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U.S. Securities and Exchange Commission

SEC Charges Bogus PIPE Promoters in $52 Million Ponzi Scheme


Washington, D.C., Sept. 15, 2008 — The Securities and Exchange Commission today charged an Irvine, Calif., attorney and two other promoters for conducting a $52.7 million Ponzi scheme in which they sold investors bogus PIPE (private investment in public equity) investments, promised unrealistic profits, and misappropriated more than $20 million of investors' funds to function as their own personal piggy bank.

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The SEC's complaint alleges that attorney Jeanne M. Rowzee along with James R. Halstead of Santa Ana, Calif., and Robert T. Harvey of Prosper, Texas, told investors that Rowzee was an experienced securities attorney who personally screened and selected each PIPE investment after thorough due diligence. Contrary to these representations, they did not place investor funds in PIPE investments. Rowzee, Halstead, and Harvey instead used new investor funds to pay principal and returns to earlier investors, and to finance their own personal endeavors such as trips to Las Vegas, property purchases, and alimony payments.

"Investors must be wary of promoters, even securities attorneys or other purported 'experts' who offer investment opportunities with high returns but fail to disclose complete and verifiable information about the investment they're touting," said Rosalind R. Tyson, Regional Director of the SEC Los Angeles Regional Office. "In this case, as alleged in our complaint, the so-called PIPE investments did not exist. The defendants raised millions of dollars from unsuspecting investors and simply used it to enrich themselves."

The SEC's complaint, filed in federal court in Santa Ana, Calif., alleges that from at least March 2004 through December 2006, the defendants sold the purported PIPE investments to investors, promising returns of 19 to 54 percent within 12 to 16 weeks. The SEC's complaint also alleges that Harvey formed a California limited liability company, Harvest Income LLC, to pool investor funds to invest in the purported PIPE investments. The defendants allegedly solicited business clients and acquaintances and generated word-of-mouth referrals.

According to the SEC's complaint, Halstead misappropriated at least $10.4 million of investor funds to support an extravagant lifestyle that has included frequent trips to Las Vegas and three luxurious homes. He also used the funds to pay living expenses for his wife, children, and others. Rowzee misappropriated at least $5.6 million of investor funds to pay her home mortgage and credit card bills, and purchase property in Arizona. Harvey misappropriated at least $2 million of Harvest Income funds to pay his personal credit card bills and other expenses, including alimony payments to his ex-wife. Harvey also paid himself approximately $2.3 million in purported "management fees."

The SEC's complaint charges the defendants with violating the registration and antifraud provisions of the federal securities laws and seeks permanent injunctive relief, disgorgement and financial penalties.

The Commission acknowledges the assistance of the Federal Bureau of Investigation (FBI) and the California Department of Corporations in this matter.

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For more information, contact:

Andrew Petillon
Associate Regional Director
Los Angeles Regional Office
(323) 965-3214

Kelly Bowers
Senior Assistant Regional Director
Los Angeles Regional Office
(323) 965-3924

John M. McCoy
Regional Trial Counsel
Los Angeles Regional Office
(323) 965-4561



Modified: 09/15/2008