
INVESTMENT ADVISERS ACT OF 1940
Release No. 2257 / July 7, 2004
Admin. Proc. File No. 3-11536
ADMINISTRATIVE PROCEEDINGS INSTITUTED AGAINST JOSE P. ZOLLINO
The Securities and Exchange Commission announced today that it instituted public administrative proceedings against Jose P. Zollino ("Zollino") pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act").
In the Order Instituting Administrative Proceedings ("Order"), the Division of Enforcement alleges that on January 7, 2004, the U.S. District Court for the Western District of Texas entered a judgment against Zollino permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aiding and abetting violations of Sections 206(1) and 206(2) of the Advisers Act. Securities and Exchange Commission v. Inverworld, Inc., et al., Civil Action Number SA-99-CV-0822 (W.D. Tex.). The Commission's complaint alleged that since January 1, 1997, InverWorld, at the direction of Zollino, managed approximately $433 million on behalf of at least 1,000 Mexican and other Latin American investors. Contrary to representations that client funds would be primarily invested in safe, secure investments, InverWorld instead recommended and/or invested a substantial portion of client funds in extremely risky and undisclosed investments. In addition, InverWorld grossly misrepresented the true value of client investments in monthly account statements. Further, InverWorld created a complex web of affiliated offshore entities, such as IWG Services, Ltd. and IG Services, Ltd., to disguise the true nature of InverWorld's investment activities.
The Order alleges further that on May 15, 2002, Zollino pleaded guilty to conspiracy to commit fraud in violation of 18 U.S.C. § 371 and conspiracy to launder monetary instruments in violation of 18 U.S.C. § 1956. United States v. Zollino, Criminal Action Number SA-01-CR-180 (W.D. Tex.). The object of the conspiracy was to commit securities fraud, among other things. Zollino's plea agreement arose out of his involvement in the fraudulent activities of InverWorld. On October 9, 2002, the court sentenced Zollino to 144 months imprisonment and ordered him to pay criminal restitution of $341,787,496. Zollino is currently incarcerated at Forrest City Federal Correctional Facility in Forrest City, Arkansas.
A hearing before an administrative law judge will be scheduled to determine whether the allegations in the order are true, to provide the Respondent an opportunity to dispute these allegations, and to determine what remedial action, if any, is appropriate in the public interest. The Order directed the Administrative Law Judge to issue an initial decision within 210 days from the date of service of the Order.
See also the Order in this matter