U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20321 / October 2, 2007
SEC v. Peter J. Dawson, et al., Civil Action No. CV 06-6360 (ADS) (EDNY)
Court Enters Preliminary Injunction Against Peter J. Dawson, BMG Advisory Services, Inc., and Ethan Thomas Co., Inc.
The Securities and Exchange Commission announced today that on August 27, 2007, the United States District Court for the Eastern District of New York entered a preliminary injunction order ("Order") against Peter J. Dawson, BMG Advisory Services, Inc., and Ethan Thomas Co., Inc. Pending a final disposition of the Commission's enforcement action, the Order enjoins all Defendants from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and enjoins Defendants Dawson and BMG from violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Among other things, the Order also freezes the Defendants' assets and the assets of Defendant Dawson's spouse, Lisa Dawson.
The Commission's complaint, filed on November 30, 2006, alleges that the Defendants misappropriated more than $2 million from at least seven investment advisory clients. Dawson, the president and sole shareholder of BMG and Ethan Thomas, targeted primarily elderly investors living on Long Island, and advised these clients to surrender existing variable annuity policies, mortgage their residences, and transfer the proceeds to Ethan Thomas for Dawson to manage through BMG, his investment advisory firm. In connection with Dawson's advisory services, Dawson made materially false and misleading statements to his clients about their investments and the use of their funds. Dawson promised between a 12 and 15 percent guaranteed return on each investment, and he assured clients that he would arrange to pay their mortgages and/or pay monthly "returns" on the investments. To the extent that the 12 to 15 percent return exceeded the client's mortgage obligation, Dawson promised that excess return would be accrued in the client's account. Rather than investing the money as promised, Dawson abused his clients' trust and misappropriated their funds for his own use. Dawson withdrew over $100,000 of his clients' funds for his own benefit. At the same time, Dawson failed to make investors' mortgage payments as he had promised. In October and November 2006, because some investors received notices that their mortgages were not being paid, they complained to Dawson, who refused to return their calls and closed BMG's office.
In its enforcement action, the Commission is seeking additional relief, including orders permanently enjoining the Defendants from committing future violations of the foregoing federal securities laws, and a final judgment ordering the Defendants to disgorge ill-gotten gains and assessing civil penalties.