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COMPLAINTThe United States Securities and Exchange Commission ("Commission") files this complaint against Defendants David B. Henderson, Independent Funding Ltd./Nevada, Independent Funding, Inc. and Jess L. Mercer and Relief Defendants Todd D. Henderson, Secured Capital Services, LLC, and Securus Capitalis Limited and would respectfully show the Court as follows: SUMMARY1. David B. Henderson ("Henderson"), through his companies Independent Funding Ltd./Nevada and Independent Funding Inc., is engaged in an ongoing fraud involving the unregistered offer and sale of securities referred to variously as "notes," "Enhanced Automobile Receivables," and "Commercial Paper Secured Purchaser Agreements" (collectively, the "Notes"). The Notes are generally twelve-month promissory notes paying interest monthly or quarterly. Henderson and his companies use false, misleading and materially incomplete offering materials representing that Henderson's companies will use investor proceeds to purchase secured automobile loans from third parties and that these loans will secure the Notes. Jess L. Mercer, Henderson's most prolific sales agent, has sold over $1.6 million of these notes to elderly investors in Texas. 2. Despite the significant risk inherent in this investment, Henderson's offering materials describe the Notes as "safe" and "liquid," and represent that they are not securities. If anything, the safety and liquidity claims are false. The Notes are not secured by any form of collateral and are non-recourse against Henderson or his companies. The Notes are not liquid and Henderson, in his sole discretion, determines who, if anyone, will receive the return of their invested principal on demand. Beyond this, Henderson uses note proceeds largely for purposes other than purchasing auto loans. To date, Henderson, through sales agents like Mercer, has sold approximately $2 million of these securities. Of the $2 million raised from investors, however, only $190,000 is traceable to purchases of auto loans. Henderson, undisclosed to investors, has used the rest of the proceeds to, among other things, loan money to his son, Todd D. Henderson, loan money to a third party to build a used car lot, repay holders of an earlier series of unregistered promissory notes and make Ponzi payments to investors. 3. The Commission, in the interest of protecting the public from any further unscrupulous and illegal activity, brings this action against the Defendants, seeking temporary, preliminary and permanent injunctive relief, disgorgement of all illicit profits and benefits Defendants have received plus accrued prejudgment interest and a civil monetary penalty. The Commission also seeks an asset freeze against Henderson and his companies, an accounting and other incidental relief, as well as the appointment of a receiver to take possession and control of Henderson, Independent Funding Ltd./Nevada. and Independent Funding, Inc.'s assets for the protection of Defendants' victims. Finally, the Commission also seeks to recover from the Relief Defendants all assets transferred to them that are traceable to investor monies raised by the Defendants. JURISDICTION AND VENUE4. This Court has jurisdiction over this action pursuant to § 22(a) of the Securities Act of 1933 (the "Securities Act") [15 U.S.C. §77v(a)] § 27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78(aa)]. Defendants, directly and indirectly, made use of the mails and of the means and instrumentalities of interstate commerce in connection with the acts, practices and courses of business described in this Complaint. Venue is proper because many of the transactions, acts, practices and courses of business described below occurred within the jurisdiction of the Northern District of Texas. PARTIES5. David B. Henderson, age 64, resides in Salt Lake City, Utah, and is the purported Chief Executive Officer ("CEO") and joint stockholder of Independent Funding, Inc., and the sole stockholder of Independent Funding Ltd./Nevada. Henderson is a licensed insurance broker in Utah. He was licensed by Utah to sell securities, but that license lapsed in 1999. In August 1999, Henderson consented to an order by the Idaho Department of Finance sanctioning him and his company for offering securities, similar to the ones identified in this Complaint, in violation of the Idaho Securities Act's salesperson and securities registration provisions. This order also concluded that the offering documents Henderson provided to investors omitted material facts, in violation of the Idaho Securities Act. 6. Independent Funding Ltd./Nevada (I-Fund Ltd.), is a Nevada corporation headquartered in Salt Lake City. Henderson, in an effort to protect current investor funds from the claims of investors from an earlier offering, incorporated this company through a Nevada-based nominee, who continues to act as sole officer and director. Henderson, however, is the company's sole employee and controls 100% of its stock. 7. Independent Funding, Inc. (I-Fund Inc.), is a Utah corporation headquartered in Salt Lake City. Henderson is the company's sole employee, and owns the company with his wife. 8. Jess L. Mercer, age 58, of Dallas, Texas, is an insurance agent licensed by the state of Texas. Mercer received in excess of $80,000 in commissions from the sale of over $1,250,000 worth of the Notes. 9. Todd D. Henderson, age 35, resides in Salt Lake City and is Henderson's son. He or his companies have received at least $280,000 of Note proceeds. 10. Secured Capital Services, LLC, is a Utah limited liability company headquartered in Salt Lake City and owned and operated by Todd Henderson, its sole employee. This company has received at least approximately $27,000 of Note proceeds, purportedly for maintaining the auto loans allegedly securing the Notes. 11. Securus Capitalis Limited is a Nevada corporation headquartered in Salt Lake City and owned and operated by Todd Henderson. This company has received at least $122,000 of Note proceeds for unknown reasons. FACTUAL BACKGROUND12. From 1998 until approximately December 2000, Henderson, through I-Fund Inc., conducted an unregistered offering of securities that purportedly were backed by auto loans held by a Salt Lake City used car dealership. Essentially, Henderson and I-Fund Inc. raised money from investors, then loaned money to the car dealership to fund its inventory. In return, the dealership gave I-Fund Inc. promissory notes purportedly secured by the loans resulting from auto sales. 13. In approximately December 2000, the car dealer defaulted on its debts to I-Fund Inc., which at that time totaled more than $700,000. This left Henderson without a source of funds to pay his original investors. Accordingly, Henderson turned to a new securities offering as a way to pay back original investors and continue to operate. 14. From September 2001 to the present, Henderson and his companies have raised at least $2 million through Note sales to at least 22 investors located in Texas, Arizona, California and Utah. Most of these investors are elderly. 15. Henderson has solicited thousands of annuity and insurance brokers, principally in Texas and California, to sell the Notes to investors, promising commissions of 5% on the funds raised. As a result of his recruitment efforts, Henderson has assembled a network of at least seven brokers located in Texas and other states through which he offers and sells the Notes. These brokers, who Henderson calls "sales agents," offer and sell the Notes issued by Henderson and his companies and provide investors with Henderson's offering documents. 16. Henderson's offering documents are replete with misleading claims, material omissions and outright falsehoods. Henderson represents to investors, through the offering documents, that 82% of the investor funds will be used to purchase auto loans, which will secure the Notes. The remaining 18% will pay sales commissions (7%), outside services (4%), administrative expenses (4%), and cash reserves (3%). In fact, however, Henderson has spent only $190,000, or approximately 9% of investor funds, purchasing auto loans, all from the same used car dealer. Henderson has spent far more for purposes not disclosed to investors. For instance, he paid at least $208,790 to security holders from his previous offering, and spent at least another $63,000 on legal bills pursuing the car dealership associated with that offering. He also has paid at least another $283,000 to Todd Henderson or his companies, either as direct payments or as alleged "loans." Henderson has drawn down at least $200,000 for personal uses, and, in classic Ponzi fashion, is using cash from new Note sales to make lulling payments to investors. He also has spent $137,598 to buy inventory for the used car dealer, and has loaned that dealer an additional $30,000 to fund a business expansion. The offering materials do not disclose any of these other uses of offering proceeds, nor do they contain legitimate financial information about Henderson or his companies. 17. Henderson's offering materials also mislead investors about the safety of their investments, describing them as being "safe as an annuity," purportedly because they are secured by the auto loans (and the autos securing those loans) and "by cash reserve funds which are maintained in Trust and accumulate interest earned." The offering materials further represent that, until used to buy auto loans, investor funds will be placed in "U.S. Government securities or other investments with comparable safety." The offering materials assure investors that "the cash reserves, the vehicle titles, the insured retail consumer vehicle loan contracts, U.S. Government Securities, the vehicles and other assets of comparable safety provide sufficient funds to repay the principal should there be a default on" the Notes. Lastly, the offering materials comfort investors by promising that an "independent" third party will service the auto loan portfolios. 18. These claims are false. The Notes plainly are not backed by auto loans, since Henderson has used approximately 9% of offering proceeds to buy such loans. Henderson has never maintained a "cash reserve" or purchased "U.S. Government securities or other investments with comparable safety," and, instead, deposits investor monies into a bank account that he uses to pay his own personal expenses. Further, Todd Henderson, not an "independent" third party, purportedly services the auto loans. In short, rather than being "safe as an annuity," these investments are extremely risky. 19. Henderson's offering materials contain other critical misrepresentations and omissions. For example, Henderson misleads investors about the liquidity of their investments, comparing the Notes' liquidity to that of a certificate of deposit ("CD"). There is no truth to this comparison. In contrast to CD holders (who can withdraw their funds at will, albeit often with a penalty), investors in the Notes can withdraw their principal before maturity only at Henderson's discretion. 20. Henderson further causes substantial confusion as to the identity of the obligor of the Notes. The maker, according to the Notes, is an entity called "Independent Funding Limited, Inc.," of which Henderson, according to the offering documents, is allegedly the President and CEO. This entity does not exist. On the contrary, I-Fund Ltd., the entity Henderson formed after his first failed investment offering, is the entity that, according to Henderson, is the company using investor funds and responsible for returning to the investors their investment returns. Henderson is neither an officer nor a director of this entity. To further confuse the issue, Henderson tells investors to make their checks out merely to "Independent Funding," which Henderson then deposits into a single I-Fund Inc. account. 21. The offering materials and Henderson's promotional materials also create the impression that Henderson is operating a large and sophisticated business. The offering documents claim that "the officers, directors and consultants retained by the Company and the officers, directors and consultants retained by the Affiliates have experience in the business of vehicle financing, insurance, loan underwriting, collections and the sale of portfolios." These materials also describe a purported "accounting department" that monitors the company's "sources and uses of cash flow, the collateralization position of the lenders, and the results of operations." In reality, Henderson's companies are a one-man operation that Henderson operates from a small rented office with his son's help, the ostensible purpose of which is to provide financing for a single used car lot also located in Salt Lake City. There is no "accounting department" that monitors what happens to investors' money and Henderson includes in his list of experienced "Affilliates" vendors from which he buys accounting software and purchase money insurance policies in case consumers buying the used cars default on their loans - which usually charge 28% interest per year. 22. Henderson has not registered his current offering with the Commission or any state. Henderson claims the Notes are not securities and, therefore, may be offered without registration. If a sales agent questions this claim, Henderson provides a letter he compiled from excerpts of attorney opinion letters supposedly given to acquaintances. Notably, however, although Henderson sought an attorney's endorsement of his homemade opinion letter from multiple law firms, each firm refused to endorse Henderson's claims. Nevertheless, Henderson has continued to provide the letter to sales agents and intends to continue using the letter in recruiting future sales agents. 23. Mercer is by far Henderson's most prolific agent, responsible for almost $1.6 million of the $2 million raised. Mercer gained access to his elderly victims through his position as a sales agent for a Dallas estate planning and annuity company. Mercer identified company clients that he viewed as good prospects, then visited them to make his sales pitch for the Notes, which he described as a "new opportunity" that is "perfect" for the client. 24. Mercer represented to investors that the Notes were safe, risk-free and guaranteed. Upon gaining investors' trust, he caused them to liquidate their current investments (usually annuities and CDs, often at substantial penalties) and invest their funds with Henderson. Mercer takes full credit for convincing clients to invest in the Notes because "he had convinced himself" of the Notes' legitimacy and safety. Mercer, however, prior to offering the Notes to his victims conducted no meaningful due diligence into Henderson, his background, the safety of the Notes or the representations Henderson made regarding the Notes. Instead, Mercer accepted Henderson's claims largely because his offering materials appeared professional and his office looked nice. CLAIMS FIRST CLAIM
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