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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 48455/September 8, 2003

INVESTMENT ADVISERS ACT OF 1940
Release No. 2169/September 8, 2003

ADMININSTRATIVE PROCEEDING
File No. 3-11210


In the Matter of

DARIUS L. LEE


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ORDER MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS BY DEFAULT

The Securities and Exchange Commission (Commission or SEC) instituted this proceeding on August 8, 2003, by an Order Instituting Proceedings (OIP), pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Section 203(f) of the Investment Advisers Act of 1940.

The OIP was served on Respondent Darius L. Lee (Lee) on August 14, 2003. By the terms of the OIP and Rule 220(b) of the Commission's Rules of Practice, 17 C.F.R. § 201.220(b), Lee's Answer was due twenty days later, i.e., by September 3, 2003. No Answer has been filed, and the time for filing has now expired. Accordingly, Lee is in default within the meaning of Rules 155(a)(2) and 220(f) of the Commission's Rules of Practice, 17 C.F.R. §§ 201.155(a)(2), .220(f), and an Administrative Law Judge may determine the proceeding against him upon consideration of the record, including the OIP, the allegations of which may be deemed to be true.

I find the following allegations in the OIP to be true:

Lee, age 29, resides in Queens, New York. He was employed at JB Stanley Group, LP (JB Stanley) and Cambridge Capital Holdings Management (Cambridge) as an account executive and salesman from November 1998 to September 1999. JB Stanley is a non-operating limited liability partnership that was a purported hedge fund and asset management firm. Cambridge is a non-operating limited liability company that was the general partner of, and investment adviser to, JB Stanley. Since September 1996, Lee has been employed as a registered representative with several brokers and dealers, including Hornblower & Weeks, Inc., PHD Capital, Wolff Investment Group, Inc., and Benson York Group, Inc. Lee holds series 7, 62, and 63 licenses. Lee most recently worked as a registered representative of Delta Asset Management Company, LLC.

On January 10, 2002, the Commission filed a civil injunctive action charging violations of the securities registration and antifraud provisions and seeking permanent injunctions, disgorgement and prejudgment interest, and civil penalties against defendants Lee, Jean Baptist Jean Pierre (Jean Pierre), and Gabriel Toks Pearse. SEC v. Jean Pierre, 02 Civ. 253 (S.D.N.Y.) (SWK).

The complaint in the injunctive action alleged, among other things, that:

  1. From at least May 1997 to at least October 1999, Lee defrauded investors in connection with the purchase or sale of JB Stanley limited partnerships and Cambridge and Union Transfer and Cargo Corporation (UTC) stock (collectively, the Fraudulent Offerings). Specifically, the complaint alleged that, as a result of the Fraudulent Offerings, the defendants raised a total of $407,700 from at least sixteen investors, with Lee receiving $8,050 for his participation in the fraud.

  2. Lee made numerous material oral misrepresentations and omissions of fact concerning the Fraudulent Offerings, including that: (a) JB Stanley is a hedge fund and money or asset management firm that pooled investor funds to purchase and sell securities, when, in fact, a substantial portion of the investor funds were not pooled for investing but instead were misappropriated by Jean Pierre; (b) JB Stanley would conduct an initial public offering (IPO), at a specific price, with JB Stanley investors being able to sell their shares for a profit, when, in fact, JB Stanley never conducted an IPO, never took any steps to prepare for an IPO, and never conducted any legitimate business; (c) Cambridge would be imminently conducting an IPO and investors would be able to sell their shares for a substantial profit, when, in fact, Cambridge never conducted an IPO nor took any steps to prepare for one; (d) Jean Pierre had consistently achieved a 50% return on other funds that he managed, when, in fact, Lee had no knowledge, nor did he ever try to determine, whether Jean Pierre had managed any funds other than JB Stanley; and (e) UTC was structured along the lines of Western Union, UTC stock would be publicly traded within one year, and that investors could earn up to four to five times the amount invested if their money was kept in UTC for at least one year, when, in fact, UTC was a start-up, local enterprise that had only conducted a wire transfer business for two months.

  3. Lee also knew that a series of fraudulent written materials were being mailed to potential investors in the Fraudulent Offerings, which included: (a) false account statements to investors that overstated the performance of the JB Stanley fund; (b) misstatements in a JB Stanley brochure regarding the experience of its employees and its prominence as an asset management firm; (c) misstatements in Cambridge's April 1999 quarterly report regarding the structure of UTC's business and a proposed merger with another company; and (d) misrepresentations in a 1999 letter sent to JB Stanley investors soliciting investments in UTC.

On June 25, 2003, the district court granted the Commission's application for summary judgment against Lee in the injunctive action. In doing so, the district court found that Lee committed securities fraud, violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. The district court permanently enjoined Lee from future violations of those provisions of the securities laws. It also ordered Lee to disgorge $8,050 of ill-gotten gains derived from his fraudulent conduct, plus $2,641.13 in prejudgment interest, and ordered Lee to pay a civil penalty of $25,000. SEC v. Jean Pierre, 02 Civ. 253 (S.D.N.Y.) (SWK), 2003 WL 21488014 (S.D.N.Y. June 25, 2003).

In view of the foregoing, I find that it is in the public interest to bar Lee from associating with any broker, dealer, or investment adviser.

Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, IT IS ORDERED THAT Darius L. Lee is barred from association with any broker, dealer, or investment adviser.

James T. Kelly
Administrative Law Judge

 

http://www.sec.gov/litigation/admin/34-48455.htm


Modified: 09/08/2003