U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18516 / December 22, 2003
Securities and Exchange Commission v. SEC v. Delta Rental Systems, Inc., et al., Case No. 91-2136-CIV-DAVIS (S.D. Fla.)
The Securities and Exchange Commission ("Commission"), the United States Attorney for the Southern District of Florida and the United States Postal Inspection Service, Miami Division, announced the unsealing of a twenty-five count Indictment yesterday against Philip R. Gratz, a former stockbroker who conducted business as Phoenix World Wide Enterprises, Inc. ("Phoenix"). On December 16, 2003, a federal grand jury sitting in Miami, Florida, returned an Indictment charging Gratz with nine counts of mail fraud, five counts of wire fraud, four counts of securities fraud, and seven counts of criminal contempt. The maximum penalty for mail, wire, and securities fraud charges is 20 years' imprisonment as to each count; and there is no statutory maximum penalty for criminal contempt. Gratz was arrested at his residence in Marlton, New Jersey.
As background, on or about April 30, 1992, the United States District Court for the Southern District of Florida in the case of SEC v. Delta Rental Systems, Inc., et al., Case No. 91-2136-CIV-DAVIS (S.D. Fla.) entered a Final Judgment of Permanent Injunction and Other Relief (the "Permanent Injunction") against Gratz, which prohibited him from committing future violations of, among others, the anti-fraud provisions of the federal securities laws. In violation of the Permanent Injunction, from in or around November 1998, to in or around March 2003, Gratz, while doing business as Phoenix, conducted a scheme to defraud in which he raised approximately $8.9 million from various investors located in different states throughout the country, including investors residing in the Southern District of Florida.
On March 20, 2003, the Commission filed an emergency civil contempt action against Gratz in the United States District Court for the Southern District of Florida in order to put a halt to the scheme. In that action, the Commission charged Gratz with disobeying the provisions in the Permanent Injunction that enjoined him from future violations of the anti-fraud provisions of the federal securities laws. The following day, the Court granted the SEC's request for emergency relief, entered a temporary asset freeze, and appointed a Receiver to take over Phoenix. On May 20, 2003, with Gratz's consent, the Court entered an order on civil contempt sanctions, ordering Gratz to disgorge all ill-gotten gains, imposing an asset freeze, and awarding attorney's fees. On October 22, 2003, with Gratz's consent, the Court entered a Final Judgment on Civil Contempt, ordering Gratz to disgorge $7,236,417, together $60,303.48 as prejudgment interest, which amount represents the proceeds he received.
The Commission's filing of its emergency civil contempt action against Gratz in March 2003 was derived from the same activity that led to the indictment. The indictment charges that to carry out his scheme, Gratz solicited individuals to invest money with him in return for guaranteed annual "interest" payments ranging from 25% to 50%. During investor solicitations, Gratz falsely represented to investors, among other things, that he would invest all of their funds in the stock market. In truth, Gratz misappropriated over $3 million in investor funds for his and his family's personal use and benefit, including to purchase, among other things, a luxury home, real estate properties, two Mercedes Benz automobiles, artwork, jewelry and watches, home furnishings, a vacation to St. Barthelemy, a country club membership; to lease a Range Rover sport utility vehicle; and to pay for personal credit card expenses, which included, among other things, vacations, airfare, lodging, cruises, limousines, restaurants, designer clothes, and retail store purchases. According to the indictment, Gratz induced investors to invest money by making false statements and omissions of material facts concerning, among others, the use of investor funds, the profitability of Gratz's securities trading, and Gratz's prior criminal and disciplinary history. The criminal contempt counts charged in the indictment stem from Gratz's violation of the Permanent Injunction.