U.S. Securities and Exchange Commission
Litigation Release No.18419 / October 17, 2003
SEC v. Steven E. Thorn, et al., (U.S.D.C. S.D. Ohio, Civil Action 01-CV-290, filed April 2, 2001)
SEC Obtains Summary Judgement Against Several Defendants And Relief Defendants In $75 Million Prime Bank Scheme
On October 14, 2003, the Honorable Edmund A. Sargus, Jr. of the U.S. District Court for the Southern District of Ohio granted summary judgment in favor of the Commission and against defendants Steven E. Thorn (Thorn), Derrick McKinney (McKinney), and Rick Malizia (Malizia) and his company, RMAZ, LLC (RMAZ), holding them liable for raising approximately $75 million from investors in a series of fraudulent prime bank schemes and using investor funds to conduct a massive Ponzi scheme. The Court found that the defendants had violated Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and that Thorn, McKinney and Malizia violated Sections 15(a) and 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder. The Court also found that several relief defendants, which include Roger Weizenegger (Weizenegger), Frederick Harris (Harris), Blue Chip Investments, Inc. (Blue Chip), Solo Ventures, LLC (Solo Ventures), Carl Jackson (Jackson), Redmill Holdings, LLC (Redmill), Edgar Mojica (Mojica), and Durietha Dziorney (Dziorney), had received ill-gotten gains in connection with the fraudulent scheme and had no legitimate claims to the payments they received from the defendants.
In granting the Commission's motion for summary judgment, the Court ruled that the defendants should be permanently enjoined from future violations of the antifraud and broker-dealer registration provisions of the securities laws and awarded the following amounts of disgorgement and pre-judgment interest against the defendants and relief defendants: 1) defendant Thorn was ordered to disgorge $5,070,395 of ill-gotten gains plus $1,802,132 of pre-judgment interest; 2) defendant McKinney was ordered to disgorge $54,200 plus $16,499 of pre-judgment interest and was held jointly and severally liable for $1,434,757 of disgorgement and $294,632 of pre-judgment interest imposed against his company, International Trading Partners, Ltd., pursuant to a previous Court order; 3) defendant Malizia was ordered to disgorge an amount to be determined later by the Court; 4) relief defendant Weizenegger was ordered to disgorge $1,451,920 and $632,643 of pre-judgment interest; 5) relief defendants Harris and his two companies, Blue Chip and Solo Ventures, were ordered to disgorge $505,920 plus $139,867 of pre-judgment interest; 6) relief defendants Jackson and Redmill were ordered to disgorge $282,380 plus $70,721 of pre-judgment interest; 7) relief defendant Mojica was ordered to disgorge an amount to be determined later by the Court; and 8) relief defendant Dziorney was ordered to disgorge $32,919 plus $5,081 of pre-judgment interest. The Court had previously ordered Dziorney to surrender a $61,500 diamond ring that Thorn had bought for her with investor funds. Lastly, the Court ordered Thorn, Malizia, and McKinney to pay civil penalties in amounts to be determined at a later hearing.
The Commission alleged that from February 1998 through April 2001, the defendants and others raised approximately $75 million through the offer and sale of investments in a series of purported European bank trading programs. The defendants' programs exhibited many of the characteristics of the fraudulent prime bank schemes that the Commission, the Federal Reserve Board and other regulators have warned do not exist. The defendants told investors that the programs involved the trading of bank instruments issued by foreign banks; they promised investors returns ranging as high as 200 percent per month; they assured investors that the investments were risk free; and they warned investors that participation in the trading programs required total secrecy and confidentiality. In reality, the defendants dissipated much of the investors' funds to pay personal and business expenses, purported returns to earlier investors, make payments to the relief defendants and undisclosed salaries and fees for themselves.
The Court previously entered judgments against several other defendants and relief defendants. The Court entered a judgment on June 22, 2001, against defendant Craig Morgan in which he consented to be permanently enjoined from violating Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder; on December 23, 2002 the Court ordered Morgan to pay a $20,000 civil penalty. On April 12, 2001, the Court entered a judgment against defendant Karen Estrada (Estrada) in which she consented to be permanently enjoined from violating Section 17(a) of the Securities Act, and Sections 10(b), 15(a), and 15(c) of the Exchange Act, and Rules 10b-5 and 15c1-2 thereunder. On the same day, the Court also entered a judgment against her companies, Fund Global, LLC and Global Equity Group, LLC, in which they consented to be permanently enjoined from violating Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5. On September 30, 2002, the Court ordered Estrada to disgorge $625,975 and her companies to disgorge $1,491,000. Estrada's disgorgement award is presently subject to a pending motion for reconsideration. On February 21, 2003, the Court entered a default judgment against International Trading Partners, Ltd. permanently enjoining it from violating Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and ordering it to pay $1,434,757 in disgorgement plus $294, 632 in prejudgment interest. On April 28, 2003, the Court entered default judgments against several relief defendants ordering: 1) Allen George to disgorge $79,300 plus $13,495 in pre-judgment interest; 2) Leon Heard and his company, Alice's International Salon & Spa to disgorge $80,000 plus $5,901 in pre-judgment interest; and 3) Rene Sorra and his company, RLS International Investors, LLC to disgorge $410,125 plus $83,240 in pre-judgment interest.