U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20144 / June 5, 2007
SEC v. C. Wesley Rhodes, Jr., Rhodes Econometrics, Inc., the Rhodes Company, and Resource Transactions, Inc., Civil Action No. CV06-1353-MO (D. Or.)
Oregon Investment Adviser and His Companies Consent to the Entry of Permanent Injunctions
The Securities and Exchange Commission today announced that C. Wesley Rhodes, age 55 and a resident of West Linn, Oregon, and three Oregon companies he controlled consented to be enjoined from future securities fraud.
The Commission's complaint alleges that Rhodes and his companies raised millions of dollars from individual investors, including many senior citizens, by representing that he would invest their money in stocks and bonds. The complaint further alleges that contrary to representations made to investors, Rhodes did not invest their funds in stocks and bonds. Instead, Rhodes took their money and used it for other purposes, including buying vintage automobiles and sports memorabilia. According to the complaint, Rhodes sent account statements to the investors representing that their investments had an aggregate value of nearly $40 million as of June 30, 2006. At the time a receiver was appointed for Rhodes' companies on September 21, 2006, however, Rhodes had less than $2 million invested in stocks and bonds.
On September 21, 2006, the Commission filed in the United States District Court for the District of Oregon a complaint and an application for temporary emergency relief against Rhodes and three Oregon companies he controlled, charging that they defrauded investors in violation of the federal securities laws. Aside from Rhodes, the defendants were Rhodes Econometrics, Inc., an investment adviser registered with the Commission, and two other companies, The Rhodes Company and Resource Transactions, Inc., both unregistered investment advisers. On the same date, the Commission obtained a temporary injunction against all defendants for securities fraud, as well as a temporary asset freeze and the appointment of a temporary receiver over all Rhodes-controlled companies. (See Litigation Release No. 19855.) The Commission subsequently obtained a preliminary injunction against all defendants and an order appointing a permanent receiver.
Rhodes and his companies, without admitting or denying the allegations of the Commission's complaint, consented to the entry of final judgments permanently enjoining them from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The court entered the permanent injunctions on May 30, 2007. The Commission continues to seek return of ill-gotten gains with prejudgment interest and penalties against all defendants.