U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20450 / February 6, 2008
Securities and Exchange Commission v. VesCor Capital Corp., VesCor Capital, Inc., Vescorp Capital, LLC, VesCorp Capital IV-A, LLC, VesCorp Capital IV-M, LLC and Val E. Southwick, Case No. 1:08cv0012DB (USDC D.Ut.)
SEC Files Civil Action Against VesCor Capital Corp. and Val E. Southwick
The Commission has filed a civil action seeking permanent injunctions, disgorgement and civil penalties against VesCor Capital Corp., Val E. Southwick and four related companies in connection with VesCor's and Southwick's fraudulent offers and sales of approximately $180 million in notes to over 800 investors since the early 1990's. The Commission's complaint alleges that many of VesCor's investors were senior citizens who invested substantial portions of their savings or mortgaged their homes to pay for the investments.
The complaint alleges the defendants engaged in a fraudulent, unregistered offering of notes by VesCor-related companies, all of which were controlled by Southwick. The defendants allegedly promised annual returns of 8% to 24% , with the returns being generated by profits from VesCor's real estate projects. The complaint further alleges that the defendants made material misrepresentations concerning those real estate projects and operated a Ponzi scheme in which newly invested funds were often used: (1) to pay the promised returns to earlier investors, (2) to fund Southwick's and his family's living expenses and (3) to pay the operating expenses of the VesCor enterprise. Southwick allegedly made a variety of misrepresentations to investors, including: (1) invested funds would be used to develop specific real estate projects; (2) the real estate developments were highly profitable, and (3) the investment risk was nonexistent or extremely limited because investments were secured by recorded property interests or were highly collateralized. Finally, the complaint alleges that, contrary to VesCor and Southwick's representations, investor funds were used in whatever manner Southwick chose, VesCor's real estate projects were not profitable and VesCor's operations were insolvent and could not continue operating without continually obtaining new investor money.
It is alleged that through this conduct the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Commission acknowledges the assistance of the Utah Division of Securities and the Utah Attorney General's Office in this matter.