U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21188 / August 27, 2009
Securities and Exchange Commission v. Ben-Wal Leasing Company, et al., United States District Court for the Central District of California, Civil Action No. CV 09-06223-ODW (FMOx)
SEC OBTAINS EMERGENCY RELIEF TO HALT OFFERING FRAUD TARGETING MOBILE HOME PARK COMMUNITIES
On August 26, 2009, the Securities and Exchange Commission filed a complaint in the United States District Court for the Central District of California against Pomona, Calif.-based Jerry E. Benson and his two entities, Ben-Wal Leasing Company and Ben-Wal Management, Inc. (the "Ben-Wal entities") for perpetrating an ongoing investment fraud targeting investors, including seniors, at mobile home park communities throughout California. The court entered an order halting the alleged fraud and freezing the assets of Benson and the Ben-Wal entities.
The SEC's complaint alleges that since approximately 1990, Benson has been offering and selling investments in Ben-Wal Leasing in the form of promissory notes, guaranteeing annual returns of 12% and claiming that investors have earned annual returns up to 18%. Ben-Wal Leasing raised at least $5.7 million from approximately 126 investors from 2004 through April 2009. The complaint alleges that the defendants offered the investment through advertisements in circulars provided to mobile home park communities throughout California. The complaint alleges that Benson falsely told investors that their funds would be used to purchase printing equipment that would be leased to printing companies and the income from the printing companies' lease payments would pay the 12% returns to investors. He also represented that no investor had ever lost money.
The SEC's complaint alleges that the defendants did not use investor money as represented. Instead, a significant amount of investor money was transferred to CTR Web Printing, Inc. ("CTR Printing"), a company owned and operated by Benson's son, Scott W. Benson. In addition, Benson did not disclose to investors that CTR Printing was, in essence, the only lessee of printing equipment, and it was not regularly making its lease payments to Ben-Wal Leasing. Moreover, Benson never informed investors that Ben-Wal Leasing was using new investor funds to make principal and interest payments to previous investors in a Ponzi-like fashion.
In May 2009, Benson and Ben-Wal Leasing stipulated to a desist-and-refrain order issued by the California Department of Corporations ("DOC"), which ordered Benson and Ben-Wal Leasing to cease offering or selling securities in California in violation of state law. The SEC's complaint alleges that Ben-Wal Leasing stopped making interest payments to investors in June 2009. According to the complaint, Benson first claimed to investors that the cessation of payments was due to some account discrepancies requiring an audit. More recently, however, Benson falsely told investors they were not being paid because the SEC had not approved the payments and that he was working with the SEC to "expand business." The complaint alleges that despite the DOC's desist-and-refrain order, Benson continues to solicit investors under a different name â" Ben-Wal Management, Inc.
In its lawsuit, the SEC obtained an order (1) freezing the assets of Benson and the Ben-Wal entities along with the assets of relief defendant CTR Printing; (2) appointing a temporary receiver over the Ben-Wal entities and their affiliates; (3) preventing the destruction of documents; (4) granting expedited discovery; (5) requiring accountings from Benson and the Ben-Wal entities; and (6) temporarily enjoining Benson, Ben-Wal Leasing, and Ben-Wal Management from future violations of Section 17(a) of the Securities Act of 1933 and temporarily enjoining Benson and Ben-Wal Leasing from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against Benson and the Ben-Wal entities and disgorgement from CTR and Scott Benson. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for September 4, 2009 at 1:30 p.m.
Investors seeking more information about the SEC's enforcement action against Benson and the Ben-Wal entities should contact the Los Angeles Regional Office by telephone at (323) 965-4574 or by email at ben-wal@sec.gov.