SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16179 / June 8, 1999
SEC v. Lewis Allen Rivlin, Edwin Earl Huling III, and Alfred Huascar Velarde, as Defendants; and Z-Finance, S.A., Anthony P.Zioudas, Hedley Finance Ltd., Christian Dante, and Chrysanthos Chrysostomou, as Relief Defendants, Civil Action No. 99 01455 (RCL) (U.S. District Court for the District of Columbia)
SEC Charges Washington Lawyer Lewis Rivlin and Two Others
for Defrauding Investors of $6.2 Million in Prime Bank Scheme;
Ecuadorian Charity for Underprivileged Girls Among Duped Investors
The Securities and Exchange Commission today brought fraud and broker-dealer registration violation charges against Lewis Allen Rivlin, a Washington lawyer, and Edwin Earl Huling III, who worked at Rivlin's law firm, for defrauding investors of $6.2 million in a prime bank scheme between December 1997 and June 1998. The SEC also charged Alfred Huascar Velarde, formerly Rivlin's law partner and currently a Virginia lawyer, for aiding and abetting the fraud. Rivlin and Huling are contesting the charges; Velarde has settled the charges.
The SEC's Complaint alleges that Rivlin and Huling, with Velarde's assistance, offered and sold at least $6,239,000 worth of securities in a fictitious trading program to at least four groups of investors, including an Ecuadorian charity for underprivileged girls. The trading program purportedly involved the pooling of investor funds to purchase and resell deeply discounted bank instruments at a profit, under the auspices of Chrysanthos Chrysostomou, formerly the Metropolitan of Limassol, a bishop in the Greek Orthodox Church in Cyprus.
The Complaint further alleges that the defendants lured investors into the Program through the use of numerous oral and written misrepresentations, including that the investments would be risk-free and would generate tremendous profits ranging from 20% to 100% at least every ten international banking days. In addition, the Complaint alleges that Rivlin gave his "personal guarantee" to at least two of the investors. The Complaint alleges that the investors never received any profits, and that they lost all of their principal. Finally, the Complaint alleges that after the investments were made, the defendants made misrepresentations to investors in an effort to lull them into inaction.
Without admitting or denying the allegations, Velarde agreed to never again violate the antifraud provisions of the federal securities laws and to pay a $20,000 civil penalty.
The SEC also charged as relief defendants Greek company Z-Finance, S.A. and its chairman and chief executive officer, Anthony Zioudas; British Virgin Islands company Hedley Finance, Ltd. and its chief of administration, Christian Dante; and Chrysanthos Chrysostomou, formerly the Metropolitan of Limassol. A relief defendant is an individual who received ill-gotten investor funds.
The SEC's Complaint, filed in the U.S. District Court in Washington, D.C., seeks preliminary and permanent injunctive relief, an accounting of the money trail, disgorgement of ill-gotten gains, prejudgment interest and civil money penalties. The SEC seeks to enjoin defendants Rivlin and Huling for violations of Sections 17(a) of the Securities Act of 1933 and Sections 15(a) and 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder.
This case is part the SEC's continuing effort to combat prime bank fraud and to alert the public to the risks posed by these phony instruments. The risks of this type of fraud and warnings about how to avoid it are spelled out in the Interagency Advisory: Warning Concerning "Prime Bank" Notes, Guarantees, and Letters of Credit and Similar Financial Instruments (October 21, 1993), which is discussed on the SEC's Homepage at http://www.sec.gov/enforce/alerts/prime.htm.
Webmaster Note:  The Prime Bank information section has been moved. Updated information on this topic can be found at http://www.sec.gov/enforce/pbank/pbnkhome.htm
The SEC acknowledges the valuable assistance of the United Kingdom Department of Trade and Industry and the Securities Board of the Netherlands (the Stichting Toezicht Effectenverkeer) in this investigation.