U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19750 / June 30, 2006.
Securities and Exchange Commission v. Jeffrey A. Weston and Integrated Equities, Inc., (U.S.D.C., District of Nevada, Las Vegas Division, Civil Action No. 2:06-CV-00779-RCJ-GWF)
SEC Files Emergency Lawsuit to Halt Fraudulent Securities Offering Involving Defaulted Pre-War German Bonds
On June 26, 2006, the Securities and Exchange Commission filed an emergency action in Las Vegas federal court to halt what the Commission contends is a fraudulent offering of joint venture interests involving defaulted pre-World War II German bonds. On June 27, the court entered a temporary restraining order suspending the offering and an order freezing the defendants' assets. The court also ordered the defendants to preserve documents and submit to expedited discovery. The court set a hearing for July 7, 2006 to consider the Commission's application for preliminary injunctive relief, appointment of a receiver and the entry of orders requiring defendants to repatriate investor funds and provide an accounting.
The defendants named in the Commission's Complaint are:
The Commission's Complaint alleges that Weston and IEI, directly and through sales agents, have raised at least $7.7 million from sales of the joint venture interests to over 50 investors in 16 states since June 2004. The Commission asserts that Weston and IEI entice investors through numerous material misrepresentations and omissions, such as: that investor funds will be used only to purchase the German bonds; that IEI will buy one bond per $1,000 invested; that the bonds will be placed in a trust, interests in which will be "securitized," insured, rated "AAA" by Standard & Poor's, and sold to institutional investors; and that the proceeds of the sale of these securitized interests will provide investors 100% or greater annual returns for up to thirty years.
According to the Complaint, Weston and IEI have done none of these things. Instead, the Commission contends that Weston largely has used investor money to enrich himself or for purposes unrelated to the offering. The Complaint details, for instance, that Weston "borrowed" $2 million of investor proceeds to purchase and furnish a luxurious home and to fund his family's living expenses, and that he wired an additional $454,000 of investor funds to Swiss banks. The Complaint further alleges that Weston used $100,000 of investor proceeds to pay legal expenses unrelated to the offering, sent another $415,000 to one investor as Ponzi payments, and paid undisclosed commissions of $550,000 to two sales agents. The Commission believes that $1.6 million of the offering proceeds remain in bank accounts Weston controls and $300,000 remains in law firm accounts as retainers. The balance is unaccounted for.
Weston and IEI are charged with securities fraud under both the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition to the temporary restraining order and asset freeze already granted, the Commission's Complaint seeks injunctive relief, appointment of a receiver, a repatriation order, an accounting and orders prohibiting the destruction of documents and expediting discovery. The Complaint also seeks civil penalties and disgorgement.