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. 16601 / June 20, 2000

SECURITIES AND EXCHANGE COMMISSION v. SOUTHWEST INCOME TRUST, ET AL., Civil Action No. CV 97-0953 PHX RCB

The Securities and Exchange Commission ("Commission") announced that on June 12, 2000, the Honorable Robert C. Broomfield, United States District Judge, issued Final Judgments against Defendants Southwest Income Trust, Advantage Income Trust and Investors Trading Trust (collectively, the "Trusts") and Anthony G. Marriott ("Marriott"), Steven R. Shoop ("Shoop"), Charles D. Brown ("Brown") and Donn K. Phillips ("Phillips") for their role in a $10.7 million scheme involving the fraudulent sale of investments in a Treasury securities trading program. Defendants consented to the entry of the Final Judgments without admitting or denying the Commission's allegations.

Defendants, with the exception of the Trusts, previously consented, without admitting or denying the Commission's allegations, to the entry of Judgments of Permanent Injunction prohibiting them from future violations of the registration and/or antifraud provisions of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder.

The Commission alleged in its Complaint that Defendants raised the $10.7 million from approximately 149 investors in Arizona and California through the sale of interests in the Trusts and other programs. Defendants represented to investors that: investor funds would only be used to purchase and trade Treasury securities; investors would receive 1% per month in profits from trading Treasury securities; if the 1% monthly return from trading profits were not achieved, investors' funds would be returned; and only after payment of the 1% monthly return would the trustees of the Trusts, sales agents, and others be paid from excess trading profits. The Complaint further alleged that, contrary to these representations, Defendants operated a Ponzi-like scheme that paid investors their 1% monthly return from other investors' funds, failed to return investors' funds after suffering large trading losses, misappropriated investor funds for their personal benefit, and transferred over $3 million of investor funds to Bahamian bank accounts.

The Final Judgments permanently enjoin the Trusts from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 7(a) of the Investment Company Act of 1940. The Final Judgments require Marriott to pay disgorgement in the amount of $850,856.55, plus prejudgment interest, but waive payment of all but $272,107.28 of this sum, and do not assess a civil penalty, based on his demonstrated inability to pay. The Final Judgments further require Shoop to pay disgorgement in the amount of $733,181.17, plus prejudgment interest, but waive payment of all but $115,203.57 of this sum, and do not assess a civil penalty, based on his demonstrated inability to pay. The Final Judgments further require Brown and Phillips to pay disgorgement in the amounts of $6,486.33 and $3,110.00, respectively, plus prejudgment interest, but waive payment of these sums, and do not assess a civil penalty, based on their demonstrated inability to pay.

The other defendants named in the Commission's Complaint, Palo Verde 136, Inc., Advantage Marketing Group, Inc. and FLC Corporation, previously consented, without admitting or denying the Commission's allegations, to the entry of Judgments of Permanent Injunction prohibiting them from future violations of the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission withdrew its claims for disgorgement and civil penalties against these defendants because they are defunct and have no assets.

http://www.sec.gov/litigation/litreleases/lr16601.htm


Modified:06/22/2000