U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20886 / February 6, 2009
Securities and Exchange Commission v. Ross Owen Haugen, Civil Action No. 1:09-CV-0129 (ND Ga.)
The Securities and Exchange Commission ("Commission") announced today that the Honorable Orinda D. Evans, United States District Judge for the Northern District of Georgia, entered an order permanently enjoining Ross Owen Haugen ("Haugen"). The order restrained and enjoined Haugen from future violations of Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Haugen was also ordered to pay disgorgement, pre-judgment interest and a civil penalty in amounts to be resolved upon motion of the Commission at a later date, and directed that for purposes of that motion, the allegations of the Commission's Complaint shall be deemed true. Haugen consented to the entry of the order without admitting or denying the allegations of the Commission's Complaint.
The Complaint, filed on January 16, 2009, alleged fraud against Haugen 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 alleged that Haugen served as vice president of sales and marketing for Coadum Advisors, Inc. ("Coadum"), and conducted the offerings along with Mansell Capital Partners III, LLC ("Mansell"). The Complaint alleged that 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." 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. Further, 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. 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. 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 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 on January 3, 2008.