U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19347 / August 24, 2005
SECURITIES AND EXCHANGE COMMISSION v. RAINMAKER MANAGED LIVING, LLC, A NEW YORK LIMITED LIABILITY COMPANY; RAINMAKER MANAGED LIVING, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; FURMAN & DILMAGHANI P.C.; ALIREZA DILMAGHANI; SIDNEY F. LEVINE; AND JAMES JOSEPH CONWAY, No. CV 05-06121 (SJO) (SHx) (C.D. Cal.)
SEC HALTS MULTI-MILLION DOLLAR ONGOING FRAUD
The Securities and Exchange Commission, on August 22, obtained a temporary restraining order, asset freeze and other emergency relief in a civil fraud action filed against six defendants: Rainmaker Managed Living, LLC, a New York limited liability company; Rainmaker Managed Living, LLC, a California limited liability company; Furman & Dilmaghani P.C., a New York law firm; Alireza Dilmaghani, age 41, an attorney; Sidney F. Levine, whose age and residence are not known; and James Joseph Conway, 50, of San Pedro, California. The Commission's complaint alleges that the defendants raised at least $7.03 million from investors by representing, among other things, that investor money would be kept in an attorney trust or escrow account to be used solely for purchasing and developing properties as assisted living facilities, and then, contrary to their representations, misappropriated over half the money for their own personal use and to make purported interest payments to investors.
The Commission's complaint alleges that since at least August 2004, the defendants have raised over $7 million, and probably more than $8 million, from investors in an unregistered securities offering, promising a "guaranteed" 25% annual return. The defendants tell investors that they use investor funds to purchase, build and refurbish assisted living facilities for retirees, and that no management fees will be taken until the facilities are profitable. The complaint further alleges that the defendants repeatedly emphasize the key role of the associated law firm in the assisted living center project, including the fact that until the assisted living centers generate a profit, the defendants will pay the 25% annual return from other sources, such as the law firm's revenues. Contrary to these representations, investor funds were not segregated and used as represented. Instead the defendants have made payments, out of the account in which investors deposited their funds, totaling over $3.75 million to themselves, and over $850,000 back to investors as purported interest.
The Commission's complaint alleges that all of the defendants violated the securities registration and antifraud provisions of the federal securities laws, 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. As to Conway, the complaint further alleges that he violated the broker-dealer registration provisions of Section 15(a) of the Exchange Act. In addition to emergency relief, the Commission's complaint seeks from each defendant preliminary and permanent injunctions, disgorgement with prejudgment interest, and a civil penalty.
Acting on the Commission's lawsuit, the Honorable S. James Otero, United States District Judge for the Central District of California, issued a temporary restraining order against Rainmaker NY, Rainmaker CA, Furman & Dilmaghani P.C., Dilmaghani, Levine, and Conway and issued orders freezing the defendants' assets, requiring accountings from the defendants, prohibiting the defendants from destroying documents, and ordering expedited discovery. A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for September 6, 2005.
The Commission acknowledges the assistance of the United States Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation, which executed a search warrant on the office of Rainmaker NY and Furman & Dilmaghani P.C. on August 23, 2005. In addition, the Commission acknowledges the assistance of the Office of the New York State Attorney General, and the California Department of Corporations.