U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20081 / April 19, 2007
SEC v. Sherwin P. Brown, Jamerica Financial and Brawta Ventures, Civil Action No. 06-1213 (D. Minn.) (Magnuson, J.)
The Securities and Exchange Commission ("Commission") announced that on April 3, 2007, the Commission filed a motion for a civil contempt against Sherwin P. Brown ("Brown") and Jamerica Financial, Inc. ("Jamerica") for violating the Agreed Order of Preliminary Injunction and Asset Freeze ("Preliminary Injunction") entered by the Honorable Paul A. Magnuson of the United States District Court for the District of Minnesota on April 14, 2006. The Preliminary Injunction prohibited Brown and Jamerica from violating certain antifraud and recordkeeping violations of the federal securities laws.
The Commission filed an emergency action on March 29, 2006, against Brown, Jamerica, a Minneapolis, Minnesota-based investment advisor of which Brown serves as the majority owner and President, and Brawta Ventures, LLC ("Brawta"), the private investment fund formed by Brown and Jamerica. The complaint alleged that Brown and Jamerica raised at least $1.65 million from 53 investors for Brawta. The Commission further alleged that the defendants defrauded the investors of Brawta by misappropriating at least $569,950 of investor funds to pay for Brown's personal expenses and Jamerica's business expenses, and by misrepresenting the value of Brawta to the investors by failing to disclose or account for the funds that were diverted.
In its motion for civil contempt, the Commission submitted evidence that Brown and Jamerica, in violation of the Preliminary Injunction, continued to provide false valuations to the investors of Brawta, which substantially overstated the value of their investment. In support of its motion for civil contempt, the Commission submitted evidence that the true value of Brawta was worth less than half of what Brown and Jamerica claimed it to be. In addition, the Commission contended that Brown and Jamerica have failed to make and keep true, accurate and current records relating to the business of Jamerica, also in contempt of the Preliminary Injunction.