SEC v. Falor, et al.
Case No. 09-cv-05644 (N.D. Ill.)
On September 11, 2009, the Commission filed a complaint against Robert D. Falor ("Falor") and named his wife, Jennifer L. Falor, as a relief defendant ("Relief Defendant"). The complaint alleged that, from approximately July 2004 through April 2005, Falor fraudulently offered and sold approximately $9 million of securities to approximately 55 investors in the form of membership interests in various limited liability companies that he controlled and operated. Falor offered and sold securities in Printers Row Investors, LLC, South Beach Investors, LLC, and Tides Hotel Investors, LLC for the purported purpose of buying old hotels, converting them to hotel-condominiums, and selling the hotel-condominium units at a profit ("conversion projects"). Contrary to these representations, Falor used a majority of the investors' money to make payments to himself and to his wife, to buy luxury automobiles, to lease private airplanes, and to finance other real estate projects. Due to the misappropriation of investor funds, Falor had insufficient capital to complete the conversion projects. All of the properties that were the subject of the conversion projects have been sold and any funds received from these sales were distributed to Falor, not the investors. See Complaint.
On August 6, 2013, the Relief Defendant was found liable for $140,100.00 in disgorgement and prejudgment interest, of which $125,000.00 was deemed satisfied by funds previously seized by the Court. The Relief Defendant paid the remaining $15,100.00 as ordered. The Clerk was ordered to deposit the funds into an interest bearing account with the Court Registry Investment System (collectively, the "Fund"), pending further order of the Court. See the Relief Defendant's Final Judgment.
On February 27, 2015, Falor was found liable for $14,509,370.49 in disgorgement, prejudgment interest, and penalties. Falor has not made any payments to date, and the matter has been referred to the Commission's Office of Collections. See Falor's Final Judgment.
On May 21, 2015, the Court appointed Damasco & Associates LLP as the Tax Administrator to fulfill the tax obligations of the Fund.
On February 1, 2016, the Commission collected $20,865.00 from the Florida Department of Financial Services in unclaimed funds held in the name of Robert Falor.
On April 14, 2016, the Commission filed a motion to appoint a plan administrator, approve a distribution plan, transfer funds, and authorize payment of future tax obligations and fees and expenses of the Tax Administrator. The motion proposed the appointment of Michael S. Lim, a Commission employee, as the Plan Administrator, and the distribution plan in the motion ("Distribution Plan"), sought to distribute the Fund, funds collected from the Florida Department of Financial Services, and any future funds to be paid by or collected from Falor (the "Distribution Fund"). See the Commission's Motion.
On April 20, 2016, the Court entered an order, which was revised on May 18, 2016 and May 19, 2016, that granted the SEC's motion. In the order, the Court appointed Michael S. Lim as the Plan Administrator, approved the Distribution Plan, authorized the transfer of the Distribution Fund for distribution to injured investors, and authorized the Commission to pay the future tax obligations and Tax Administrator's fees and expenses from the Distribution Fund. See the Court's Order dated May 19, 2016.
The Distribution Plan provides that the distribution of the Distribution Fund shall be made on a pro rata basis to all Eligible Recipients based upon the investor's pro rata investments with Falor as set forth in Exhibit A of the Distribution Plan (attached to the Commission's Motion above).
On July 13, 2016, the Commission filed a motion to disburse $129,476.17 from the Distribution Fund to Eligible Recipients. See Motion to Disburse Distribution Fund. The Commission amended its motion on July 18, 2016, to change the disbursement amount to $150,307.17. See Amended Motion to Disburse Distribution Fund.
On August 4, 2016, the Court granted the Commission's motion and entered an order to disburse $150,307.17 from the Distribution Fund to Eligible Recipients. See Order Approving Disbursement.
For more information, please contact the Plan Administrator:
Michael S. Lim, Senior Counsel, SEC, Office of Distributions
Telephone Number: (202) 551-4659