U.S. SECURITIES & EXCHANGE COMMISSION
Litigation Release No. 18281 / August 8, 2003
United States v. John R. Powell, Criminal Case No. CR 03-782 (C.D. Cal.)
JOHN R. POWELL, MOVIE PRODUCER AND FORMER STOCKBROKER, INDICTED FOR LYING TO THE SEC
On August 5, 2003, a federal grand jury indicted John R. Powell, former President of Irvine Securities, Inc. and currently a movie producer, for making false statements to the Securities and Exchange Commission. The indictment charges Powell with making false statements to a federal agency and obstruction of justice. The indictment alleges that during 2002, the Commission proposed settling a civil case filed by the Commission against Powell and others. During the course of settlement discussions, the Commission staff stated that it would consider waiving a portion of the proposed amount of disgorgement and an additional money penalty if Powell was unable to pay the full amount. The Commission required Powell to submit sworn financial statements demonstrating his inability to pay. Powell submitted two sworn financial statements, dated January 2002 and July 2002.
The indictment alleges that in each of the financial statements, Powell claimed he had a negative net worth and that he had no equity in his Laguna Beach house because his mortgage was essentially equal to the property's "quick sale" market value. The indictment further alleges that Powell, in fact, knew at the time he submitted the January 2002 financial statements that his residence had been appraised at a value of over $3 million, that a mortgage lender would loan him at least $1,750,000 against the property, and that he had at least $500,000 in equity in the property. In Powell's July 2002 financial statements submitted to the Commission, Powell did not disclose that he had refinanced his house in February 2002 to withdraw more than $428,000 in cash from the property. Nor did the financial statements disclose that Powell deposited this money directly into a bank account in the name of a film production company that Powell owned and controlled. Powell subsequently wrote checks on this bank account to pay for his monthly mortgage payments and other living expenses.
On October 10, 2002, in an action brought by the Commission, the United States District Court for the Central District of California entered an injunction prohibiting Powell from violating 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. For more information, see Litigation Release Nos. 18182 (June 9, 2003), and 15822 (July 29, 1998).
The criminal case is being prosecuted by the United States Attorney's Office for the Central District of California.