U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23320 / August 13, 2015
Securities and Exchange Commission v. John Thornes, Defendant, and Christopher Burnell, Kyle Larick, and Doreen Thornes, Relief Defendants, Civil Action No. 14-cv-01598 RJK (SPx) (C.D. Cal.)
Final Judgment and Permanent Industry Bar Entered Against California-Based Broker Alleged to Have Stolen Money From Client Accounts; Relief Defendants Ordered to Disgorge Funds
The Securities and Exchange Commission announced that on August 7, 2015, John T. Thornes of Redlands, California, formerly the sole owner of Thornes & Associates, Inc., a broker-dealer registered with the Commission from August 1996 until November 2013, and an investment adviser registered with the State of California from December 2001 to September 2013, was permanently barred from association with any broker, dealer, investment adviser, or other securities industry professional. He was further barred from participating in any offering of a penny stock. Thornes was barred based upon a final judgment of permanent injunction entered against him on July 21, 2015 in an action brought by the Commission against him and three relief defendants in the United States District Court for the Central District of California. Both the final judgment and the Commission order barring Thornes were entered pursuant to Thornes' consent. Thornes neither admitted nor denied the Commission's allegations.
The Commission alleged in the injunctive action that from December 2010 through January 2013, Thornes misappropriated approximately $4.4 million from two brokerage accounts: a trust account established for the benefit of a dementia patient in her eighties, for which Thornes was the trustee and broker; and a scholarship trust account established for the purpose of providing scholarships to local students, for which Thornes' mother was trustee.
According to the SEC's complaint, Thornes stole money from the two accounts from November 2010 to April 2013 primarily to benefit two of his friends, Christopher Burnell of Highland, Calif., and Kyle Larick of Redlands, Calif. He also caused excess trustee fees to be paid to his mother from the scholarship trust account. The complaint named Burnell, Larick and Doreen Thornes as relief defendants, and sought disgorgement from them.
In addition to permanently enjoining Thornes from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, the final judgment orders Thornes to pay disgorgement of $4,366,790, prejudgment interest of $278,540, and a penalty of $4,366,790.
On July 20, 2015, the district court also entered final judgments against relief defendants Burnell and Doreen Thornes pursuant to their consents, which ordered them to disgorge $3,071,112.90 and $60,000 respectively. Burnell and Doreen Thornes are jointly and severally liable with Thornes for these amounts. Finally, on July 20, 2015, the court issued an order denying the Commission's motion for summary judgment and granting relief defendant Larick's motion for summary judgment, finding that Larick had a "legitimate claim" to the monies he received from the scholarship trust account because he was either a good faith investor or borrower of the funds.
See also: LR 23058 (August 4, 2014); Securities Exchange Act Rel. No. 75644 (August 7, 2015).