U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21151 / July 23, 2009
Securities and Exchange Commission v. Philip E. Lowery, Civil Action No. 1:05-CV-354 (PLM) (W.D. Mich.)
FEDERAL COURT GRANTS SUMMARY JUDGMENT FOR SEC AND ORDERS PERMANENT INJUNCTION AGAINST PHILIP E. LOWERY IN FRAUDULENT OFFERING ACTION
The Securities and Exchange Commission announced that on July 15, 2009, the Honorable Paul L. Maloney, United States District Judge for the Western District of Michigan, granted the Commission's motion for summary judgment, in part, against Philip E. Lowery, the architect of a fraudulent offering of Colorado registered limited liability partnership (RLLP) units that were supposedly formed to share in the profits from online casinos Lowery was to create and run. The Court permanently enjoined Lowery from future violations of the registration and antifraud provisions of the federal securities laws.
In its Complaint, filed May 19, 2005, the Commission alleged that Lowery violated the antifraud and registration provisions of the federal securities laws in connection with the offer and sale of $5.8 million RLLP units to over 80 investors nation-wide. According to the complaint, Lowery made false and misleading statements in connection with his selling efforts, including providing potential investors with unrealistic profit projections and telling them the investments were guaranteed and their funds would be used for partnership and casino business expenses, when, in fact, most of the funds were used to pay for personal expenses. Eventually, investors lost all of their money after the casinos were shut down due to operational problems.
Judge Maloney granted the Commission's motion as to all of its claims against Lowery. In his 46-page order granting summary judgment, Judge Maloney found that, "in failing to find arguably-sound statistics or other bases for his profit and market-share projections, and in diverting investor-"partner" capital from the RLLPs and casinos to his personal use without consulting or even informing them, [Lowery] engaged in 'highly unreasonable conduct which is an extreme departure from the standards of ordinary care.'" The Court permanently enjoined Lowery from further violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Court ordered Lowery to disgorge his ill-gotten gains, and remanded the case to Magistrate Judge Ellen S. Carmody for a determination of the amount of disgorgement and any prejudgment interest, civil penalties, and other damages or relief deemed appropriate.
For further information, see Litigation Release 19231 (May 19, 2005).