UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17967 / February 4 , 2003
SECURITIES AND EXCHANGE COMMISSION V. BIG COUNTRY AGS, INC. D/B/A AGS, INC., ET AL., Defendants, Civil Action No. 3:02-CV-606-L
SEC OBTAINS $1.9 MILLION JUDGMENT IN CONNECTION WITH FRAUDULENT INTERNATIONAL GOLD TRADING SCHEME.
On January 16, 2003, in an enforcement action filed by the Securities and Exchange Commission ("SEC"), the United States District Court for the Northern District of Texas, Dallas Division, entered judgment against Godfried Martin Sarpong and his company, Africa Gemstone Corporation, for violating the antifraud and securities registration provisions of the federal securities laws. Sarpong is a citizen of the Republic of Ghana, who resides in London, and Africa Gemstone is a Ghanaian corporation with offices in London and Accra, Republic of Ghana.
The court ordered Sarpong and Africa Gemstone, jointly and severally, to disgorge unjust profits of $1,105,621, plus prejudgment interest of $73,632.59, and the court ordered Sarpong and Africa Gemstone to pay civil money penalties of $120,000 and $600,000, respectively. The total monetary relief ordered by the court was $1,899,254. The court also enjoined Sarpong and Africa Gemstone from offering or selling unregistered securities in violation of Sections 5(a) and 5(c) of the Securities Act of 1933, and from committing securities fraud, in violation 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 SEC filed the case on March 22, 2002, charging Sarpong, Africa Gemstone and others with selling unregistered securities and misleading investors in connection with an international gold trading deal. According to the Complaint, between February 2000 and January 2001, the defendants raised over $1.3 million by offering and selling unregistered promissory notes to investors in several states. The SEC alleged that the defendants assured investors they could liquidate their principal upon thirty days notice; promised investors returns of five percent to ten percent per month (i.e., 60-120% per annum); and promised to earn those returns by using the investors' money to buy gold bullion in Ghana and sell it in England at a 12% profit. The SEC further alleged that the defendants told investors that the risk of the investment was minimal, because of "built-in safety factors," such as oversight by the government of Ghana and verification of the investment by the defendants. In fact, according to the Complaint, those safeguards did not exist, and Sarpong, operating through Africa Gemstone, inflicted substantial losses by stealing much of the investors' money.
The SEC further alleged that, although Sarpong agreed to trade gold for the other defendants on an ongoing basis - continually returning any sale proceeds to Ghana to purchase more gold - he instead diverted more than half of the sale proceeds (over $750,000) to his personal bank account. The SEC also alleged that Sarpong stole two gold shipments valued at approximately $250,000. As a result of Sarpong's thefts, the investment was never profitable, and never earned sufficient profits to be able to pay the investors the returns the defendants promised.
The Commission's complaint charged that Africa Gemstone and Sarpong, along with their associates, Mark Tuley of Abilene, Texas, Ardis Gaither and John Temple of Sweetwater, Texas, and Big Country AGS, Inc. ("AGS"), a Texas corporation based in Sweetwater, directly or indirectly sold unregistered securities, in violation of Sections 5(a) and 5(c) of the Securities Act of 1933; and committed securities fraud, in violation 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. In its Complaint, the Commission requested that the defendants be enjoined from future securities violations and be ordered to disgorge their illegal profits and pay civil money penalties.
Simultaneously with the filing of its action, the Commission accepted an offer of settlement from AGS, Gaither, Temple and Tuley, in which those defendants agreed, without admitting or denying the allegations in the Commission's Complaint, to the entry of an order enjoining them from further violations of the securities laws; to pay civil money penalties of $20,000 each; and to pay disgorgement of $200,000 in illegal profits, plus $22,840 in prejudgment interest. AGS, Gaither, Temple and Tuley also agreed to pay the costs of disbursing the disgorged profits and prejudgment interest to the bona fide holders of AGS promissory notes on a pro rata basis. Despite their agreement to those terms, AGS, Gaither, Temple and Tuley have, to date, refused to pay any of the agreed amounts, and the SEC has filed contempt proceedings in an effort to enforce the terms of the settlement.