U.S. Securities and Exchange Commission
Litigation Release No. 18839 / August 19, 2004
Securities and Exchange Commission v. Upshaw and Associates, L.L.C. et al. (U.S.D.C. N.D. Ill., Civil Action Number 04 C 5437, filed August 18, 2004)
On August 18, 2004, the Commission obtained an Order of Permanent Injunction and Other Equitable Relief (Order of Permanent Injunction) against defendants James E. Upshaw, Sr. (Upshaw) and Upshaw and Associates, L.L.C. (Upshaw and Associates), enjoining them from violating the anti-fraud and registration provisions of the securities laws. The Order of Permanent Injunction also freezes the assets of the Upshaw and Upshaw and Associates pending the resolution of the appropriate amount of disgorgement and civil penalties, requires the defendants to give an accounting, prohibits document destruction and permits expedited discovery. The defendants consented to the Order of Permanent Injunction without admitting or denying the allegations of the Commission's complaint.
In its complaint, which was filed on August 18, the Commission charged that Upshaw's investment scheme was an "affinity fraud," targeting members of the African-American community, including African-American churches and their members. Upshaw is 47 years old and a resident of Oak Brook, Illinois. The Commission alleged that, from at least October 2000 to the present, Upshaw raised at least $6.1 million from more than 130 investors through the unregistered offer and sale of securities in the form of high return promissory notes, which were issued by Upshaw & Associates. According to the complaint, Upshaw represented to investors that he would invest their funds in large-cap U.S. stocks, Treasury bills and commercial paper, guaranteeing returns of up to 10% per month. Upshaw, however, invested little, if any, investor proceeds in the manner promised. Instead, Upshaw used investor funds to pay returns to other investors, fund business ventures for himself, his wife, and his friends, and to purchase a luxury home and two luxury cars. In addition, Upshaw made a series of misrepresentations regarding the safety of the investments, falsely stating that the returns were guaranteed and insured. The majority of investors in Upshaw's scheme reside in Illinois, Ohio and California.
The complaint alleged that, by the above conduct, Upshaw and Upshaw and Associates violated 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. In addition to the permanent injunctive relief already obtained, the Commission also seeks the entry of an order requiring defendants to disgorge ill-gotten gains and pay civil penalties.
The Commission acknowledges the assistance of the Securities Department of the Illinois Secretary of State's office and the Illinois Attorney General's office in the investigation of this matter.