U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21367 / January 8, 2010
SEC v. Edward P. May and E-M Management Co. LLC, Civil Action No. 2:07-cv-14594 (E.D. Mich.) (Feikens, J.)
The Securities and Exchange Commission ("SEC") announced that on January 7, 2010, the Honorable John Feikens of the United States District Court for the Eastern District of Michigan issued a final judgment against Edward P. May ("May"), in connection with an $250 million offering fraud that allegedly involved phony Las Vegas casino and resort telecommunication deals that were sold to as many as 1,200 investors, many of whom are senior citizens. May consented to the Order without admitting or denying the allegations of the SEC's complaint. The Court's Order permanently enjoins May from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Order further requires May to pay disgorgement in the amount of $37 million, plus prejudgment interest of $3.8 million, and a civil penalty of $130,000.
The SEC's civil injunctive complaint that was filed on November 20, 2007, alleged that May, through E-M Management Co. LLC ("E-M"), raised as much as $250 million between 1998 and July 2007 from investors living in such states as Michigan, California, Florida, Illinois, New York, Ohio and New Jersey. According to the allegations of the complaint, May and E-M sold securities in the form of interests in limited liability companies ("LLCs"), and told investors that these LLCs had been contracted to install and provide telecommunications equipment and services to such major hotel chains and casinos as Hilton, MGM Grand, Motel 6, Tropicana and Sheraton. The complaint also alleged that May and E-M promised returns in the form of monthly payments to investors for a period as long as 12 to 14 years, and "guaranteed" that investors, at a minimum, would receive the promised payments for approximately the first 20 to 24 months after they invested.
The SEC's complaint further alleged that, in reality, the LLCs did not have any telecommunication contracts with the establishments identified in offering materials provided by May and E-M. To further their alleged scheme, May and E-M provided some investors with copies of fictitious contracts with various hotels and casinos. Some of which included the names of purported hotel executives who did not exist. The SEC's complaint alleged that the defendants' conduct violated antifraud and registration provisions of the federal securities laws.
In October 2009, the U.S. Attorney for the Eastern District of Michigan filed an indictment against May, charging him with 59 felony counts of mail fraud. If found guilty on all counts, May faces a statutory maximum sentence of 20 years incarceration on each count of the indictment. The indictment also includes forfeiture allegations which would require May to forfeit $35 million in proceeds of the charged crimes.