United States Securities and Exchange Commission
Litigation Release No. 18123 / May 7, 2003
Securities and Exchange Commission v. Nancy J. Cheal, individually and d/b/a Relief Enterprise, et al. (United States District Court for the District of Massachusetts, C.A. No. 00 CV 10182-EFH)
Nancy J. Cheal-Promoter of Fraudulent Internet Trading Scheme-Permanently Enjoined From Committing Securities Fraud and Ordered to Pay Disgorgement and a $500,000 Civil Penalty
The Securities and Exchange Commission announced today that it obtained a permanent injunction against Nancy J. Cheal and an order that she pay disgorgement and a $500,000 civil penalty. The final judgment orders Cheal to satisfy her disgorgement obligation by complying with the order of restitution to be entered against her in a parallel criminal proceeding entitled United States v. Nancy J. Cheal, D.Mass. Criminal No. 01-10076-RWZ. In addition, the final judgment orders Richard L. Birmingham, a relief defendant, to pay disgorgement and prejudgment interest totaling $1,095,345. U.S. District Court Judge Edward F. Harrington entered a final judgment against the defendants on April 21, 2003.
On January 31, 2000, the Commission filed a Complaint against Cheal (d/b/a Relief Enterprise) and relief defendant Birmingham, alleging that Cheal violated the general antifraud and securities registration provisions of the federal securities laws (Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder). On February 1, 2000, the United States District Court for the District of Massachusetts granted the Commission's motion for an ex parte order and, among other things, temporarily restrained the fraudulent activities, froze assets of Cheal and Birmingham, and froze the proceeds of the offering. On February 15, 2000, the Court entered a Preliminary Injunction and Order for Other Equitable Relief against Cheal and Birmingham, which, among other things, continued the asset freeze. On October 15, 2002, Cheal pleaded guilty to seven criminal charges based upon the same factual conduct, including five counts of mail fraud and two counts of wire fraud, in the United States District Court for the District of Massachusetts. Cheal was sentenced on February 20, 2003 to 87 months in prison and ordered to pay restitution to the victims of the scheme.
The Commission's complaint alleged that Cheal, directly and through representatives, raised more than $1.5 million in a Prime Bank-like investment fraud perpetrated over the Internet and by other means. The Commission alleged that Cheal, doing business as Relief Enterprise, fraudulently offered and sold investments in a bank debenture trading program by making baseless promises of a 100% weekly return on a website and through other means of solicitation. According to the Commission's complaint, a substantial amount of the money raised from investors was deposited to a bank account controlled by Birmingham, who used it to pay various expenses, including debit card withdrawals at a casino.
The Court, in connection with the allegations related to this scheme, permanently enjoined Cheal from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 17(a), 5(a) and 5(c) of the Securities Act of 1933.