SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16896 / February 13, 2001
SECURITIES AND EXCHANGE COMMISSION V. TAC INTERNATIONAL LIMITED, DOUGLAS R. WALKER, CRAIG SOUTHWOOD, LARRY B. RICHARDSON and JAN HARRY "JACK" WILDE, 3:00CV54MU (GCM) (WDNC) (February 7, 2000)
SEC OBTAINS DEFAULT JUDGMENTS AGAINST TAC INTERNATIONAL LTD. AND ITS OWNERS FOR "PRIME BANK" FRAUD; JUDGE ORDERS THAT $10.9 MILLION BE DISGORGED
On January 31, 2001, the Securities and Exchange Commission obtained default judgments against TAC International Ltd., its former president and owner, Douglas R. Walker, and its current president and owner, Craig Southwood, in a civil action involving the sale of fraudulent "prime bank" securities which duped investors out of millions of dollars. Chief U.S. District Judge Graham C. Mullen of the U.S. District Court for the Western District of North Carolina found that TAC, Southwood and Walker violated the anti-fraud provisions of the federal securities laws. Chief Judge Mullen enjoined the defendants from future violations, ordered them to disgorge approximately $10.9 million, imposed civil monetary penalties against them totaling $770,000, and ordered them to produce a written, specific accounting of all proceeds obtained by them as a result of their conduct. Chief Judge Mullen also entered a final judgment against Jan Harry "Jack" Wilde, formerly one of TAC's national vice-presidents, enjoining Wilde from future violations.
The Commission's action, filed on February 7, 2000, alleged that from the summer of 1996 until August of 1997, TAC, a Bahamas corporation, and its senior officers, represented that by buying a Bahamian International Business Corporation ("IBC"), investors could participate in certain securities trading programs not available in the United States. These trading programs supposedly enabled investors to obtain phenomenal returns, at no risk to principal, by participating in purported trading in high yield debentures between and among banks. The Complaint alleged that the defendants did not engage in any trading, but instead used the money they procured from investors to pay for their lifestyles and personal expenses. According to the Complaint, the defendants defrauded thousands of United States residents, who each entrusted the defendants with investments of at least $1,500 each.
The Complaint alleged that Walker, TAC's original owner, developed the fraudulent IBC trading program that TAC sold to investors. Under the IBC program, investors paid a minimum of $1,500 each to get access to purported debenture trading between and among banks. The Complaint alleged that TAC represented that at the end of one year, the IBC trading program could generate as much as $20,000 from the original $1,500 investment -- an annual return of over 1,300%. According to the Complaint, Southwood, TAC's present owner, supervised TAC's operations at its headquarters in the Bahamas and created a second fraudulent investment scheme, which he named the "Southwood Program." Under the Southwood Program, the Complaint alleged, investors were required to wire a minimum of $50,000 to TAC. According to the Complaint, TAC promised a return of 600% within thirty days of the initial investment. The Complaint alleged that, along with another national vice president, Wilde trained TAC's United States sales force to market the fraudulent programs and supervised the marketing efforts.
The default judgments entered against TAC, Southwood and Walker find that each of them violated the anti-fraud provisions of the federal securities laws, 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, permanently enjoin each of them from engaging in future violations of those provisions, and require each of them to account for and disgorge $8,419,367.70, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $2,579,087.26, for a total of $10,998,454.96. The Court also ordered TAC, Southwood and Walker to pay civil penalties of $550,000, $110,000 and $110,000, respectively.
The SEC issued an Investor Alert concerning prime bank schemes, which can be found at the SEC's website, www.sec.gov.http://www.sec.gov/litigation/litreleases/lr16896.htm