KENNETH J. GUIDO (Cal. Bar No. 040020)
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
1. This Court has jurisdiction over this action pursuant to Sections 20(d)(1) and 22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(d)(1) and77v(a), and Sections 21(d)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(d)(3)(A), 78u(e) and 78aa.
2. Venue is proper in this district pursuant to Securities Act Section 22(a), 15 U.S.C. § 77v(a), and Exchange Act Section 27, 15 U.S.C. § 78aa, because certain of the transactions, acts, practices and courses of conduct constituting violations of the laws alleged occurred within this District and because certain of the Defendants reside in and transact business in this District.
3. The Commission brings this action to stop the ongoing fraudulent offer and sale by each of the Defendants of proceeds from fictitious bond offerings. From at least December 2001 to the present, the Defendants have fraudulently raised at least $850,000, by offering through websites and facsimile solicitations to unwitting individuals and entities (hereinafter "participants") seeking venture capital, the opportunity, for a fee, to receive proceeds from bond offerings that do not exist. In connection with this fraudulent scheme, the Defendants have falsely represented that: (1) they are the exclusive coordinators and intermediaries of several multi-billion dollar "Guaranteed-Insurance Contract" Bond ("GIC Bond") offerings in which well known large financial institutions are involved; (2) in exchange for a fee (denominated a "due diligence" fee), the Defendants will assist the victims to participate in the proceeds of a specific bond offering; and (3) the participants' fees will be refunded if the Defendants are unable to secure participation in the proceeds of the bond offering for the participants. The well known financial institutions named by the Defendants as Principal Participants in the offering have disclaimed any involvement in any bond offering with the Defendants, and there is no evidence that any of the "GIC Bond" offerings exist, or have ever existed. In addition, the Defendants have not returned any portion of the participants' fees as promised, despite repeated requests by participants to do so. The Defendants are continuing to solicit funds from potential participants in the GIC Bond offering. At least oneparticipant intends on sending the Defendants additional funds to participate in a "new" offering.
4. By engaging in the conduct alleged in this Complaint, each of the Defendants has violated the antifraud provisions of Securities Act Section 17(a), 15 U.S.C. § 77q(a). In addition, each of the Defendants has violated the broker-dealer registration provisions of Exchange Act Section 15(a)(1), 15 U.S.C. § 78o(a)(1). The Commission seeks a temporary restraining order and preliminary and permanent injunctions prohibiting such conduct in the future, as well as an order freezing assets of the Defendants and the Relief Defendant, an order appointing a receiver, and other interim relief, and orders that the Defendants and the Relief Defendant disgorge their ill-gotten gains, and that the Defendants pay civil penalties.
5. Leon Jordan II ("Jordan"), age unknown, is a U.S. citizen residing in Rancho Cucamonga, California. Jordan is the President and CEO of Defendant Jordan Enterprises and appears to be the sole principal of Defendant Jordan Holdings. Purportedly, Jordan is an attorney and accountant with extensive experience helping individuals and entities obtain financing. Jordan's resume includes references from celebrities such as lawyer Johnnie Cochran and former pro basketball player A.C. Green. Jordan appears to have an interest in a bank account at First Financial Federal Credit Union in Ontario, California. Jordan was previously terminated from a predecessor to PriceWaterhouseCoopers for improper use of a corporate credit card. Defendant Jordan represents that through his company Defendant Jordan Enterprises, LLC, he has participated in over 100 private and quasi-public and public securities offerings since 1985, providing: (1) Corporate planning, mergers and acquisitions and reorganization; (2) Debt and Equity Financing; (3) Private Offerings; and (4) Public Offerings.
6. Jordan Enterprises, LLC ("Jordan Enterprises"), is an entity organized under California law and maintains its principal place of business at 1801 Avenue ofthe Stars, Los Angeles, California 90067. Jordan is the CEO and President of Jordan Enterprises, which appears to have no other officers or directors. Jordan Enterprises maintains a brokerage account at Salomon Smith Barney in Costa Mesa, California.
7. Jordan Holdings, LLC ("Jordan Holdings"), is an entity organized under Nevada law and appears to maintain its principal place of business at 1365 North Pampas Avenue, Rialto, California 92376. Jordan appears to own and control Jordan Holdings, and appears to be its sole principal, officer and director. Jordan Holdings maintains a brokerage account at Salomon Smith Barney in Costa Mesa, California.
8. Raymond J. Brown ("Brown"), age 52, is a U.S. citizen residing in Marrero, Louisiana. On his website, Brown holds himself out as a Certified International Financier and founder of Ray Brown & Associates, which he describes as, among other things, a full service brokerage house. Brown & Associates has never been registered as a broker-dealer with the Commission. On three occasions, from November 1997 through February 1999, Brown applied to obtain series 6 and 63 securities licenses, but failed to pass the required examinations.
9. Ray Brown & Associates ("Brown & Associates") is a Louisiana corporation established in 1992 and operated by Ray Brown. Brown and his wife, Carmen, appear to be the only principals. Brown & Associates maintains a bank account at Hibernia National Bank in New Orleans, Louisiana.
10. Defendants Brown and Brown & Associates represent that they provide "state of the art financial analysis, expert consulting," and assist in the preparation of mission statements for the marketplace. They represent that they have extensive experience and offer assistance in procuring, among other things, venture capital for business enterprises. Defendant Brown represents that he is a "Certified International Financier" with thirty years experience and has developed Defendant Brown & Associates into a "complete brokerage house, whose financial expertise covers mayareas." Defendants Brown and Brown & Associates is represented by the Defendants to be a Principal in the GIC Bond offering as one of two "Exclusive Intermediaries."
11. Sheila S. Jordan, age unknown, is a U.S. citizen residing in Rancho
Cucamonga, California, and is the wife of Defendant Leon Jordan. Sheila Jordan maintains a trust account at Salomon Smith Barney in Costa Mesa, California, which received $150,000 in funds from the Jordan Holdings account at Salomon Smith Barney on July 2, 2002. Sheila Jordan also received a check for $240,000 from Defendant Jordan on March 13, 2002. The check was drawn against the Jordan Enterprises account at Salomon Smith Barney.
THE FRAUDULENT SCHEME
12. Since at least December 2001, the Defendants have fraudulently raised at least $850,000 by offering small businesses seeking venture capital the opportunity to participate in multi-billion dollar bond offerings, in which the Defendants purportedly serve as "bond coordinators" and "intermediaries". In reality, the bond offerings are phony. The targeted participants are usually start-up companies seeking millions of dollars in financing, which they have been unable to obtain by conventional means. There appear to be at least twenty-six participants who have been victimized by the Defendants.
13. In most cases, the Defendants provide participants with offering materials, riddled with misspellings and grammatical errors, which describe the purported bond offering at issue. The written materials represent that the Defendants are the exclusive coordinators and intermediaries of a GIC Bond offering. According to the materials, a GIC Bond is a corporate bond in which "an insurance company will be employed to guarantee the debt performance of the company which guarantees the return of the debt."
14. The Defendants represent that, in return for a so-called "due diligence" fee, Jordan Enterprises will perform "an analysis and overview of the [participant's]business, cash flows and financial requirements, while coordinating the financing of [the participant's] enterprise." The Defendants represent that the following entities are "Principal Participants and Institutions" in the bond offering:
Bond Council [sic] - O Melviney [sic] & Myers;
The Defendants also represent that if Jordan Enterprises chooses not to coordinate the financing for the participant upon completion of the due diligence process, Jordan Enterprises will refund the due diligence fee minus travel expenses.
15. The bond offerings and the due diligence processes are fraudulent ploys to swindle each participant out of tens of thousands of dollars. Each of the alleged "Principal Participants and Institutions" has expressly disclaimed any association with the Defendants in any bond offering, particularly the GIC Bond offerings the Defendants claim to be arranging. In addition, despite paying between $6,000 and $40,000 for a purported "due diligence" of their company, and receiving approval from the Defendants to participate in the bond offering, no participant has actually received any funding from the Defendants. The Defendants have promised the participants that they will receive funding usually within weeks of their approval. For example, some participants who were approved in February 2002 were promised funding in March or April 2002. Other participants who were approved in May 2002 were promised funding in September 2002. None have received funding, nor have any participants been refunded their due diligence fees. No bond offering currently exists or has ever existed.
16. In response to several participants' complaints regarding delays in obtaining their financing, the Defendants have made additional false representations,including representations that: (1) the passage of the Sarbanes-Oxley Act and/or the Patriot Act has hindered the Defendants' ability to obtain bond ratings from Moody's and Standard & Poor's; (2) the Defendants are in the process of obtaining a letter from the Commission concerning whether the bond offering is exempt from the Commission's registration requirements1; (3) the bond offering at issue has fallen through, but the Defendants are working on new bond offerings in London and Canada; and (4) the bond offering has been delayed, but the Defendants will obtain a "bridge loan" (representing 20% of the original funding amount) for the participants in the interim.
17. Several participants have demanded the return of their fees and threatened to sue the Defendants and/or refer them to the criminal authorities. Thus far, the Defendants have not returned any monies to any of the participants. Nevertheless, the Defendants continue to solicit funds from potential participants in the GIC Bond offering. If the Defendants are not enjoined, they will continue to fraudulently raise funds from unsuspecting participants.
FIRST CLAIM FOR RELIEF
Violations of Securities Act Section 17(a), 15 U.S.C. §77q(a)
18. Paragraphs 1 through 17 are realleged and incorporated herein by reference.
19. Defendants, by engaging in the conduct described above, directly or indirectly, in the offer or sale of securities, by the use of means or instruments of transportation or communication in interstate commerce or by use of the mails:
a. with scienter, employed devices, schemes or artifices to defraud;
b. obtained money or property by means of untrue statements of material fact or by 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; or
c. engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon the purchasers of such securities; in violation of Securities Act Section 17(a).
20. By reason of the foregoing, the Defendants violated, and unless restrained and enjoined will continue to violate, Securities Act Section 17(a), 15 U.S.C. § 77q(a).
SECOND CLAIM FOR RELIEF
Exchange Act Section 15(a)(1), 15 U.S.C. § 78o(a)(1)
21. Paragraphs 1 through 20 are realleged and incorporated herein by this reference.
22. Defendants, by engaging in the conduct described above, made use of the mails or means or instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of, securities.
23. During the relevant period, Defendants have neither been registered with the Commission as broker-dealers in accordance with Exchange Act Section 15(b), 15 U.S.C. § 78o(b), nor associated with a Commission registered broker-dealer.
24. By reason of the foregoing, Defendants violated, and unless restrained and enjoined will continue to violate, Exchange Act Section 15(a)(1), 15 U.S.C. § 78o(a)(1).
THIRD CLAIM FOR RELIEF
(Against The Relief Defendant Sheila S. Jordan)
25. Paragraphs 1 through 24 are realleged and incorporated herein by this reference.
26. As alleged in paragraph 11 above, the Relief Defendant Sheila S. Jordan has received funds from, at a minimum, Defendant Jordan, which are the proceeds, or traceable to the proceeds, of the unlawful activities of the Defendants.
27. The Relief Defendant has obtained the funds as part of and in furtherance of the securities violations alleged in this Complaint, and under circumstances in which it is not just, equitable and conscionable for her to retain the funds. As a consequence, the Relief Defendant has been unjustly enriched.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court:
Issue findings of fact and conclusions of law that the Defendants engaged in the alleged violations.
Issue orders temporarily, preliminarily and permanently enjoining the Defendants and their officers, agents, servants, employees, and attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating Securities Act Section 17(a).
Issue orders temporarily, preliminarily and permanently enjoining the Defendants and their agents, servants, employees, and attorneys, and all persons in active concert or participation with them who receive actual notice of the injunctionby personal service or otherwise, and each of them, from violating Exchange Act Section 15(a)(1).
Issue a temporary restraining order and a preliminary injunction freezing the assets of each of the Defendants, as well as the assets received by the Relief Defendant, directly or indirectly, from the activities described in the Commission's Complaint; prohibiting the defendants and the Relief Defendant from destroying documents; allowing expedited discovery; and ordering accountings from the Defendants and the Relief Defendant.
Enter an order that the Defendants disgorge all ill-gotten gains from their illegal conduct, together with prejudgment interest thereon, and enter an order that the Relief Defendant disgorge an amount equal to the illegally obtained funds she received from the Defendants, together with prejudgment interest thereon.
Enter an order that Defendants pay civil penalties pursuant to Securities Act Section 20(d), 15 U.S.C. 77t(d), and Exchange Act Section 21(d)(3), 15 U.S.C. 78u(d)(3) .
Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
DATED: December , 2002
1 The Commission has no record of any request from any of the Defendants regarding such a request for exemption.