UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7529 / April 27, 1998 SECURITIES EXCHANGE ACT OF 1934 Release No. 39918 / April 27, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9587 ------------------------------------------------------------------ ___________________________________ : : ORDER INSTITUTING PUBLIC In the Matter of : ADMINISTRATIVE AND CEASE-AND- : DESIST PROCEEDING PURSUANT TO THOMAS F. FERRIS, : SECTION 8A OF THE SECURITIES : ACT OF 1933 AND SECTIONS 15(b), Respondent. : 19(h), AND 21C OF THE : SECURITIES EXCHANGE ACT OF : 1934, MAKING FINDINGS, AND : IMPOSING REMEDIAL SANCTIONS AND : ORDER TO CEASE AND DESIST ___________________________________ : I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative and cease-and-desist proceeding pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), be instituted against Thomas F. Ferris ("Ferris"). II. In anticipation of the institution of this proceeding, Ferris has submitted an Offer of Settlement, which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings contained in this order, except that Ferris admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, Ferris by his Offer of Settlement consents to the findings and the imposition of the sanctions contained in this Order Instituting Public Administrative and Cease-and-Desist Proceeding Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and Order to Cease and Desist ("Order"). Accordingly, IT IS ORDERED that a proceeding against Ferris be, and hereby is, instituted. III. On the basis of this Order, and the Offer of Settlement submitted by Ferris, the Commission finds that:[1] A.Ferris has been a registered representative since 1984. Ferris was the sole owner and president of, and was associated with, Pacific Capital Partners, Inc. ("Pacific Capital"), a registered broker-dealer, from June 15, 1989, until November 9, 1997, when Pacific Capital's Form BDW became effective (File No. 8-41257). Pacific Capital was located in La Jolla, California. B.Ferris has also been the sole owner and control person of The Sagres Company, Inc. ("Sagres") from 1993 through the present. Sagres is located in La Jolla, California. C.From August 1993 through December 1996, Pacific Capital offered and sold units in two limited partnerships, Recovery Asset Group, Ltd. ("RAG-I") and Recovery Asset Group II, Ltd. ("RAG-II"), to investors. Pacific Capital raised $3 million and $1.79 million from investors in RAG-I and RAG-II, respectively. The business of each of the partnerships is to purchase and either resell or collect on bad debt, such as delinquent credit card accounts. Sagres is the general partner of the RAG-I and RAG-II partnerships. D.From March 1994 through January 1995, Ferris caused RAG-I to make distributions to investors which exceeded the partnership's gross revenue from debt collections. Similarly, from November 1995 through April 1996, Ferris caused RAG-II to make distributions which exceeded revenues to its investors. Specifically, undisclosed to investors, Ferris caused RAG-I and RAG-II to supplement the distribution payments by returning a portion of the investors' original capital investment in each partnership. E.Ferris caused Pacific Capital and its sales representatives to make false statements about the distribution payments described in Paragraph III.D. to prospective investors in RAG-I and RAG-II. Ferris prepared periodic supplements to the partnerships' offering documents which stated the amount of the distribution payments to previous investors. The supplements did not disclose that investor money was partially used to make up the distributions. Based on the supplements, sales representatives at Pacific Capital also conveyed similar information on the telephone to prospective investors. Ferris failed to disclose, and caused Pacific Capital's failure to disclose, that the distributions partially consisted of a return of the investors' money. F.Ferris willfully violated Section 17(a) of the Securities Act by, directly or indirectly, using the means and instruments of transportation or communication in interstate commerce and by use of the mails in the offer or sale of securities: (1) to employ devices, schemes, and artifices to defraud; (2) to obtain money and property by means of untrue statements of material fact and omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (3) to engage in transactions, practices, and a course of business which operated as a fraud or deceit upon purchasers of securities, as is more particularly described in Paragraphs III.C. through E., above. G.Ferris willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by, directly or indirectly, using the means and instrumentalities of interstate commerce and of the mails in connection with the purchase or sale of securities: (1) to employ devices, schemes, and artifices to defraud; (2) to make untrue statements of material facts and to omit to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (3) to engage in acts, practices, and a course of business which operated as a fraud or deceit upon customers, as is more particularly described in Paragraphs III.C. through E. above. H.Ferris willfully aided and abetted and caused Pacific Capital's violations of Section 15(c)(1) of the Exchange Act and Rule 15c1- 2 thereunder by making use of the mails and the means and instrumentalities of interstate commerce to effect transactions in, and to induce and to attempt to induce the purchase and sale of securities otherwise than on a national securities exchange of which Pacific Capital was a member, by: (1) engaging in acts, practices, and a course of business which operated as a fraud or deceit upon Pacific Capital's customers; and (2) making untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, which statements or omissions were made with knowledge or reasonable grounds to believe that the statements or omissions were untrue or misleading, as is more particularly described in Paragraphs III.C. through E. above. IV. On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Ferris' Offer of Settlement. Accordingly, IT IS HEREBY ORDERED that: A.Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Ferris shall cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and causing any violation and any future violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder; B.Ferris be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment company, or investment adviser, with the right to reapply for association after one year and six months to the appropriate self-regulatory organization, or if there is none, to the Commission; and C.Ferris shall, within thirty (30) days after entry of this order, pay a civil money penalty of $20,000 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check, or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (4) submitted under cover letter that identifies Ferris as a respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Elaine M. Cacheris, Regional Director, Securities and Exchange Commission, 5670 Wilshire Blvd., 11th Floor, Los Angeles, CA 90036. By the Commission. Jonathan G. Katz Secretary **FOOTNOTES** [1]:The findings herein are made pursuant to Ferris's Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. SERVICE LIST Rule 141 of the Commission's Rules of Practice provides that the Secretary, or another duly authorized officer of the Commission, shall serve a copy of the Order Instituting Public Administrative and Cease-and-Desist Proceeding Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and Order to Cease and Desist on each person named as a party in the order and their legal agent. The attached Order Instituting Public Administrative and Cease- and-Desist Proceeding Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and Order to Cease and Desist has been served on the following parties and other persons entitled to notice: The Honorable Brenda P. Murray Chief Administrative Law Judge Securities and Exchange Commission Mail Stop 11-6 450 Fifth Street, N.W. Washington, D.C. 20549 Securities and Exchange Commission Branch of Regional Office Assistance Attn: Peter M. Hong Mail Stop 8-9 450 Fifth Street, N.W. Washington, D.C. 20549 Securities and Exchange Commission Pacific Regional Office Attn: Diana K. Tani Kathleen K. Bisaccia Michael R. Wilner 5670 Wilshire Blvd., 11th Floor Los Angeles, CA 90036 Edward J. Gelfand, Esq. Gartenberg Jaffe Gelfand & Stein 11755 Wilshire Blvd., Suite 1230 Los Angeles, CA 90025-1518 Counsel to Thomas F. Ferris Thomas F. Ferris 2120 Caminito Del Barco Del Mar, CA 92014 UNITED STATES SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549 OFFICE OF THE SECRETARY CERTIFIED MAIL RETURN RECEIPT REQUESTED Edward J. Gelfand, Esq. Gartenberg Jaffe Gelfand & Stein 11755 Wilshire Blvd., Suite 1230 Los Angeles, CA 90025-1518 Re:In the Matter of Thomas F. Ferris Dear Mr. Gelfand: Please find enclosed an Order Instituting Public Administrative and Cease-and-Desist Proceeding Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and Order to Cease and Desist. The findings and remedial sanctions imposed are in accordance with the Offer of Settlement, dated February 20, 1998, which your client, Thomas F. Ferris, submitted to the Commission and which the Commission has determined to accept. The sanctions imposed by the enclosed Order shall be effective immediately. If you have any questions or wish to discuss any aspect of the proceedings, you may contact Diana K. Tani, Assistant Regional Director of the Commission's Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036 Sincerely, Jonathan G. Katz Secretary Enclosure UNITED STATES SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549 OFFICE OF THE SECRETARY CERTIFIED MAIL RETURN RECEIPT REQUESTED Thomas F. Ferris 2120 Caminito Del Barco Del Mar, CA 92014 Re:In the Matter of Thomas F. Ferris Dear Mr. Ferris: Please find enclosed an Order Instituting Public Administrative and Cease-and-Desist Proceeding Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h), and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and Order to Cease and Desist. The findings and remedial sanctions imposed are in accordance with the Offer of Settlement, dated February 20, 1998, which you submitted to the Commission and which the Commission has determined to accept. The sanctions imposed by the enclosed Order shall be effective immediately. If you have any questions or wish to discuss any aspect of the proceedings, you may contact Diana K. Tani, Assistant Regional Director of the Commission's Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036. Sincerely, Jonathan G. Katz Secretary Enclosure For Immediate Release NEWS DIGEST SUMMARY ADMINISTRATIVE PROCEEDING INSTITUTED AND SETTLED AGAINST THOMAS F. FERRIS The Securities and Exchange Commission (Commission) announced that on _________, 1998, it instituted and simultaneously settled public administrative and cease-and-desist proceedings against Thomas F. Ferris (Ferris), the owner and president of Pacific Capital Partners, Inc. (Pacific Capital), formerly a registered broker-dealer. The Commission alleges that, from August 1993 through December 1996, Pacific Capital offered and sold units in two limited partnerships, Recovery Asset Group, Ltd. and Recovery Asset Group II, Ltd., to investors. The Order alleges that Ferris caused the partnerships to make distributions to investors which exceeded the partnerships' gross revenue from business operations, and that Ferris caused Pacific Capital to make false statements to prospective investors about these distribution payments. Ferris consented to the entry of a cease-and-desist order, agreed to pay a civil penalty in the amount of $20,000, and is barred from association with any broker, dealer, municipal securities dealer, investment company, or investment adviser, with the right to reapply for association in one year and six months. Ferris consented to the administrative order without admitting or denying the findings in the Order. Michael R. Wilner Pacific Regional Office/Los Angeles (213) 965-3928