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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
BEFORE THE
SECURITIES AND EXCHANGE COMMISSION

April 29, 2004

ADMINISTRATIVE PROCEEDING
FILE NO. 3-11467


In the Matter of

Joseph L. Norris and Mark G. Coleman,

Respondents.  



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ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940

I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Joseph L. Norris ("Norris") and Mark G. Coleman ("Coleman").

II.

After an investigation, the Division of Enforcement alleges that:

A. RESPONDENTS

1. Norris, age 56, was a resident of Carson City, Nevada, and acted as an unregistered investment adviser during the relevant time. From July 1998 through 2000, Norris raised funds from approximately three dozen clients by offering to invest the clients' money in high-yield, offshore, no-risk investments. Norris was to be compensated for his investment advisory services from the difference between the purchase price and the sale price of those investments. Norris controlled and did business under the names of two Nevada limited liability companies, Magellan Communications Group, LLC, and Northern Lights Financial, LLC.

2. Coleman, age 48, was a resident of Carson City, Nevada, and was associated with an unregistered investment adviser during the relevant time. Coleman assisted Norris in raising client funds, was compensated from client funds, and prepared and distributed to clients false monthly account statements.

B. THE UNDERLYING ACTION AND THE INJUNCTION

1. On March 7, 2002, the Commission filed a complaint seeking a permanent injunction against Norris, Coleman and the two corporate entities, alleging that they violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also alleged that Norris and the corporations violated Section 206 of the Advisers Act, and that Coleman aided and abetted those violations. As part of the action, the Commission also requested ancillary relief in the form of an accounting, disgorgement, prejudgment interest, and penalties.

2. The Commission's Complaint alleged that, from July 1998 through 2000, Norris and Coleman raised approximately $8.5 million from more than thirty clients by promising to invest the money in offshore "trading programs" that would generate returns of four to seven percent per month, or the equivalent of 48 to 84 percent per year. The Complaint alleged that these "trading programs" had the characteristics typical of fraudulent "prime bank" schemes, which have been the subject of dozens of Commission enforcement actions over the past decade. The Complaint further alleged that Norris and Coleman lost approximately $6 million of their clients' funds in their attempts to invest in such "trading programs," then sent their clients fictitious account statements concealing the losses. The Complaint also alleges that Norris and Coleman continued to encourage clients and prospective clients to deposit money with them without disclosing the losses.

3. On December 24, 2002, the Honorable David W. Hagen, United States District Judge for the District of Nevada, granted the Commission's motion for summary judgment as to Norris and Coleman. On February 18, 2003, the Court entered a final judgment against Norris and Coleman, permanently enjoining them from violating the aforementioned provisions of the Exchange Act and the Advisers Act, ordering them (jointly and severally) to pay disgorgement and prejudgment interest of $6,900,251.59, and ordering each of them to pay a civil penalty in the amount of $120,000.

III.

In view of the allegations made by the Division of Enforcement, the Commission deems it necessary and appropriate in the public interest that public administrative proceedings be instituted to determine:

A. Whether the allegations set forth in Section II are true, and in connection therewith, to afford Norris and Coleman an opportunity to establish any defense(s) to such allegations; and

B. What, if any, remedial action is appropriate in the public interest against Norris and Coleman pursuant to Section 203(f) of the Advisers Act.

IV.

IT IS ORDERED that a public hearing for the purpose of taking evidence on the questions set forth in Section III hereof be convened at a time and place to be fixed, and before an Administrative Law Judge to be designated by further order as provided by Rule 200 of the Commission's Rules of Practice, 17 C.F.R. 201.200.

IT IS FURTHER ORDERED that Norris and Coleman shall file Answers to the allegations contained in this Order within twenty (20) days after service of this Order, as provided by Rule 220 of the Commission's Rules of Practice, 17 C.F.R. 201.220.

If Norris or Coleman fails to file the directed answer, or fails to appear at a hearing after being duly notified, he may be deemed in default and the proceeding may be determined against him upon consideration of this Order, the allegations of which may be deemed to be true as provided by Rules 155(a), 220(f), 221(f) and 310 of the Commission's Rules of Practice, 17 C.F.R. 201.155(a), 201.220(f), 201 221(f) and 201.310.

This ORDER shall be served forthwith upon Norris and Coleman personally or by certified mail.

IT IS FURTHER ORDERED that the Administrative Law Judge shall issue an initial decision no later than 210 days from the date of service of this Order, pursuant to Rule 360(a)(2) of the Commission's Rules of Practice.

In the absence of the appropriate waiver, no officer or employee of the Commission engaged in the performance of investigative or prosecuting functions in this or any factually related proceeding will be permitted to participate or advise in the decision upon this matter, except as a witness or counsel in proceedings held pursuant to notice. Since this proceeding is not "rule-making" within the meaning of Section 551 of the Administrative Procedure Act, it is not deemed to be subject to the provisions of that Section 553 delaying the effective date of any final Commission action.

For the Commission, by its Secretary, pursuant to delegated authority.

Jonathan G. Katz
Secretary

 

http://www.sec.gov/litigation/admin/ia-2231-o.htm


Modified: 04/30/2004