SEC v. Christopher Freeman Brogdon Case No. 15-civ-8173 (KM) (D.N.J.)

SEC v. Marrien Neilson
Case No. 16-cv-5475 (KM-JBC) (D.N.J.)

In the Matter of BOKF, NA 
Admin. Proc. File No. 3-17533

In the Matter of Lawson Financial Corporation, et al.
Admin. Proc. File No. 3-17901

In the Matter of John T. Lynch, Jr.
Admin. Proc. File No. 3-17902

On November 20, 2015, the Commission filed a complaint seeking emergency relief against Christopher Freeman Brogdon (“Brogdon”) and named Connie Brogdon, Tygh Brogdon, Brogdon Family LLC, Gordon Jensen Healthcare Association, Inc., JRT Group Properties, LLC, Mobama Nursing, LLC, National Assistance Bureau, Inc., Saint Simons Healthcare, LLC and Winter Haven Homes, Inc. as relief defendants (“Brogdon District Court Action”). The complaint alleged that, since 1992, Brogdon amassed nearly $190 million through dozens of municipal bond and private placement offerings (“Brogdon Bond Offerings”) in which investors supposedly earn interest from revenues generated by the nursing home, assisted living facility, or other retirement community project supported by their investment. Among other securities law violations, Brogdon commingled investor funds instead of using the money to finance the project described to investors in the disclosure documents for each offering. From the commingled accounts, he diverted investor money to other business ventures and personal expenses. See Complaint.

On December 28, 2015 a judgment was entered in the Brogdon District Court Action against Brogdon and his wife, Connie Brogdon (collectively, the “Brogdons”), ordering them to redeem 13 bond offerings and 6 private placement offerings listed on Exhibit B to the judgment by paying in full all accrued interest, principal outstanding, and any other amounts required by the governing bond or private placement documents (the bondholders and investors collectively, referred to herein as the “Investors”). The Brogdons were ordered to propose a plan, subject to approval of the Monitor and the Court, for the fair, prompt, and efficient disposition or refinancing of certain entities and assets listed on Exhibit C to the judgment and, if necessary, the personal assets of the Brogdons, in order to satisfy their obligations under the judgment. See the Brogdons’ Judgment. Soneet R. Kapila was appointed to act as Monitor in this action to protect investors. See Order Appointing Monitor On Consent.

On July 19, 2016, the Court entered an order approving the plan for disposition or refinancing of properties and payment of Investors in further of settlement (the “Plan”). See the Court’s Order.

On September 9, 2016, the Commission filed a related complaint against Marrien Neilson (“Neilson”), a former senior vice president of BOKF, NA (“BOKF”), who was chiefly responsible for the failures of BOKF’s trust department while overseeing what turned out to be fraudulent bond offerings managed by Brogdon. See Neilson’s Complaint. On March 3, 2017, the Court ordered Neilson pay a total of $55,000.00 in disgorgement, prejudgment interest, and civil penalties to the Commission (“Neilson Judgment”). See Neilson’s Judgment.

Also on September 9, 2016, the Commission instituted and simultaneously settled related administrative and cease-and-desist proceedings (the “BOKF Order”) against BOKF, a national banking association and registered municipal securities dealer and advisor, who served as indenture trustee for 39 of the Brogdon Bond Offerings and as dissemination agent for 33 of those offerings. In the BOKF Order, the Commission found that, since 2000, BOKF, while serving as indenture trustee and dissemination agent for the majority of the Brogdon Bond Offerings, allowed Brogdon to perpetuate this fraud while failing to perform its disclosure and notice obligations to bondholders. The Commission ordered BOKF to pay a total of $1,667,721.36 in disgorgement, prejudgment interest, and civil money penalties to the Commission. See the Commission’s order:  Release No. 33-10204. 

On April 5, 2017, the Commission instituted and simultaneously settled another related administrative and cease-and-desist proceedings (the “Lawson Order”) against Lawson Financial Corporation (“LFC”), a registered broker-dealer, and Robert Lawson (“Lawson”), its founder and CEO. In the Lawson Order, the Commission found that, from 2010 to 2014, LFC and Lawson violated the antifraud provisions of the federal securities laws in connection with LFC’s underwriting of the Brogdon Bond Offerings. Among other things, LFC and Lawson conducted inadequate due diligence on Brogdon’s bond offerings, depriving investors of material information related to the offerings and allowing Brogdon to perpetuate his fraud. The Commission ordered LFC and Lawson to pay a total of $476,652.12 in disgorgement, prejudgment interest, and civil money penalties to the Commission. The civil money penalties were ordered to be paid pursuant to a 12-month payment plan. See the Commission’s order: Release No. 33-10334. 

Also on April 5, 2017, the Commission instituted and simultaneously partially settled another related administrative and cease-and-desist proceedings (“Lynch Order”) against John T. Lynch, Jr. (“Lynch”). In the Lynch Order, the Commission found that, from at least June 2010 to December 2013, Lynch served as an investment banker and underwriter’s counsel for LFC in connection with underwriting 12 of the fraudulent Brogdon Bond Offerings. Among other things, Lynch conducted only a cursory inquiry into information provided by Brogdon, his representatives and other parties with respect to the financing. Lynch also failed to obtain a written continuing disclosure undertaking from Brogdon as required by Exchange Act Rule 15c2-12(b)(5)(i). Finally, Lynch was listed as underwriter’s counsel in official statements of the Brogdon Bond Offerings and received compensation as such; however, Lynch was not qualified to serve as underwriter’s counsel because he was an inactive member of the Pennsylvania bar. The Commission ordered Lynch to pay a total of $44,676.00 in disgorgement, prejudgment interest, and civil money penalties to the Commission pursuant to a 12-month payment plan. See the Commission’s order: Release No. 33-10335. 

On August 21, 2017, the Court entered an order authorizing the Commission to transfer all funds it had collected, and that it may subsequently collect, pursuant to the Neilson Judgment, BOKF Order, Lawson Order, and the Lynch Order to the Monitor for distribution to Investors in accordance with the Court-approved Plan, as amended, in the Brogdon District Court Action. See the Court’s Order.

On October 19, 2017 the Commission issued an order establishing Fair Funds for the funds paid, and to be paid, pursuant to the BOFK Order and Lawson Order and authorizing the Fair Funds to be transferred to the court-appointed Monitor, in the related, Brogdon District Court Action, so that the Fair Funds can be combined with the funds obtained in that action and distributed by the Monitor to harmed Investors. See the Commission’s order:  Release No. 34-81905.

On November 6, 2017, in SEC v. Marrien Neilson the Court established a Fair Fund and directed the transfer of funds to the court-appointed Monitor, in the related, Brogdon District Court Action, so that the Fair Fund can be combined with the funds obtained in that action and distributed by the Monitor to harmed Investors.

For more information regarding this distribution, please contact the Monitor:

Soneet R. Kapila
Telephone Number: 954-761-1011
Email: kapila@kapilamukamal.com
Website: http://www.kapilamukamal.com/sec-v-christopher-freeman-brogdon-et-al/