U.S. SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17531 / May 22, 2002
SECURITIES AND EXCHANGE COMMISSION V. FIRST CAPITAL SERVICES, INC., ET AL. (Civil Action No. 00-8445-CIV-MIDDLEBROOKS (S.D. Florida, Miami Division)
Securities and Exchange Commission Obtains Judgments Against all Four Defendants Involved in Fraudulent Promissory Note Case
The Securities and Exchange Commission announced that the U.S. District Court for the Southern District of Florida has entered final judgments against all four of the defendants involved in a securities fraud action arising from a promissory note scheme. The Court granted summary judgments against two individual defendants, Raphael "Ray"" Levy of Lake Worth, Florida and Larry Schwartz of Boca Raton, Florida, for their involvement in a scheme that fraudulently induced more than 600 investors in 27 states to purchase at least $55 million in unregistered promissory notes. The remaining two defendants, U.S. Capital Funding, Inc. and First Capital Services, Inc., consented to the entry of final judgments against them.
The Court permanently enjoined all four defendants from future violations of the antifraud provisions of the federal securities laws and from offering or selling unregistered securities. In addition, the court permanently enjoined Levy and U.S. Capital from selling securities without registering with the Commission as broker-dealers or associating with registered broker-dealers.
The judgments against Levy and Schwartz require that they disgorge their ill-gotten gains plus interest and pay civil penalties. Levy was ordered to pay disgorgement of $798,600 plus prejudgment interest and a civil penalty of $798,600. (He is currently serving a 14 year sentence for fraud in an unrelated criminal action, in which he was ordered to pay restitution of $117 million.) Schwartz was order to pay disgorgement of $89,000 plus prejudgment interest and a civil penalty of $100,000.
The Court also ordered U.S. Capital to disgorge $9.6 million and First Capital to disgorge $37.4 million and that the two entities satisfy the disgorgement orders to the extent of their financial capabilities. Therefore, disgorgement was waived with respect to U.S. Capital except to the extent that U.S. Capital receives funds pursuant to its claim in a bankruptcy proceeding against its co-defendant, First Capital, and disgorgement was waived with respect to First Capital except to the extent that the U.S. Bankruptcy Court for the Southern District of Florida orders First Capital to make a distribution to U.S. Capital's court-appointed receiver. The disgorged funds will be distributed to injured investors under a plan proposed by the receiver and approved by the Court.