SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17421 / March 19, 2002
SECURITIES AND EXCHANGE COMMISSION v. RICHARD GOETTLICH, ET AL., 97 Civ. 1144 (JAG)(D.N.J.)
The Securities and Exchange Commission ("Commission") announced today that First Interregional Equity Corp. ("FIEC"), a registered broker-dealer now in Securities Investor Protection Company ("SIPC") liquidation, and First Interregional Advisors Corp. ("FIAC"), formerly an equipment lease finance company and now a debtor in bankruptcy proceedings under Chapter 11, agreed to settle a civil action charging FIEC and FIAC with participating in a massive "Ponzi" scheme that resulted in investor losses of over $100 million.
In a complaint for injunctive and other relief filed on March 6, 1997, the Commission alleges, among other things, that defendants FIEC, FIAC and their former President, Richard Goettlich ("Goettlich"), defrauded investors by offering and selling purported interests in equipment leases. Specifically, the defendants systematically purported to assign the entire receivable streams from individual equipment leases to investors after assigning them to one or more prior investors. As a result of the fraud, FIEC, FIAC and Goettlich obtained approximately $295 million from investors -- an amount that exceeded FIAC's actual lease receivable inventory by over $100 million.
The Commission's complaint charged FIEC, FIAC and Goettlich, with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b) of the Exchange Act and Rule 10b-5, and as to FIEC, violations of Section 15(c)(1) of the Exchange Act and Rule 15c1-2.
When the action was commenced, the Commission obtained emergency relief to halt the fraud, including temporary restraining orders, preliminary injunctions, the appointment of receivers and asset freezes. In addition, the Commission sought civil penalties and disgorgement of the defendants' ill-gotten profits.
Without admitting or denying the charges brought against them, the Chapter 11 Trustee for FIAC and the Trustee appointed under the Securities Investor Protection Act ("SIPA") for FIEC consented to the entry of final consent judgments permanently enjoining them from violations of the antifraud provisions of the federal securities law on February 26, 2001 and December 21, 2001, respectively.
On May 20, 1999, the Court entered a final judgment by default against Richard Goettlich, which permanently enjoined him from future violations of the antifraud provisions of the federal securities laws, ordered him to disgorge $123,900,000 in ill-gotten gains plus $23,275,277 in prejudgment interest; and required him to pay $123,900,000 in civil penalties. The default judgment was entered after Goettlich failed to answer or otherwise respond to the Commission's complaint.
In a separate action, the Commission has charged two other individuals for their roles in the FIAC-FIEC "Ponzi" scheme -- Anthony Gianninoto, formerly a financial operations principal of FIAC and FIEC, and Eileen Laine, formerly a data processing manager for those companies. The Commission's case against those two individuals, who have also pleaded guilty to criminal charges arising out of this fraud, remains pending.
For more information see Litigation Release Nos. 15276, 15979 and 16160.