UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17553 / June 10, 2002
SEC v. Terry L. Dowdell, et al., Civil Action No. 3:01CV00116 (W.D. Va.) (Honorable James H. Michael, Jr.)
On June 4, 2002, the Honorable James H. Michael, Jr., Senior U. S. District Judge for the Western District of Virginia, entered a permanent injunction order against Terry L. Dowdell and two entities that he controls in connection with a massive international Ponzi scheme Dowdell orchestrated. The scheme raised more than $70 million from investors in the U.S. and abroad through the sale of securities in a trading program purportedly being operated by Vavasseur Corp., a Bahamian company which is also a Defendant in the lawsuit. In a Consent and Stipulation filed in conjunction with the entry of the permanent injunction order, Dowdell has now admitted to the fraud.
As is alleged in the SEC's Complaint, Dowdell offered and sold, through various promoters and marketers in the U.S. and abroad, fictitious "prime bank" securities purportedly involving the purchase and sale of foreign bank trading instruments such as medium term debentures. Dowdell and his promoters represented that his trading program would provide virtually risk-free returns of 4 percent per week for 40 weeks per year - up to 160% per year. As Dowdell admitted in his Consent and Stipulation, there was in fact no actual trading program. Instead, Dowdell was operating a classic Ponzi scheme in which old investors were being paid with new investor money.
In its permanent injunction order, the Court entered findings in favor of the SEC with respect to its allegations against Dowdell and two of the entities that he controls, Dowdell Dutcher & Associates, Inc. ("DDA") and Emerged Market Securities, DE-LLC ("EMS"). The Court incorporated into its order as additional findings of fact the representations contained in Dowdell's Consent and Stipulation. The Court further found that Dowdell, DDA and EMS have engaged in and are likely to continue to engage in violations of 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. The Court permanently enjoined Dowdell, DDA and EMS from further violations of these provisions and ordered Dowdell, DDA and EMS to disgorge all investor funds and ill-gotten gains received by them through the Ponzi scheme.
Prior to the entry of the permanent injunction order, the Court had entered orders freezing more than $21 million of investor funds diverted by Dowdell into various domestic accounts under his control. Dowdell admitted in his Consent and Stipulation that even after these freeze orders, Dowdell continued his scheme by using various foreign bank accounts controlled directly or indirectly by U.K. nationals. These foreign accounts include accounts at the Bank of Butterfield in Guernsey, the Bank of Ireland in Ireland, Fortis Bank in Belgium and Banamex in Mexico. Through the cooperative efforts of banks and government authorities in Guernsey, Ireland and Belgium, more than $7 million of investor funds have also been frozen in those foreign jurisdictions.
Additional information on how prime bank and other banking-related investment schemes work can be found at the SEC's Prime Bank Fraud Information Center (http://www.sec.gov/divisions/enforce/primebank.shtml) in the enforcement section of the SEC's Web site.