U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20859 / January 21, 2009
Securities and Exchange Commission v. Ross Owen Haugen, Civil Action No. 09-cv-0129 (ND Ga. January 16, 2009)
The Securities and Exchange Commission ("Commission") announced today that it filed a Complaint in the United States District Court for the Northern District of Georgia against Ross Owen Haugen ("Haugen") alleging fraud in connection with sales of securities interests in four offerings identified as Coadum Capital Fund 1, LLC ("Coadum 1"), Coadum Capital Fund II, LP ("Coadum II"), Coadum Capital Fund III, LP ("Coadum III") and Mansell Acquisition Company LP ("MAC"). Approximately $30 million was raised from investors in the four offerings from early 2006 through January 2008. The complaint alleges that defendant Haugen served as vice president of marketing for Coadum Advisors, Inc. ("Coadum"), who along with Mansell Capital Partners III, LLC ("Mansell") conducted the offerings. The complaint alleges that Haugen was the primary salesman of securities sold in the fraudulent offerings. The Haugen matter is a companion case to SEC v. Coadum Advisors, Inc., et al., Civil Action File No. 1:08-CV-0011-ODE (N.D. Ga.), a civil action filed on an emergency basis in January 2008.
The instant complaint alleges that as vice president of sales and marketing for Coadum, Haugen directly solicited and sold more than 50% of the Coadum securities in the offerings. The private placement memoranda for the four offerings ("PPMs"), all of which made similar representations, described an investment objective involving "risk-controlled" strategies consisting of purchasing AA or better rated securities at one price, and simultaneously selling the securities at a higher price, generating a profit on the price difference, which Coadum and Mansell referred to as "commercial trading programs." The complaint also alleges that at least some investors were assured of from 3% to 6% (or in one investment 2.5 percent to 8 percent) return per month on their initial investments. The funds from the offerings were commingled in accounts controlled by Coadum or Mansell. Coadum and Mansell invested the majority of the funds through a Malta based "investment platform" which in turn invested the funds in related entities which never began operation or provided any returns. In the meantime, Coadum and Mansell falsely represented in monthly account statements to investors that the investors had been earning approximately four percent per month and that all or most of the investors' principal was in escrow. The complaint alleges that contrary to representations to investors, Coadum and Mansell "borrowed" approximately $3.4 million of, or against, the investors' funds and disbursed to apparently related parties approximately an additional $5 million. Haugen told investors, falsely, that their investment principal was risk free, insured and never left the escrow account or was otherwise guaranteed against loss. In fact, Haugen knew that investors' funds were being invested in off-shore trading programs. Trading profits were purportedly earned in a "non-recourse" margin account. Although the PPMs represented that no commissions would be paid on the investments, and that the promoters would be compensated based on a percentage of earnings, Haugen received substantial commissions from investor funds prior to earnings on those funds, which never occurred. The complaint also alleges that Haugen recruited other salesmen and received a portion of their commissions.
The Commission's complaint charges Haugen with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)], and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] and seeks a permanent injunction, disgorgement, prejudgment interest and a civil penalty.