U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20553 / May 2, 2008
Securities and Exchange Commission v. Sherwin P. Brown, Jamerica Financial and Brawta Ventures, LLC, Civil Action No. 06-1213 (D. Minn.) (Tunheim, J.)
The Securities and Exchange Commission ("Commission") announced that on May 1, 2008, the Honorable John R. Tunheim of the United States District Court for the District of Minnesota ordered that Sherwin P. Brown ("Brown"), Jamerica Financial, Inc. ("Jamerica") be held in contempt of court for violating the terms of the Agreed Order of Preliminary Injunction and Asset Freeze. Judge Tunheim's ruling affirmed the February 14, 2008 recommendation of Magistrate Judge Franklin L. Noel who ruled that Brown and Jamerica be held in contempt by failing to provide the Commission with financial records and other records relating to the customer accounts of Jamerica. Judge Tunheim ordered that Brown and Jamerica immediately make all their books and records available to the Commission for inspection.
On November 14, 2007, the Commission moved for a rule to show cause against Brown and Jamerica for violating the terms of the preliminary injunction order. The Commission alleged that Brown and Jamerica, without proper disclosure to the Commission, impermissibly moved their customers into a new third-party account trustee and altered the billing structure that was established under the preliminary injunction order. The Commission also alleged that Brown and Jamerica opened a new bank account to serve as Jamerica's operating account without disclosing it to the Court or the Commission. The Commission further alleged that Brown and Jamerica failed to produce financial records that they were required to provide under the preliminary injunction order. On December 6, 2007, Magistrate Judge Noel granted the Commission's motion, and ordered Brown and Jamerica to appear on December 17, 2007 to show cause why they should not be held in contempt.
The Commission brought an emergency enforcement action on March 29, 2006 against Brown, Jamerica and Brawta Ventures, LLC ("Brawta"), in connection with an alleged fraudulent scheme to misappropriate funds from investors, a number of whom are retired or near retirement. On April 14, 2006, the Court entered an agreed preliminary injunction order and asset freeze, which enjoined the defendants from future violations of the federal securities laws and placed limitations on the assets of the defendants in order to preserve and protect investor equity. On July 7, 2006, upon the motion of the Commission, the Court appointed Nauni Jo Manty as Receiver over Brawta.
According to allegations in the Commission's civil injunctive complaint, Brown is the majority owner and President of Jamerica, a Minneapolis, Minnesota-based investment advisor. Brown was also manager of Brawta, a purported private investment fund formed by Brown and Jamerica. The Commission's complaint alleges that Brown, Jamerica and Brawta raised at least $1.65 million from 53 investors and defrauded the investors of Brawta by misappropriating at least $569,950 of investor funds, and using the diverted proceeds to pay for Brown's personal expenses and Jamerica's business expenses.
The Commission's complaint alleged that the defendants' conduct violated the antifraud and record keeping provisions of the federal securities laws. In addition to an injunction and asset freeze, the Commission's complaint also seeks the disgorgement of any investor funds defendants may have misappropriated as well the imposition of civil penalties.