United States Securities and Exchange Commission
Litigation Release No. 16572 / May 31, 2000
SEC FILES COMPLAINT AGAINST THREE SALES AGENTS IN CONNECTION WITH SEBASTIAN INTERNATIONAL ENTERPRISES' $17.7 MILLION PONZI SCHEME
Securities and Exchange Commission v. Linda Ballou, Ronald Wackler and Bruce Harlan, Case No. 600-CV-692-ORL 19B (M.D. Fla.) (filed May 31, 2000).
The Securities and Exchange Commission (SEC) announced that on May 31, 2000, it filed a civil complaint against three individuals who raised approximately $2.7 million from the public as part of a $17.7 million Ponzi scheme conducted by Sebastian International Enterprises, Inc. (SIE). Simultaneously with the filing of the lawsuit, the three individuals, Linda Ballou of Rancho Mirage, California, Ronald Wackler of Troy, Ohio and Bruce Harlan of Sharon, Connecticut, agreed to settle the charges against them without admitting or denying the allegations in the SEC's complaint. The SEC's lawsuits follow an emergency action brought by the SEC in August, 1999 that halted SIE's fraudulent offering.
In its complaint, the SEC alleges that between at least July, 1997 and August 19, 1999, SIE sold $17.7 million worth of purportedly "high interest promissory notes" to over 400 investors nationwide. The complaint further alleges that SIE sold the notes through a network of insurance agents, financial advisers and registered representatives of broker dealers.
The SEC's complaint alleges that Ballou and Wackler raised over $1.5 million of the total raised by SIE. The SEC further alleges that Ballou and Wackler made material misrepresentations and omissions to investors concerning, among other things, the risk and safety of SIE's securities, the ability of SIE to pay interest and principal on the notes, and the alleged existence of a surety bond guaranteeing the notes. In return for selling the SIE securities, the SEC alleges that Ballou and Wackler received commission payments from SIE in the amount of $154,994 and $23,464, respectively.
The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains and civil money penalties from Ballou and Wackler based on allegations that they violated the securities and broker-dealer registration provisions and the antifraud provisions of the federal securities laws. Specifically, the complaint alleges that Ballou and Wackler violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.
The complaint also alleges that Bruce Harlan, of Sharon, Connecticut, offered and sold SIE's unregistered securities. The complaint further alleges that Harlan sold over $1.1 million worth of notes and earned approximately $114,558 in commissions. The complaint, which seeks injunctive relief and the imposition of civil money penalties, alleges that Harlan violated Section 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act.
Simultaneously with the filing of the SEC's complaint, Ballou, Wackler and Harlan agreed to settle the action against them by consenting, without admitting or denying any of the allegations contained in the SEC's complaint, to the entry of a permanent injunction from future securities law violations. Ballou will also be ordered to pay disgorgement of $154,994, and Wackler will be ordered to pay disgorgement of $23,464. Under the terms of the settlement, Wackler will partially satisfy payment of his disgorgement amount by paying $7,000. The remainder of Wackler's disgorgement, and all of Ballou's disgorgement, will be waived, and the SEC will not seek civil penalties, due to their demonstrated financial inability to pay. Harlan will also pay a civil penalty of $5,500.