U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19927 / November 30, 2006
SEC v. Peter J. Dawson, et al., Civil Action No. CV 06-6360 (ADS) (EDNY)
SEC Brings Emergency Action Against Peter J. Dawson, Bmg Advisory Services, Inc., and Ethan Thomas Co., Inc. to Halt Ongoing Fraud Against Senior Citizens
The Securities and Exchange Commission announced today that it filed an emergency enforcement action against Peter J. Dawson, BMG Advisory Services, Inc., and Ethan Thomas Co., Inc. to halt an ongoing misappropriation of investor funds.
The Commission's complaint, filed in the Eastern District of New York, alleges that the Defendants misappropriated more than $2 million from at least seven investment advisory clients. Dawson, the president and sole shareholder of BMG and Ethan Thomas, targeted primarily elderly investors living on Long Island, and advised these clients to surrender existing variable annuity policies, mortgage their residences, and transfer the proceeds to Ethan Thomas for Dawson to manage through BMG, his investment advisory firm. In connection with Dawson's advisory services, Dawson made materially false and misleading statements to his clients about their investments and the use of their funds. Dawson promised between a 12 and 15 percent guaranteed return on each investment, and he assured clients that he would arrange to pay their mortgages and/or pay monthly "returns" on the investments. To the extent that the 12 to 15 percent return exceeded the client's mortgage obligation, Dawson promised that excess return would be accrued in the client's account. As recently as October 25, 2006, Dawson (through BMG) assured investors in writing that their accounts contained a "certified balance" of the initial funds entrusted to him plus the guaranteed interest. Rather than investing the money as promised, Dawson abused his clients' trust and misappropriated, and is continuing to misappropriate, their funds for his own use. Dawson withdrew over $100,000 of his clients' funds for his own benefit. At the same time, Dawson failed to make investors' mortgage payments as he had promised. During the past month, because some investors received notices that their mortgages were not being paid, they complained to Dawson, who has since refused to return their calls and closed BMG's office.
The Complaint charges the Defendants with violating Section 17 (a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint also charges Dawson and BMG with violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
In its emergency enforcement action, the Commission is seeking, among other emergency relief, temporary restraining orders (i) prohibiting Defendant from committing further violations of the federal securities laws; and (ii) freezing the Defendants' assets. In addition to this emergency relief, the Commission also seeks orders enjoining the Defendants, preliminarily and permanently, from committing future violations of the foregoing federal securities laws, and a final judgment (i) ordering the Defendants to disgorge ill-gotten gains, and (ii) assessing civil penalties against the Defendants.