U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23036 / July 2, 2014

Securities and Exchange Commission v. Todd A. Duckson, et al., Civil Action No. 10-3995-DWF/JJK (D. Minn.)

Court Imposes Officer and Director Bar, Injunction and Monetary Sanctions Against Minneapolis Attorney Based On Fraud Verdict

The Securities and Exchange Commission announced today that, on June 27, 2014, Judge Donovan W. Frank, of the U.S. District Court in St. Paul, Minnesota, issued an Opinion and Order imposing sanctions against Todd A. Duckson, a Minneapolis, Minnesota attorney, Capital Solutions Monthly Income Fund, LP, a Minneapolis-based real estate lending fund (the "Fund"), and Transactional Finance Fund Management LLC ("TFFM"), a company owned by Duckson that became the Fund's investment advisor in November 2008. In the Order, Judge Frank imposed permanent injunctions against all three defendants, barred Duckson from serving as an officer or director of a publicly traded company for a period of ten years, and imposed financial sanctions exceeding $14.5 million against the Fund, $3.3 million against Duckson and TFFM, jointly and severally, and $1.8 million against Duckson individually.

The Commission's complaint, which was filed in September 2010, alleged that the defendants engaged in securities fraud in connection with a series of unregistered offerings of interests in the Fund. The complaint alleged that in written documents provided to investors between March 2008 and late 2009, the Defendants made materially false and misleading statements that effectively hid the Fund's deteriorating financial condition. The complaint also alleged that the Fund represented that it would use proceeds raised in the offerings primarily to make real estate loans and other investments, when in fact the Fund used most of the proceeds to pay senior lenders on properties the Fund had acquired and to make interest payments to existing investors. Duckson played a key role in drafting the written documents provided to investors, first as the attorney for the Fund and, in and after November 2008, as the Fund's manager.

After a five-week trial, on October 22, the jury returned a verdict for the Commission and against all three Defendants, finding that Duckson and the Fund violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that Duckson aided and abetted the Fund's violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and that TFFM violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Finally, the jury found in favor of TFFM on the Commission's claim that it violated Section 17(a) of the Securities Act.

In his June 27 Opinion and Order, Judge Frank permanently enjoined the Fund, TFFM and Duckson from violating, or aiding and abetting violations of, Section 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and barred Duckson from serving as an officer or director of a publicly traded company for a period of ten years. Judge Frank also imposed the following monetary sanctions:

  • $12,063,430 in disgorgement, plus $2,519,751 in prejudgment interest against the Fund;
  • $2,960,771 in disgorgement, plus $340,862 in prejudgment interest against Duckson and TFFM, jointly and severally;
  • $1,450,843 in disgorgement, plus $305,494 in prejudgment interest against Duckson individually; and
  • Civil penalties of $50,000 and $15,000 against Duckson and TFFM, respectively.

The trial team from the Commission's Chicago Regional Office consisted of attorneys Eric M. Phillips, Daniel J. Hayes, Benjamin J. Hanauer, Marlene Key-Patterson and paralegal Terri Y. Roberts.

For additional information, please see Litigation Releases Nos. 21657 (September 21, 2010), 22675 (April 16, 2013), 22796 (September 11, 2013), and 22853 (October 23, 2013).

 

http://www.sec.gov/litigation/litreleases/2014/lr23036.htm


Modified: 07/02/2014