UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16211 \ July 14, 1999
SECURITIES AND EXCHANGE COMMISSION v. DONALD G. BROOKS and BROOKS FINANCIAL PLANNING, INC., 3:99-CV-1326-D, USDC, ND/TX (Dallas Division)
On July 12, 1999, Judge Sidney A. Fitzwater, United States District Judge for the Northern District of Texas, issued a Preliminary Injunction enjoining Donald G. Brooks ("Brooks") and his company Brooks Financial Planning, Inc. ("BFP") from future violations of the anti-fraud provisions of the federal securities laws. In his ruling, Judge Fitzwater determined that it was reasonably likely that Brooks would continue to violate the securities laws and attempt to move or conceal his assets. The preliminary injunction also restrains Brooks, BFP and others from using or disposing of any funds or assets of Brooks or BFP, including jewelry purchased by Brooks. Moreover, the Court ordered financial institutions to freeze any assets held in the name, or for the benefit of Brooks or BFP.
The Securities and Exchange Commission ("Commission") alleged in its lawsuit that Brooks, a former registered representative associated with Commission-registered broker-dealers, raised and misappropriated at least $1.2 million from victims, including elderly church members, through sales of fictitious church bonds and interests in a fictitious "Interim Church Loan Fund" ("Church Fund"). Brooks, a 64 year old part-time education minister and Bible study teacher solicited retired brokerage clients and attendees of religiously-oriented seminars he conducted. Prospective investors were encouraged to liquidate conservative investments, such as government bonds or federally guaranteed certificates of deposit, to invest in the Church Fund. Investors were told that the Church Fund would invest in various church-issued and secured notes or other debt obligations that would provide safe annual returns of 11% or more. The Commission alleged that none of the money raised was used to purchase church-issued debt instruments or any other form of investment. Instead, investors' monies were used for operating expenses, to make "interest" payments to other investors in an obvious "Ponzi" scheme, and to support Brooks' extravagant lifestyle, which included gambling trips, vacations, and lavish gifts to female acquaintances.
In its complaint, the Commission alleged that the defendants 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. The Commission also seeks an order permanently enjoining Brooks and BFP, an order requiring disgorgement of all wrongfully obtained profits, with prejudgment interest, and civil penalties.http://www.sec.gov/litigation/litreleases/lr16211.htm