Securities and Exchange Commission v. Mark D. Montana, individually and d/b/a M & M Properties, and M & M Financial, Inc., Defendants, and Karen E. Montana, Relief Defendant.
Civil Action No. G-04-542, (United States District Court; Southern District of Texas; Galveston Division)
On September 9, 2004, the SEC announced that the United States District Court for the Southern District of Texas granted the SEC's request, in its complaint filed the same day, for emergency relief, including a temporary restraining order, asset freeze, the appointment of a receiver, and orders expediting discovery and prohibiting document destruction. The Court ordered the relief against the defendants named in the Commission's complaint: Mark D. Montana, individually and d/b/a M & M Properties, and M & M Financial, Inc. ("M & M Financial"). The Commission alleges in its complaint that the defendants committed securities fraud in connection with a fraudulent scheme that has elicited at least $1.8 million from investors, many of whom are also securities brokerage customers of the defendants.
In its complaint, the Commission alleges that the defendants are defrauding investors in the following manner: 1) Montana promises investors that M & M Financial will purchase at a discount, with the investors' pooled funds, large blocks of securities that he will select using his vast securities industry expertise; 2) Montana promises investors, and apparently in some instances guarantees investors, an annual return of up to 15 percent; 3) Montana assures the investors that their funds will remain safe, claiming that their moneys are SIPC insured; 4) on a monthly or quarterly basis, as evidence of the purported success and safety of the investments, Montana prepares and mails to the investors "account statements" purportedly reflecting the composition and value of their investments, and furnishes some investors automatic principal withdrawals. The Commission further alleges that the defendants are fraudulently failing to disclose the following facts: 1) that the defendants are misappropriating a large portion of the investors' funds; 2) that the defendants are not purchasing the securities reflected on the "account statements" Montana prepares and disseminates to the investors; and 3) the defendants, in classic "Ponzi" fashion, are using the investment monies of new investors to redeem the investments of preceding investors.
The Commission named in its complaint, as a relief defendant, Karen E. Montana, the wife of defendant Mark D. Montana, based on her alleged improper receipt of investor funds. The Commission seeks to freeze any investor funds in her control.
The Commission alleges in its complaint that the defendants Mark D. Montana, individually and d/b/a M & M Properties, and M & M Financial, Inc. each violated Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief that has been granted, the Commission seeks against the defendants permanent injunctions, disgorgement plus prejudgment interest and civil money penalties.
The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the Southern District of Texas and the Federal Bureau of Investigation.
