U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19219 / May 4, 2005
Securities and Exchange Commission v. David Tanner, individually and d/b/a Capital Enhancement Club, Rocky D. Spencer, Marroc Corp. and Richard P. Kringen, Defendants, and Margaret Spencer, Omnibus LLC, Vectra Resources LLC and Dynamic Environmental Solutions, Inc. Relief Defendants, Civil Action No. 05-4057-SAC, (United States District Court; District of Kansas; Topeka Division)
SEC SUES TO HALT INTERNET HIGH YIELD OFFERING FRAUD AND TO FREEZE ASSETS FOR INVESTORS
On May 4, 2005, the SEC filed an emergency action in United States District Court for the District of Kansas against David Tanner, d/b/a Capital Enhancement Club ("CEC"), Rocky D. Spencer, Marroc Corp. ("Marroc") and Richard P. Kringen charging that the defendants, using the name CEC, are engaged in an ongoing fraudulent Internet-based high yield investment scheme that raised at least $15 million in the last six months, most of which was sent offshore. The Court granted a temporary restraining order, asset freeze and other emergency relief against the defendants.
In its complaint, the Commission alleges that CEC promised to pay monthly interest of approximately 7% to 11% (or annual returns of 120% to 260%) representing profits purportedly from "trading in international markets." Tanner, CEC's originator and managing partner, maintains the CEC website that instructs new investors on how to purchase the CEC investment and issues monthly statements and newsletters to investors. Kringen, who was named in a cease-and-desist order by the Kansas Office of the Securities Commissioner for an earlier prime bank scheme, holds invitation-only meetings to entice new investors. Spencer, a convicted felon, controls at least one bank account, held in Marroc's name, in which more than $5 million of investor funds was deposited. In reality, the CEC's "international trading program" does not exist, investors are not told about the backgrounds of Spencer and Kringen, and Spencer has misappropriated more than $1.5 million for personal expenses and Ponzi payments.
The Commission also names in its complaint, as relief defendants, Margaret F. Spencer, the mother of defendant Spencer, Omnibus LLC, Vectra Resources LLC and Dynamic Environmental Solutions, Inc. based on their alleged improper receipt of investor funds. The Court issued an order freezing any investor funds in the relief defendants' control.
The Commission alleges in its complaint that defendants Tanner, individually and d/b/a CEC, Spencer, Marroc and Kringen each violated Sections 5(a), 5(c) and 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 each the defendants permanent injunctions, disgorgement plus prejudgment interest and civil money penalties.
The Commission acknowledges the assistance of the Kansas Office of the Securities Commissioner.