U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20406 / December 19, 2007
SEC v. Edward P. May and E-M Management Co. LLC, Civil Action No. 2:07-CV-14594 (E.D. Mich.) (Feikens, J.)
The Securities and Exchange Commission ("SEC") announced that on December 18, 2007, the Honorable John Feikens of the United States District Court for the Eastern District of Michigan issued a partial final judgment and order for permanent injunction and other relief against Edward P. May ("May") and E-M Management Company LLC ("E-M"), in connection with an alleged $250 million offering fraud that allegedly involved phony Las Vegas casino and resort telecommunication deals and may have involved as many as 1,200 investors, many of whom are senior citizens. May and E-M consented to the Order without admitting or denying the allegations of the SEC's complaint. The Court's Order permanently enjoins May and E-M from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Order further indicates that the Court will determine the specific amounts, if any, of disgorgement and civil penalties against May and E-M at a separate hearing upon notice and motion by the SEC.
The SEC's civil injunctive complaint that was filed on November 20, 2007, alleged that May, through E-M, raised as much as $250 million between 1998 and July 2007 from investors living in such states as Michigan, California, Florida, Illinois, New York, Ohio and New Jersey. According to the allegations of the complaint, May and E-M sold securities in the form of interests in limited liability companies ("LLCs"), and told investors that these LLCs had been contracted to install and provide telecommunications equipment and services to such major hotel chains and casinos as Hilton, MGM Grand, Motel 6, Tropicana and Sheraton. The complaint goes on to allege that May and E-M, both orally and in writing, promised returns in the form of monthly payments to investors for a period as long as 12 to 14 years, and "guaranteed" that investors, at a minimum, would receive the promised payments for approximately the first 20 to 24 months after they invested.
The SEC's complaint further alleged that, in reality, the LLCs did not have any telecommunication contracts with the establishments identified in offering materials provided by May and E-M. To further their alleged scheme, May and E-M provided some investors with copies of fictitious contracts with various hotels and casinos. Some of which allegedly included the names of purported hotel executives who did not exist. The SEC's complaint alleged that the defendants' conduct violated antifraud and registration provisions of the federal securities laws.