UNITED STATES OF AMERICA
In the Matter of
ELLSWORTH WAYNE MCLAWS
|ORDER MAKING FINDINGS AND IMPOSING SANCTIONS BY DEFAULT|
The Securities and Exchange Commission ("Commission") instituted this proceeding, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934 ("Exchange Act"), on July 19, 2001, with an Order Instituting Proceedings ("OIP"). The Division of Enforcement ("Division") filed a motion for default dated January 11, 2002. The Division requests that Respondents Ellsworth Wayne McClaws and Alan Clagg be barred from association with any broker or dealer.
McClaws and Clagg are in default under Rules 155(a), 220(f), and 221(f) of the Commission's Rules of Practice, 17 C.F.R. §§ 201.155(a), .220(f), .221(f), because they failed to answer the OIP, failed to appear at a prehearing conference held on December 28, 2001, and failed to respond to the January 15, 2002, Order to Show Cause.
Accordingly, I find that the allegations in the OIP are deemed to be true:
From 1985 through 1991, McLaws was licensed as a registered representative with First American National Securities, Inc. From May 1993 until July 1999, Clagg was licensed as a registered representative with NYLIFE Securities, Inc. From 1997 through at least March 1999, McLaws and Clagg acted as unregistered brokers.
On January 12, 2001, McLaws and Clagg were permanently enjoined from violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, by the United States District Court for the Northern District of Texas (Dallas Division). See SEC v. Cook, No. 3:99-CV-0571-R (N. D. Tex.)
The Commission's complaint in SEC v. Cook alleges that from 1997 through at least March 1999, when the complaint was filed, McLaws, Clagg, and other defendants violated the federal securities laws by offering and selling unregistered securities in the form of a fraudulent "prime bank" trading program developed by defendants Benjamin Cook and Dennel Finance Limited ("Dennel"). The complaint alleges that McLaws, Clagg, and other defendants, targeting religious and charitable groups and persons investing retirement funds, obtained at least $30 million from investors by falsely promising to facilitate lucrative, yet completely secure, transactions in fictitious prime bank securities. McLaws, Clagg, and other defendants attracted investors by falsely representing that investor funds would be transferred to a London bank and secured by a guarantee issued by a European bank. McLaws, Clagg, and other defendants further represented that investor funds would be used to trade financial instruments with top fifty European banks and that these trades would produce investor returns of twenty-four to sixty percent over the course of the investor's twelve-month contract with Dennel. In reality, the complaint alleges, the prime bank program marketed to investors did not exist and Dennel did not send any funds to Europe for use in a trading program. Rather, defendants misappropriated investment funds for personal and unauthorized uses, including making Ponzi payments to existing investors with funds provided by new investors. The complaint also alleges that McLaws and Clagg, in the course of marketing the Dennel program, acted as unregistered brokers.
I further find it is in the public interest and necessary and appropriate for the protection of investors to order that McLaws and Clagg be barred from association with a broker or dealer pursuant to Section 15(b)(6) of the Exchange Act.
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 15(b)(6) of the Securities Exchange Act of 1934, that Ellsworth Wayne McLaws and Alan Clagg be and hereby are barred from association with any broker or dealer.
Lillian A. McEwen
Administrative Law Judge
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