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U.S. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA


Securities and Exchange Commission,

Plaintiff,   

v.

SUPERIOR OPPORTUNITIES, INC., J.F. SIMMS & CO., LLC, WILLIAM J. HICKEY, SEAN A. OSBORNE and JON F. SIMMS,

Defendants.   


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COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

Plaintiff, Securities and Exchange Commission ("SEC" or "Commission") alleges that:

I. INTRODUCTION

1. The Commission brings this action to enjoin Defendants from committing further violations of the antifraud and registration provisions of the federal securities laws in connection with an offering of securities issued by Defendant Superior Opportunities, Inc. ("Superior"). From July 1997 through September 2003, Superior, through its principals William J. Hickey ("Hickey") and Sean A. Osborne ("Osborne"), raised over $7.8 million from over 200 investors nationwide through the offer and sale of interests in collectible, charged-off credit card debt and "factoring" accounts receivable, which Superior purportedly purchased through its sole "purchasing agent," Defendant J.F. Simms & Co., LLC ("J.F. Simms"). Unbeknownst to investors, however, and contrary to assurances from Superior that 100% of investor funds would be used to purchase debt, J.F. Simms and its principal, defendant Jon F. Simms ("Simms") purchased little debt and returned a significant portion of investor funds under the guise of "profits," - thus operating a Ponzi scheme - and Simms misappropriated at least $1.4 million of investor funds for himself. In addition to permanent injunctions and other relief sought by the Commission in this civil action, the Commission also seeks an asset freeze as against Defendants Superior, J.F. Simms and Simms, individually, to prevent any further misappropriation and dissipation of investor funds.

II. DEFENDANTS

2. Defendant Superior is a Florida limited liability company with principal offices located in Boynton Beach, Florida and formerly in Parker, Colorado.

3. Defendant J.F. Simms is a Wisconsin limited liability company with principal offices located in Madison, Wisconsin.

4. Defendant Hickey is 41 years old and resides in the State of Maryland. Hickey is the president of Superior and managed the day-to-day operations of Superior.

5. Defendant Osborne is 36 years old and resides in Boynton Beach, Florida. Osborne is the vice president of Superior and managed Superior's daily operations.

6. Defendant Simms is 42 years old and resides in Madison, Wisconsin. Simms is the president of J.F. Simms and manages J.F. Simms' daily operations.

III. JURISDICTION AND VENUE

7. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. 77t(b), 77t(d) and 77v(a); and Sections 21(d), 21(e), and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. 78u(d), 78u(e) and 78aa.

8. Venue is proper in the Southern District of Florida because many of the Defendants' acts and transactions constituting violations of the Securities Act and the Exchange Act occurred in the Southern District of Florida. In addition, the principal offices of Defendant Superior were located in the Southern District of Florida, and Defendant Osborne resides in the Southern District of Florida.

9. Defendants, directly and indirectly, have made use of the means and instrumentalities of interstate commerce, the means and instruments of transportation and communication in interstate commerce, and the mails, in connection with the acts, practices, and courses of business set forth in this Complaint.

III. THE FRAUDULENT OFFERING AND MISAPPROPRIATION OF FUNDS

A. Superior and J.F. Simms's Purported Businesses

10. Superior was in the business of purchasing collectable, charged-off credit card debt portfolios and "factoring" accounts receivable. Superior purportedly purchased its credit debt and accounts receivable through J.F. Simms, its sole "purchasing agent." As Superior's "purchasing agent," J.F. Simms was responsible for purchasing Superior's debt and receivables, and managing their collections on behalf of Superior. J.F. Simms charged Superior a collection fee of 35% on all amounts collected, and an additional management fee of 15% on certain portfolios.

11. J.F. Simms, through its principal Simms, provided Superior with monthly statements detailing the collection activities on the debt and receivables it supposedly purchased on behalf of Superior. J.F. Simms also sent Superior a spreadsheet reflecting the names of purported debtors and the "collection" information for each debt portfolio and receivable. Superior received monthly checks or wire transfers from J.F. Simms purportedly representing the "profits" earned from the collection activities.

B. Superior's Fraudulent Offering

12. Commencing in July 1997, Superior began to offer investments to the public in the form of "accounts receivable purchase agreements" and promissory notes. Superior offered two investment programs to investors: a variable return program and a guaranteed, fixed return program. The fixed return program offered investors returns depending on the length of the investment; the returns ranged from 10% for a one-year term to 18% for a term of four years. The variable return program offered investors returns ranging from 24% to 36% per year. Investors who opted for the variable return program were required to sign the purchase agreements and those who chose the fixed return program each received a signed promissory note from the company.

13. According to both Superior's written offering materials and oral representations made to potential investors by Superior's principals, Hickey and Osborne, all investor funds were to be used to purchase Superior's credit card debt portfolios and accounts receivable. Superior represented to its investors that their returns came from the successful collection efforts on its debt portfolios and accounts receivable.

14. Superior touted its investment program to potential investors as "the Safe Path to Wealth" and boasted of having "total holdings under management of over $95 million." The company described an investment in Superior as one that allowed the "knowledgeable person" to "generate current income and/or long-term capital growth that exceed [sic] most other investment opportunities."

15. Superior purportedly profited from the spread between the money it received from J.F. Simms from the collections on receivables and the interest it paid to investors. Superior told investors that it pooled their funds so as to distribute uniform returns to all investors. Investors had the choice of either receiving their interest payouts on a monthly basis or having their profits reinvested into the program. Most investors chose to reinvest their returns.

16. Superior distributed its offering materials in person and by U.S. mail. The offering materials included, among other things, a tri-fold brochure detailing the investment program, a "Purchaser Suitability Questionnaire," a "Net Worth Statement," a "Due Diligence Form," an "Accounts Receivable Purchase Agreement" and a "Promissory Note." Superior's brochure consisted of two versions: one concerning Superior's credit card debt program, and a more recent version describing its accounts receivable factoring program.

17. Once prospects were persuaded to invest, they were asked to complete certain documents and forms included in the offering materials, and to return them along with their money to Superior's principals, Hickey and Osborne. Superior mailed out a monthly statement to investors reflecting their holdings and interest earned, as well as updates to investors on a regular basis discussing the company's performance and its latest news.

18. Superior's offering materials represented that the minimum investment is $2,500, however, Superior accepted funds from investors for less than that amount. Superior also accepted funds from investors' Individual Retirement Accounts ("IRA") through an IRA custodian. Superior raised the vast majority (70 percent) of all investor funds from February 2002 through September 2003.

19. In or around April 2003, Superior announced to investors that it would be transitioning from buying credit card debt portfolios into factoring accounts receivable. This new program offered investors a fixed return of 24% annually for a two-year term. This new investment was purportedly secured by the accounts receivable and investors in the new program received a promissory note from Superior.

20. From July 1997 through September 2003 ("the relevant time period"), Superior raised $7.8 million from approximately 200 investors nationwide. No registration statement has been filed or is in effect with the Commission in connection with the securities offered by Superior.

C. Material Misrepresentations and Omissions Made By Defendants

21. During the relevant time period, Defendants made numerous material misrepresentations and omissions in connection with the offer and sale of Superior's securities about, among other things, the use of investors' proceeds, the safety and security of the investments and the rate of returns or "profits" from J.F. Simms' collection of the receivables.

(i) Use of Investor Proceeds

22. Superior's written offering materials represented to potential and actual investors that all their money would be used to purchase charged-off credit card debt and accounts receivable. Moreover, in their oral communications with investors, Hickey and Osborne both assured investors and potential investors that their funds would be used solely for that purpose. Contrary to these representations, J.F. Simms only used a small portion of investor funds to purchase credit card debt and accounts receivable. The balance of proceeds were misappropriated by Simms, returned to Superior under the guise of "profits" from the collection of receivables, and used to pay other expenses.

23. For example, bank records show that of the $5.5 million in investor funds sent by Superior to J.F. Simms during February 2002 through September 2003, J.F. Simms may have used, at most, only $570,000 of those monies to purchase credit card debt and receivables. In addition, these debt and receivables generated collections of no more than $107,000.

24. Nearly all of the proceeds J.F. Simms paid to Superior as "profits" were in fact investor principal being returned back to Superior. During the relevant period, J.F. Simms returned approximately $4.4 million back to Superior under the guise of collection "profits."

25. Additionally, Simms has misappropriated at least $1.4 million of investor funds for himself. Simms has used misappropriated funds to purchase, among other things, a luxurious house, automobiles, furnishings, appliances and home improvements. He also used a significant portion of investor monies to pay his personal income taxes and to pay for J.F. Simms' business expenses.

26. During the relevant time period, J.F. Simms and Simms concealed the fact that, through Superior, it was operating a Ponzi scheme by paying interest to investors from new investor funds, and concealed Simms' own misappropriation of funds. J.F. Simms, through Simms, prepared monthly statements and spreadsheets and provided them to Superior containing mostly fabricated "collection" figures.

(ii) The Safety and Security of Superior's Investments

27. In its most recent investment program, Superior, through Hickey and Osborne, gave investors a sense of security by representing to them that their investment was secured by accounts receivable. This was false and misleading because J.F. Simms, Superior's sole "purchasing agent," purchased only a fraction of the receivables sufficient to secure all investor funds invested in this new program.

28. In addition, in their oral representations to potential investors, Hickey and Osborne misled investors into believing that Superior was a safe investment. For example, Hickey reassured one investor that the investment was safe by telling him that Superior purchased debt incurred by people from the "Bible Belt" states where he believed people were more likely to repay their debts.

29. Osborne further told at least one investor that Superior carefully chose the debt that it purchased, and that the company has never had a problem collecting on the debt. Osborne told at least two other investors that Superior was a "safe investment."

(iii) Superior's Rate of Returns

30. Defendants Superior, Hickey and Osborne made false and misleading statements to prospective and actual investors in Superior's written offering materials concerning the rate of returns that could be expected from the investment program. The materials promised investors generous returns ranging from 10% to 33% annually, depending on the type of program.

31. The representations regarding Superior's rate of returns were false and misleading because Superior did not generate profits sufficient to pay out investors' returns. By way of example, bank records show that the $570,000 worth of receivables purchased by J.F. Simms during February 2002 through September 2003 - out of over $5.5 million in investor funds sent to J.F. Simms - generated collections of no more than $107,000. Moreover, from Superior's inception through January 2002, J.F. Simms could not have generated more than $437,000 in collections on Superior's debt and receivables.

D. Role of Principals

32. Defendants Hickey and Osborne, as president and vice president of Superior, respectively, negligently made, and directed and authorized to be made, the material misrepresentations and omissions to prospective and actual investors set forth above. Hickey and Osborne both managed Superior's day-to-day operations. They dealt directly with prospective and actual investors and spoke with them about Superior's investment program. Hickey and Osborne both disseminated Superior's materially false and misleading offering materials to prospective and actual investors.

33. In addition, Hickey and Osborne both authored and distributed Superior's update letters to investors discussing Superior's performance and its latest news. Both of them prepared and disseminated Superior's monthly statements to investors purportedly reflecting investors' holdings, investment activity and interest earnings.

34. Simms knowingly or recklessly made, and directed and authorized to be made, the material misrepresentations and omissions to prospective and actual investors concerning the use of investor proceeds set forth above. J.F. Simms and Simms both played a key role in Superior's investment offering. For example, J.F. Simms's name, address and telephone number was listed on the "Due Diligence Form" distributed to a number of investors. On this document, investors were told that J.F. Simms held "proprietary information" concerning banks and collection agencies that worked with Superior.

35. In addition, on at least one occasion, Simms met in person with some of Superior's current and potential investors to answer questions they had about his role in purchasing and collecting on the credit card debt on behalf of Superior. Further, Simms provided Superior with some of the information that was used in the brochures disseminated to investors.

36. J.F. Simms, at the direction of Simms, also prepared false monthly reports sent to Superior purporting to show the credit card debt and receivables purchased on behalf of Superior's investors, the monthly status of that debt and "profits" earned as a result of J.F. Simms' collection efforts. These reports were a complete fabrication and helped conceal the fact that Simms was, in fact, operating a Ponzi scheme through Superior and illegally diverting investor funds to himself.

IV. CLAIMS FOR RELIEF
COUNT I

Sale Of Unregistered Securities In Violation Of Sections 5(a) And 5(c) Of The Securities Act
(Against All Defendants)

37. The Commission repeats and realleges paragraphs 1 through 36 of this Complaint.

38. No registration statement was filed or in effect with the Commission pursuant to the Securities Act and no exemption from registration exists with respect to the securities and transactions described in this Complaint.

39. Since a date unknown but since at least July 1997 through September 2003, Defendants Superior, J.F. Simms, Hickey, Osborne and Simms, directly and indirectly, have: (a) made use of the means or instruments of transportation or communication in interstate commerce or of the mails to sell securities as described herein, through the use or medium of a prospectus or otherwise; (b) carried securities or causing such securities, as described in this Complaint, to be carried through the mails or in interstate commerce, by any means or instruments of transportation, for the purpose of sale or delivery after sale; and/or (c) made use of the means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise, as described in this Complaint, without a registration statement having been filed or being in effect with the Commission as to such securities.

40. By reason of the foregoing, Defendants Superior, J.F. Simms, Hickey, Osborne and Simms directly and indirectly, have violated, and unless enjoined, will continue to violate Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. 77e(a) and 77e(c).

COUNT II

Fraud In Violation Of Section 17(a)(1) Of The Securities Act
(As Against Defendants J.F. Simms and Simms)

41. The Commission repeats and realleges paragraphs 1 through 36 of its Complaint.

42. Since a date unknown but since at least July 1997 through September 2003, Defendants J.F. Simms and Simms, directly and indirectly, by use of the means or instruments of transportation or communication in interstate commerce and by use of the mails, in the offer or sale of securities, as described in this Complaint, have knowingly, willfully or recklessly employed devices, schemes or artifices to defraud.

43. By reason of the foregoing, Defendants J.F. Simms and Simms, directly and indirectly, have violated and, unless enjoined, will continue to violate Section 17(a)(1) of the Securities Act, 15 U.S.C. 77q(a).

COUNT III

Fraud In Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5 Promulgated Thereunder
(As Against Defendants J.F. Simms and Simms)

44. The Commission repeats and realleges paragraphs 1 through 36 of its Complaint.

45. Since a date unknown but since at least July 1997 through September 2003, Defendants J.F. Simms and Simms, directly and indirectly, by use of the means and instrumentality of interstate commerce, and of the mails in connection with the purchase or sale of the securities, as described in this Complaint, have knowingly, willfully or recklessly: (a) employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which have operated as a fraud upon the purchasers of such securities.

46. By reason of the foregoing, Defendants J.F. Simms and Simms, directly or indirectly, have violated and, unless enjoined, will continue to violate Section 10(b) of the Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5, 17 C.F.R. 240. 10b-5, thereunder.

COUNT IV

Fraud In Violation Of Sections 17(a)(2) And 17(a)(3) Of The Securities Act
(As Against All Defendants)

47. The Commission repeats and realleges paragraphs 1 through 36 of its Complaint.

48. Since a date unknown but since at least July 1997 through September 2003, Defendants Superior, J.F. Simms, Hickey, Osborne and Simms, directly and indirectly, by use of the means or instruments of transportation or communication in interstate commerce and by the use of the mails, in the offer or sale of securities, as described in this Complaint, have: (a) obtained money or property by means of untrue statements of material facts and omissions to state material facts necessary to make the statements made, in the light of the circumstances under which they were made, not misleading; and/or (b) engaged in transactions, practices and courses of business which are now operating and will operate as a fraud or deceit upon purchasers and prospective purchasers of such securities.

49. By reason of the foregoing, Defendants Superior, J.F. Simms, Hickey, Osborne and Simms, directly and indirectly, have violated and, unless enjoined, will continue to violate Sections 17(a)(2) and 17(a)(3) of the Securities Act, 15 U.S.C. 77q(a)(2) and 77q(a)(3).

V. RELIEF REQUESTED

WHEREFORE, the Commission respectfully requests that the Court:

I.
Declaratory Relief

Declare, determine and find that Defendants Superior, J.F. Simms, Hickey, Osborne and Simms committed the violations of the federal securities laws alleged in this Complaint.

II.
Permanent Injunctive Relief

Issue a permanent injunction, restraining and enjoining:

(1) Defendants J.F. Simms and Simms, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them, and each of them, from violating: (i) Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. 77e(a) and 77e(c); (ii) Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act, 15 U.S.C. 77q(a)(1), 77q(a)(2) and 77q(a)(3); and (iii) Section 10(b) of the Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5, 17 C.F.R. 240.10b-5, thereunder.

(2) Defendants Superior, Hickey and Osborne, their officers, agents, servants, employees, attorneys, and all persons in active concert or participation with them, and each of them, from violating: (i) Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. 77e(a) and 77e(c); and (ii) Section 17(a)(2) and (3) of the Securities Act, 15 U.S.C. 77q(a)(2) and 77q(a)(3).

III.
Disgorgement

Issue an Order requiring Defendants Superior, J.F. Simms, Hickey, Osborne and Simms to disgorge all ill-gotten profits or proceeds that they have received as a result of the acts and/or courses of conduct complained of herein, with prejudgment interest.

IV.
Penalties

Issue an Order directing Defendants Superior, J.F. Simms, Hickey, Osborne and Simms to pay civil money penalties pursuant to Section 20(d) of the Securities Act, 15 U.S.C. 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. 78u(d)(3).

V.
Asset Freeze

Issue an Order temporarily freezing the assets of Defendants Superior, J.F. Simms and Simms until further Order of the Court.

VI.
Records Preservation and Expedited Discovery

Issue an Order requiring Defendants Superior, J.F. Simms and Simms to preserve any records related to the subject matter of this lawsuit that are in their custody, possession or subject to their control, and to respond to discovery on an expedited basis.

VII.
Further Relief

Grant such other and further relief as may be necessary and appropriate.

VIII.
Retention of Jurisdiction

Further, the Commission respectfully requests that the Court retain jurisdiction over this action in order to implement and carry out the terms of all orders and decrees that may hereby be entered, or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this Court.

January ____, 2004

Respectfully submitted,

By:_________________________
Teresa J. Verges
Regional Trial Counsel
Florida Bar No. 0997651
Direct Dial No. (305) 982-6384

Scott A. Masel
Senior Trial Counsel
Florida Bar No. 0007110
Direct Dial: (305) 982-6398

Chedly C. Dumornay
Deputy Assistant Regional Director
Florida Bar No. 957666
Direct Dial: (305) 982-6377

Linda S. Schmidt
Staff Attorney
Florida Bar No. 0156337
Direct Dial: (305) 982-6315

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
Telephone: (305) 982-6300
Facsimile: (305) 536-4154


http://www.sec.gov/litigation/complaints/comp18545.htm


Modified: 01/27/2004