U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21535 / May 26, 2010
Securities and Exchange Commission v. Mitchell, Porter & Williams, Inc., The Adivanala AA Investment Trust, AB3, Inc., Thomas L. Mitchell, United States District Court for the Central District of California, Case No. 10-CV-01576 PSG (FFM) (filed March 3, 2010).
SEC Obtains Preliminary Injunction in Ponzi Scheme Targeting Retired Bus Drivers
The Securities and Exchange Commission today announced that it obtained a preliminary injunction against Thomas L. Mitchell, ("Mitchell"), Mitchell, Porter & Williams, Inc. ("MPW"), the Adivanala AA Investment Trust (the "AAA Trust") and AB3, Inc., ("AB3"). The Honorable Philip S. Gutierrez, United States District Judge, also granted additional relief that the Commission sought, including an order freezing assets.
The Commission's complaint, filed March 3 in federal court in Los Angeles, alleges that Mitchell advised MPW's clients, many of whom were retired Los Angeles-area bus drivers, to invest their retirement money in a promissory note offered by the AAA Trust and AB3. The complaint further alleges that the promissory note offering carried fixed interest returns ranging between 10-15% per year for 3-6 year terms. The complaint alleges that Mitchell made various claims to investors as to how he could generate such large returns, including investing in stocks, bonds, and real estate. Rather than making any actual investments, the complaint alleges that Mitchell and the other defendants in fact operated a Ponzi scheme, in which new investor money was used to pay interest to existing investors. The complaint also alleges that between April 2009 and December 2009, the AAA Trust raised approximately $1.4 million from 6 investors. According to the complaint, $1.1 million of these funds were used to pay interest to existing investors, and another $300,000 was diverted to MPW, which Mitchell used to pay his living expenses. The complaint further alleges that during this time, the AAA Trust only invested $32,000 worth of investor funds.
The Commission's complaint charges the defendants with violating the antifraud, securities registration and broker-dealer registration provisions of the federal securities laws.
On March 3, 2010, the Honorable Philip S. Gutierrez, United States District Judge, granted the Commission's application for a temporary restraining order against the defendants and issued orders freezing their assets and prohibiting the destruction of documents.
For further information, see Litigation Release No. 21432 (March 4, 2010).