IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

COMPLAINT

Plaintiff, Securities and Exchange Commission ("Commission"), alleges the following:

NATURE OF THE ACTION

1. From at least 1988 through at least March 2002, Jeffrey L. Goldberg ("Goldberg" or "Defendant") fraudulently raised at least $6.1 million by selling six different investments to at least one hundred thirty investors. In raising money from investors, Goldberg misrepresented the nature of the investments and that he would use investors' funds — without their permission — for his other investments. When the investments inevitably failed to generate the promised returns, Goldberg perpetuated the investments, just like a Ponzi scheme, by paying returns from funds raised from new investors.

2. Throughout this time, Goldberg served in positions of trust to his potential and existing investors. He raised nearly all his funds from his investment advisory clients, most recently at Essex, LLC. Goldberg also served on the Board of Directors for two issuers for which he raised money — Stamford International, Inc. and Dauphin Technology, Inc. In March 2002, Goldberg's scheme finally collapsed leaving his remaining investors with worthless investments.

3. Through the activities alleged in this Complaint, Goldberg violated the federal securities laws. He engaged in fraud in the offer and sale of securities in violation of Sections 17(a)(1), (a)(2), and (a)(3) of the Securities Act of 1933 ("Securities Act"), and in connection with the purchase and sale of securities in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. He also engaged in fraud as an investment adviser in violation of Sections 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act").

4. Accordingly, the Commission seeks: (i) entry of a permanent injunction prohibiting Goldberg from engaging in future violations of the relevant provisions of the federal securities laws; (ii) the imposition of a civil monetary penalty against Goldberg due to the egregious nature of the violations; (iii) entry of an order barring Goldberg from serving as an officer or director of a public company; and, (iv) disgorgement, with prejudgment interest, of any ill-gotten gains.

JURISDICTION

5. This Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], and Section 214 of the Advisers Act [15 U.S.C. § 80b-14], and 28 U.S.C. § 1331.

6. The Commission brings this action pursuant to the authority conferred on it by Section 20(b) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)], Sections 21(d) and (e) of the Exchange Act [15 U.S.C. §§ 78u(d) and 78u(e)], and Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)].

7. Goldberg, directly and indirectly, made use of the mails and means and instrumentalities of interstate commerce in connection with the transactions, acts, practices, and courses of business alleged herein.

DEFENDANT

8. Goldberg, age 52, resides in Buffalo Grove, Illinois. From 1990 through 1997, Goldberg co-owned Essex Financial, Ltd, which was registered with the Commission as an investment adviser. From 1997 through March 2002, Goldberg was a principal of Essex, LLC, also registered with the Commission as an investment adviser. In addition, Goldberg held several positions related to the investments discussed in this Complaint. From 1996 to March 2002, he managed HCC Funding, LLC. In 2001, Goldberg became President, Chief Executive Officer, and Chairman of the Board of Stamford International, Inc. From 1998 through 2002, Goldberg served on the Board of Directors of Dauphin Technology, Inc. Goldberg is also an attorney and certified public accountant in Illinois, and a certified financial planner.

GOLDBERG DEFRAUDED INVESTORS

9. From at least 1988 through at least March 14, 2002, Goldberg fraudulently raised at least $6.1 million from at least one hundred thirty investors by selling six different investments. Goldberg fraudulently raised funds as follows: (1) from 1988 through 1990, approximately $1 million from ten investors for the Colonnade Development Corporation to build a housing development in Rhode Island; (2) from 1994 through 2000, more than $2.2 million from more than ten investors to loan to Econometrics, Inc., a Chicago direct marketing company; (3) in 1996, approximately $750,000 from seven investors for Willow Bay, LLC to build a housing development in Lake County, Illinois; (4) in 2001, more than $45,000 from two investors for HCC Funding, LLC to capitalize two companies doing business at the Chicago Board of Trade (from 1996 through 1999, Goldberg also raised more than $3.4 million for HCC Funding); (5) during 2000 and 2001, more than $1.669 million from forty-three investors for the Stamford Escrow to participate in an initial public offering; and, (6) in 2001, more than $465,000 from nine investors for Acacia Ventures to develop real estate in Long Grove, Illinois. In total, Goldberg raised almost $10 million.

10. In raising funds from investors, Goldberg knowingly or recklessly made material misrepresentations to investors about the nature of the investment and the intended use of their funds. When the investments inevitably failed to generate the promised returns, Goldberg knew or recklessly disregarded that he perpetuated the investments through a Ponzi scheme. Goldberg engaged in the Ponzi scheme by knowingly or recklessly disregarding that he paid returns promised to earlier investors from funds that he had raised from later investors.

11. Goldberg sustained his fraud for at least fifteen years because he knowingly or recklessly disregarded that he controlled every part of the scheme: he solicited all of the investors; handled all investor funds; controlled the bank accounts from which investor returns were paid; and responded to investor inquiries. Furthermore, Goldberg served in positions of trust to his investors. Goldberg was their investment adviser at Essex, LLC, which provided him with insight into the financial position of his investors. He also served on the Board of Directors for two issuers for which he raised money — Stamford International and Dauphin Technology, Inc. Goldberg fraudulently solicited investments and obtained funds from his investors, including his investment advisory clients, for, among others, the following three entities.

HCC Funding, LLC

12. From 1996 through at least 1998 and for a short period in 2001, Goldberg sold investments in HCC Funding. Goldberg represented to investors that HCC Funding was a holding company that provided capital for H. Corman & Company and Smallco, Inc: two companies doing business at the Chicago Board of Trade. In return for an investment in HCC Funding, Goldberg represented that investors would receive a preferred distribution or dividend each quarter equal to 3 percent of their investment. Goldberg knew or recklessly disregarded that he told investors that the distribution would be funded by the net income earned by the underlying businesses. Between 1996 and at least 1998, sixty-seven investors invested about $3.45 million in HCC Funding.

13. Goldberg invested the initial funds that he raised for HCC Funding in the underlying businesses. Goldberg knew or recklessly disregarded that the underlying companies only generated enough income to fund the payment of a dividend in the second and third quarters of 2000. Accordingly, throughout the life of the investment, Goldberg knew or recklessly disregarded that he paid dividends to investors from whatever source that was available, including money raised from investors for a separate investment called the Stamford Escrow.

14. As funds ran out, Goldberg fraudulently raised more money for HCC Funding. In August and September 2001, Goldberg raised $45,000 from two investors for HCC Funding. Goldberg knew or recklessly disregarded that he represented to the investors that their funds would be invested in HCC Funding's underlying businesses, and that the preferred distribution would be drawn from income generated by the underlying businesses. Contrary to those representations, Goldberg knew that he used their funds to pay dividends to existing HCC Funding investors.

The Stamford Escrow

15. Between May 2000 and December 2001, Goldberg fraudulently raised more than $1.669 million from at least forty-three investors for the Stamford Escrow. Goldberg knew or recklessly disregarded that he spent the entire amount on expenses related to other investments. Goldberg represented to potential investors that the Stamford Escrow was an opportunity to participate in an offering of common stock upon the merger of Stamford International, Inc. ("Stamford"), a publicly traded Canadian corporation, and Nanovation Technologies ("Nanovation"), a privately held American corporation. Goldberg further represented that he and three other people were each attempting to raise $1 million to fund an escrow account required by Canadian law to buy back the shares of any dissenting Stamford shareholders. Following the merger, investor funds held in escrow in Canada would be converted into exchangeable shares of Stamford and then exchanged for shares of Nanovation. Goldberg told investors that their investment was refundable at any time prior to the merger, as the funds would be held in an escrow account in Canada.

16. Goldberg knowingly or recklessly made numerous misrepresentations to investors about the Stamford Escrow. First, Goldberg knew or recklessly disregarded that Stamford's Board had decided against proceeding with the merger and escrow account in July 2000 because he was present in his capacity as a member of Stamford's Board when the decision was made. Accordingly, Goldberg knew or recklessly disregarded that the funds that he raised were not to be used to purchase stock held by Stamford shareholders who did not want to participate in the merger. Second, he knew or recklessly disregarded that the other three Stamford Board members that had raised money for the escrow had returned the funds to investors by Fall 2000. Third, Goldberg knew that he had not placed any investor funds in an escrow account in Canada.

Dauphin Technology, Inc.

17. In January 1996, Goldberg and several others formed Northfield Technology Group ("Northfield") to provide financing for Dauphin Technology, Inc., which had just emerged from bankruptcy. In exchange for a $130,000 investment in Northfield, Investor A, received 281,165 shares of Dauphin Technology, Inc. stock issued to Northfield. Goldberg represented to Investor A that each month Northfield would sell one percent of those shares and pay Investor A his share of the proceeds. Goldberg further represented that Northfield was to distribute to Investor A his interest in any remaining shares as of May 1998.

18. In February 2000, Goldberg knew that he sold Investor A's stock for $569,560. As of May 2000, Investor A had received no distributions of any kind from Northfield. Investor A contacted Goldberg regarding the distributions, but was unable to get a response. Goldberg eventually gave Investor A $200,000 of the proceeds from the stock sale. Goldberg knew that he failed to give Investor A the balance of the proceeds and the remaining shares of Dauphin Technology, Inc. stock. Goldberg further knew that he had instead loaned the balance of the proceeds, which belonged to Investor A, to a Chicago direct marketing firm called Econometrics, Inc.

Sources and Uses of Investor Funds

19. Between February 2000 and May 2002 alone, Goldberg knowingly commingled the funds that he raised from the various investments by depositing more than $6.9 million into two bank accounts that he controlled. The amount deposited includes investor funds of $3.4 million, wire transfers of $1.930 million from a bank account in the Bahamas controlled by Goldberg, deposits from various other sources of $1 million, and his Essex salary in the amount of $270,730.

20. Goldberg treated the funds deposited in his bank accounts as a single pot of money available to spend on whatever investment or expenditure he deemed necessary at the time. As such, Goldberg knew that he spent more than $6.9 million on, among other things, the following: $1.193 million to HCC Funding; $786,107 to Acacia Ventures; $150,000 to an Illinois company called Bimet; $907,500 to Econometrics; $112,909 to a real estate project called Homes at Riverbend; and $153,198 in loans to various people. Goldberg knew or recklessly disregarded that he did not disclose to any potential or existing investors that he had used their funds to make the loans to Bimet, Homes at Riverbend, or various other people.

21. Goldberg also knew that he wrote more than $1.1 million in checks to himself and for cash. Furthermore, Goldberg knew that he wrote checks to his wife in the amount of $267,000. The checks to his wife were written between December 2000 and November 2001. During this period, the Goldbergs remodeled their home.

COUNT I

Violations of Section 17(a)(1) of the Securities Act
[15 U.S.C. § 77q(a)(1)]

22. Paragraphs 1 through 21 are realleged and incorporated by reference.

23. As set forth more fully above in paragraphs 1 through 21, from at least January 1, 1998 through at least March 14, 2002, Goldberg, in the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, employed devices, schemes and artifices to defraud.

24. Goldberg knew or recklessly disregarded the facts and circumstances described in paragraph 22 through 23.

25. By reason of the activities described in paragraphs 22 through 24, Goldberg violated Section 17(a)(1) of the Securities Act [15 U.S.C. §§ 77q(a)(1)].

COUNT II

Violations of Sections 17(a)(2) and (a)(3) of the Securities Act
[15 U.S.C. §§ 77q(a)(2) and (a)(3)]

26. Paragraphs 1 through 21 are realleged and incorporated by reference.

27. As set forth more fully above in paragraphs 1 through 21, from at least January 1, 1998 through at least March 14, 2002, Goldberg, in the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, obtained money or property by means of untrue statements of material facts or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

28. As set forth more fully above in paragraphs 1 through 21, from at least January 1, 1998 through at least March 14, 2002, Goldberg, in the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, engaged in transactions, practices, and courses of business which operated or would have operated as a fraud and deceit upon purchasers.

29. By reason of the activities described in paragraphs 26 through 28, Goldberg violated Sections 17(a)(2) and (a)(3) of the Securities Act [15 U.S.C. §§ 77q(a)(2) and (a)(3)].

COUNT III

Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]

30. Paragraphs 1 through 21 are realleged and incorporated by reference.

31. As forth more fully above in paragraphs 1 through 21, from at least January 1, 1998 through at least March 14, 2002, Goldberg, in connection with the purchase and sale of securities, by the use of the means and instrumentalities of interstate commerce and by the use of the mails, directly and indirectly: used and employed devices, schemes and artifices to defraud; made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and course of business which operated or would have operated as a fraud and deceit upon purchasers and sellers and prospective purchase and sellers of securities.

32. Goldberg knew or recklessly disregarded the facts and circumstances described in paragraphs 30 through 31.

33. By reason of the activities described in paragraphs 30 through 32, Goldberg violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

COUNT IV

Violations of Sections 206(1) and 206(2) of the Advisers Act
[15 U.S.C. § 80b-6(1) and (2)]

34. Paragraphs 1 through 21 are realleged and incorporated by reference.

35. As forth more fully above in paragraphs 1 through 21, from at least January 1, 1998 through at least March 14, 2002, while acting as an investment adviser, Goldberg, by use of the mails or the means or instrumentalities of interstate commerce, directly or indirectly: employed devices, schemes, or artifices to defraud clients and prospective clients; and engaged in transactions, practices, and courses of business which operated as a fraud or deceit upon clients and prospective clients.

36. Goldberg knew or recklessly disregarded the facts and circumstances described in paragraphs 34 through 35.

37. By reason of the activities described in paragraphs 34 through 36, Goldberg violated Section 206(1) of the Advisers Act [15 U.S.C. § 80b-6(1)].

38. By reason of the activities described in paragraphs 34 through 35, Goldberg violated Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(2)].

RELIEF REQUESTED

WHEREFORE, the Commission requests that this Court enter a judgment:

A. permanently enjoining Goldberg from future violations of Sections 17(a)(1), (a)(2), and (a)(3) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Advisers Act;

B. barring, pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)], Goldberg from serving as an officer or director of any issuer required to file reports with the Commission under Sections 12(b), 12(g), or 15(d) of the Exchange Act [15 U.S.C. §§ 78l(b), 78l(g), and 78o(d)];

C. ordering Goldberg to pay an appropriate civil monetary penalty pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)], and Section 209(e) of the Advisors Act [15 U.S.C. § 80b-9(e)];

D. ordering Goldberg to pay disgorgement of any ill-gotten gains, plus prejudgment interest;

E. retaining jurisdiction over this action to implement and carry out the terms of all orders and decrees that may be entered; and

F. granting such other and additional relief as this Court deems just and proper.

DATED: March 29, 2003

http://www.sec.gov/litigation/complaints/comp18073.htm