U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21932 / April 15, 2011
Securities and Exchange Commission v. William K. Harrison, et al., Case No. 3:10-cv-00634-FDW-DLH (W.D. NC.)
The Securities and Exchange Commission (“Commission”) announced today that the Honorable Frank D. Whitney, United States District Judge for the Western District of North Carolina, entered an order permanently enjoining William K. Harrison (“Harrison”). The order restrained and enjoined Harrison from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 promulgated thereunder. Harrison was also ordered to pay disgorgement, pre-judgment interest and a civil penalty in amounts to be resolved upon motion of the Commission at a later date, and directed that for purposes of that motion, the allegations of the Commission’s Complaint shall be deemed true. Harrison consented to the entry of the order without admitting or denying the allegations of the Commission’s Complaint.
The Commission’s complaint, filed on December 15, 2010, alleged that between approximately December 2007 and October 2008, Harrison and his co-defendant Eddie W. Sawyers (“Sawyers”) used misrepresentations and omissions of material fact to defraud at least forty-two Wachovia brokerage customers of at least $8 million in customer funds. The complaint further alleged that on or around December 2007, Harrison and Sawyers, acting under the d/b/a “Harrison/Sawyers Financial Services,” began offering their Wachovia customers an investment opportunity that they misrepresented was guaranteed to make a 35% return, with no risk of loss of principal. In those instances when customers were informed that their monies would be used for trading options, Harrison and Sawyers misrepresented the riskiness of their trading strategy by telling customers that they had a foolproof approach to trading options and that their principal investment was secure and would make handsome returns regardless of market volatility. Harrison and Sawyers either opened accounts with optionsXpress in the client’s name or commingled the client’s funds in accounts opened in Harrison’s wife’s name or a joint account in the name of Harrison and his wife. So as to not draw attention to their conduct, Harrison and Sawyers placed “limited trading authorizations” and other related documentation associated with their scheme in the name of Harrison’s wife. Although the trading strategy that Harrison and Sawyers employed was initially successful, it soon resulted in substantial investor losses. By October 2008, they had depleted the vast majority of the money they had raised from investors. On October 13, 2008, Harrison submitted to Wachovia a resignation letter in which he confessed to “misdirecting” $6.6 million from seventeen of his Wachovia customers in order to trade online. He also admitted that he had conducted this online trading without first securing the authorization of these 17 individuals.
See also L.R.-21781