U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20986 / April 3, 2009
Securities and Exchange Commission v. Sun Empire LLC, et al., United States District Court for the Central District of California, Civil Action No. SACV 09-399 DOC (RNBx).
SEC Halts Scheme Promising Exorbitant Returns On College and Retirement Savings
The Securities and Exchange Commission charged two Southern California women and two of their companies with securities fraud, and obtained an emergency court order freezing their assets and halting their multi-level marketing scheme.
According to the SEC's complaint, Delilah Proctor, Shauntel McCoy, and their entities, Sun Empire and ECAM, a/k/a Empire Capital Asset Management, raised at least $7 million from a multi-level marketing scheme by promising guaranteed returns on high-yield instruments with domestic and international banks and other offshore entities. In fact, according to the SEC's complaint, Defendants expended investor funds for their own personal use or sent money to other entities under their control. Proctor and McCoy are also alleged to have diverted funds to three additional entities, Sun Commerce and Investment, Infinity Investment Club LLC, and Sunland Investment Club, LLC, which the SEC charged as relief defendants.
The SEC's complaint, filed in federal district court in Santa Ana, alleges that Proctor represented to prospective Sun Empire investors they would receive at least $35,000 per month on a $4,995 investment and that their investments were guaranteed to be safe. She allegedly represented that the funds from each investment group are pooled with other investment clubs' funds to create one "super corporation." The complaint alleges that Proctor represented that these pooled funds were then invested in secure offshore investments. Proctor and McCoy are alleged to have told potential ECAM investors they were able to obtain favorable rates for investors' money based on the large sums of pooled money. McCoy allegedly explained that Proctor has access to financial vehicles only available to extremely wealthy individuals.
The complaint also alleges that Proctor and McCoy presented several purported investment programs offered by ECAM during presentations at the Desert Palms Hotel and Suites. McCoy described the first program as the College Advantage Program ("CAP"), in which an investor invests $5,000 and, if the investment is on behalf of a child between the ages of one (1) and nine (9) years old, the investor is guaranteed to receive $1,000,000 by the time the investor's child enters college. McCoy also allegedly described a retirement account similar to an IRA or 401K, which was a purported "roll-over" program that did not require payment of taxes on the appreciation until retirement. McCoy stated that this program had an investment return of 4% every month, equaling an annual return rate of 48%. McCoy also offered certificates of deposit with returns five to ten times higher than those available through banks. McCoy added that these returns are guaranteed. Finally, McCoy and Proctor allegedly offered entry into a pyramid scheme in which individuals interested in ECAM could obtain one of 125 positions in the ECAM organization by accumulating funds to invest in the program. The offered positions purport to be related to the amount of money each person obtained from other investors. McCoy and Proctor promised that investors in ECAM would receive at least a 36% return on their investments per year. The complaint also alleges that they assured investors nothing could happen to the investments and that the investments were never at risk.
In fact, according to the complaint, investors did not receive returns as promised and money from investors went into accounts controlled by Proctor instead of going into foreign investments, CD's, or other promised forms of investment. McCoy allegedly claimed the investments complied with securities registration exemptions pursuant to Regulation D of the Securities Act of the 1930s and 1940s, which was not true.
The SEC obtained an order (1) freezing the assets of Sun Empire, ECAM, Proctor, and McCoy; (2) requiring accountings; (3) prohibiting the destruction of documents; and (4) granting expedited discovery; and (5) temporarily enjoining Sun Empire, ECAM, Proctor, and McCoy from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for April 15, 2009 at 8:30 a.m. The SEC also seeks permanent injunctions, disgorgement, and civil penalties against Sun Empire, ECAM, Proctor and McCoy.
The SEC acknowledges the assistance of the Federal Bureau of Investigation, the United States Attorney's Office, and the California Department of Financial Institutions.