Litigation Release No. 18045 / March 21, 2003
SEC OBTAINS DEFAULT JUDGMENT AGAINST BROKER WHO MASTERMINDED FRAUDULENT OFFERINGS
Securities and Exchange Commission v. Jean Baptiste Jean Pierre, Gabriel Toks Pearse and Darius L. Lee, 02 Civ. 253
On March 5, 2003, Judge Shirley Wohl Kram of the United States District Court for the Southern District of New York granted the Securities and Exchange Commission's ("Commission") application for a default judgment against Jean Baptiste Jean Pierre ("Jean Pierre"), a broker who directed the fraudulent and unregistered offerings of securities of three related companies. As part of the default judgment, the court issued a permanent injunction against Jean Pierre, ordered Jean Pierre to pay $589,809.32, representing $407,700 in ill-gotten gains derived from his fraudulent conduct plus prejudgment interest of $182,809.32, and ordered Jean Pierre to pay a $407,000 civil penalty. Pursuant to Section 308 of the Sarbanes-Oxley Act of 2002, the court ordered that the civil penalty be added to the disgorgement fund for the benefit of investors.
In its suit, the Commission charged Jean Pierre, as well as other defendants, with making false and misleading statements and omissions of material facts while offering and selling limited partnerships interests of JB Stanley Group, LP ("JB Stanley"), an unregistered hedge fund, and stock of JB Stanley's general partner, Cambridge Capital Holdings Management, LLC ("Cambridge"), and Cambridge's wholly-owned subsidiary, Union Transfer and Cargo Corporation ("UTC"), all of which were controlled by Jean Pierre. Through these schemes, the defendants raised approximately $407,700 from at least fifteen investors and misappropriated a large percentage of those funds.
According to the complaint, as part of the fraud, Jean Pierre made numerous oral and written misrepresentations to investors, including: (1) misrepresentations to JB Stanley investors that their funds would be used to buy and sell securities when, in fact, Jean Pierre immediately diverted investor funds to pay for lavish personal expenses; (2) false statements in promotion materials that JB Stanley was a prominent asset management firm that made investment decisions using state-of-the-art telecommunications equipment when, in fact, JB Stanley consisted of Jean Pierre and another defendant working out of a one-room office; (3) false statements in UTC promotional materials that Jean Pierre had served as a portfolio manager to several major brokerage firms and had more than twenty years of experience as an entrepreneur; (4) false statements to at least one investor that Cambridge would conduct an IPO in the near future when, in fact, Cambridge had never taken any steps towards conducting an IPO; (5) false statements to investors about the structure of UTC when, in fact, UTC did not have any operations and was not registered with any state or federal agency to operate as a wire-transfer business; and (6) false statements that Jean Pierre would repay UTC investors their investments within one year and produce a 40 to 60 percent profit in subsequent years when, in fact, Jean Pierre lacked a reasonable basis for these promises. Jean Pierre also offered and sold the securities of JB Stanley, Cambridge, and UTC without filing registration statements with the Commission and without any applicable exemption from filing.
The court ordered that Jean Pierre be permanently enjoined from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77e(a), 77e(c), and 77q(a), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, and Section 206(1) and (2) of the Investment Advisers Act of 1940, 15 U.S.C. §§ 80b-6(1) and (2). In addition, the court ordered Jean Pierre to disgorge $589,809.32, representing $407,700 in ill-gotten gains derived from his fraudulent conduct plus prejudgment interest of $182,809.32. Finally, the court imposed a civil penalty of $407,700 on Jean Pierre, recognizing the seriousness of his fraudulent conduct.
The litigation is pending against the remaining defendants.