U.S. Securities and Exchange Commission
Litigation Release No. 18234 / July 17, 2003
Securities and Exchange Commission v. Daniel D. Dyer And Oxbow Capital Partners, LLC, Civil Action No. CV 03-968 ST (D. Ore.)
SEC Sues Daniel D. Dyer and Oxbow Capital Partners, LLC For Fraud
On July 16, 2003, the Securities and Exchange Commission filed a complaint in federal district court in Portland, Oregon, against Daniel D. Dyer, age 49 and a resident of University Place, Washington, and his wholly owned company, Oxbow Capital Partners, LLC ("Oxbow Partners"), based in Tacoma, Washington. The Commission's complaint alleges that the defendants aided and abetted a massive Ponzi scheme perpetrated by Capital Consultants, LLC, formerly an investment adviser in Portland, Oregon. The Commission previously sued Capital Consultants and its principals for fraud in September 2000.
The Commission's complaint alleges that Dyer and Oxbow Partners helped Capital Consultants conceal from its clients the failure of a loan made by the former investment adviser. In November 1998, the borrower of a $160 million loan from Capital Consultants announced that it was having financial problems and stopped making loan payments. In December 1998, the defendants purchased from Capital Consultants the failed loan at its full $160 million principal balance but were unable to make scheduled monthly payments. From July 1999 to August 2000, Dyer and Oxbow Partners entered into a series of complex transactions involving Capital Consultants and two entities controlled by Timothy B. Gamwell that resulted in new client funds being used to repay clients invested in the failed loan. During the scheme, the defendants knew that Capital Consultants made misrepresentations to its clients about Dyer and Oxbow Partners' role in purchasing the failed loan.
The Commission also charges Dyer and Oxbow Partners with fraud in connection with two securities offerings. The defendants promoted and managed Oxbow Capital 1999 Fund I, LLC ("Oxbow Fund I"), an investment fund that raised $4.6 million from over 130 investors between April and October 1999. The Commission's complaint alleges that the defendants failed to disclose to investors that Oxbow Fund I's first investment would be to purchase an interest in the failed Capital Consultants loan and instead hyped another investment. The defendants also defrauded investors by agreeing to replace Oxbow Fund I's investment in the failed Capital Consultants loan with securities that the defendants did not own.
The defendants' second fraudulent offering was Washington Motorcycle Partners, LLC ("Washington Partners"), which raised about $4 million from over 200 investors between August 1999 and September 2000. Instead of purchasing stock in a motorcycle company as represented to investors, the defendants used the proceeds from the unregistered Washington Partners offering to enrich themselves and make payments on the failed Capital Consultants loan.
The Commission's complaint alleges that Dyer and Oxbow Partners violated the securities registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and violated and aided and abetted violations of the investment advisory antifraud provisions of Sections 206(1) and (2) of the Investment Advisers Act of 1940. In its action, the Commission seeks a final judgment against Dyer and Oxbow Partners enjoining them from future violations of the above provisions and ordering them to disgorge all ill-gotten gains and pay a civil penalty.
In a related matter, the Commission instituted a public cease-and-desist proceeding against Timothy B. Gamwell, a resident of Key Biscayne, Florida, pursuant to Section 203(k) of the Advisers Act. Simultaneously with the institution of the proceeding, Gamwell submitted an Offer of Settlement in which, while neither admitting nor denying the Commission's findings, he consented to the entry of an order requiring him to cease and desist from committing or causing any violations and any future violations of the antifraud provisions of Section 206(2) of the Advisers Act.
In September 2000, the Commission charged Capital Consultants and its principals, Jeffrey L. Grayson and his son, Barclay L. Grayson, with fraud and obtained emergency relief against them, including the appointment of a receiver over Capital Consultants. On April 30, 2001, the United States District Court for the District of Oregon entered permanent injunctions against Capital Consultants and the Graysons. On February 26 and December 5, 2002, amended judgments of permanent injunction were entered against Barclay and Jeffrey Grayson, respectively, that did not assess a civil penalty against them based upon their demonstrated inability to pay. On November 20, 2001, Barclay Grayson was sentenced to two years in prison in a related criminal action. On April 23, 2002, Jeffrey Grayson pleaded guilty to charges in a related criminal action.