U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

SEC Halts Ponzi Scheme Targeting Retired L.A. Bus Drivers


Washington, D.C., March 4, 2010 — The Securities and Exchange Commission today announced that it has filed fraud charges against a Los Angeles-based investment advisory firm and its principal and obtained an emergency court order to halt a $14.7 million Ponzi scheme targeting retired Los Angeles bus drivers.

Additional Materials

The SEC alleges that Thomas L. Mitchell and his firm Mitchell, Porter & Williams, Inc. (MPW), solicited clients to invest their retirement money in promissory notes offered by two other entities he operates (Adivanala AA Investment Trust and AB3, Inc.). Many of MPW's clients are recently retired bus drivers from the Los Angeles County Metropolitan Transit Authority (MTA) who were referred to the firm by former co-workers. The SEC alleges that Mitchell met with the prospective clients and encouraged them to take their retirement pensions as a lump-sum payment rather than a monthly annuity, and give him the money to manage for them. Rather than investing the money into stock, bonds or real estate as promised, Mitchell instead orchestrated a Ponzi scheme in which money from new investors was used to pay interest to existing investors.

The Honorable Philip S. Gutierrez for the U.S. District Court for the Central District of California granted the SEC's request on March 3 for a temporary restraining order and asset freeze against Mitchell and his companies.

"Mitchell and his firm jeopardized the hard-earned money of retirees and egregiously abused a position of trust with these clients," said Rosalind Tyson, Director of the SEC's Los Angeles Office.

According to the SEC's complaint, Mitchell raised funds from 82 clients in the fraudulent promissory note offering, and he promised investors fixed interest returns ranging from 10 to 15 percent annually for three or six-year terms. Mitchell made various claims to investors as to how he could generate such large returns, including investing in stocks, bonds, and real estate. In a letter to one client dated June 1, 2008, and signed by Mitchell, he stated that MPW had "been privileged to assist a number of LACMTA retirees with establishing retirement plans…" The letter further touts MPW's association with a number of well-known financial institutions, and concludes by advising the client to open an IRA rollover account as a first step.

The SEC alleges that instead of making the promised investments, Mitchell has simply used new investor money to make interest payments due to existing investors based upon their promissory notes. Moreover, Mitchell has diverted approximately 20 percent of new investor money for himself in the form of "operating expenses" and used it to fund his luxury car payments, mortgage payments, payments for a cruise, and tickets to sporting events.

Judge Gutierrez has scheduled a court hearing for March 16, 2010, on the SEC's motion for a preliminary injunction.

# # #

For more information about this enforcement action, contact:

Michele Wein Layne
Associate Regional Director, SEC's Los Angeles Regional Office
(323) 965-3850

Gregory C. Glynn
Senior Trial Counsel, SEC's Los Angeles Regional Office
(323) 965-3890

Marc J. Blau
Assistant Regional Director, SEC's Los Angeles Regional Office
(323) 965-3975



Modified: 03/04/2010