U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20841 / January 5, 2009
Securities and Exchange Commission v. Braintree Energy, Inc. and Howard Graham, Civil Action No. 1:07-CV-10307, United States District Court for the District of Massachusetts
COURT ENTERS FINAL JUDGMENTS AGAINST MASSACHUSETTS COMPANY AND ITS PRINCIPAL IN SECURITIES FRAUD CASE
The Securities and Exchange Commission ("Commission") announced today that on December 23, 2008, the United States District Court for the District of Massachusetts entered a final judgment by consent against Howard Graham, principal of Braintree Energy, Inc., and a default judgment against the company itself, a now defunct Massachusetts corporation formerly located in Cheshire, Massachusetts. The Commission's action, filed on February 20, 2007, alleged that Braintree and Graham fraudulently offered and sold unregistered securities in the form of investment contracts and/or fractional interests in oil and gas leases and that Graham diverted almost $3 million for his own personal use. The final judgment enjoins Graham from violating of the antifraud, securities registration and broker-dealer registration provisions of the securities laws. In addition, Graham was ordered to pay over $3 million in disgorgement plus prejudgment interest, and a penalty of $120,000. The Commission obtained a default judgment against Braintree Energy, Inc., permanently enjoining it from violating the federal securities laws.
According to the Commission's complaint, from at least 2000 through 2006, Graham and Braintree made numerous oral and written misrepresentations to more than 200 investors nationwide and in foreign countries regarding the expected rate of return, level of profits and risks associated with the investment. The Commission alleged that Graham and Braintree told potential investors that they could expect the return of their principal within months to a year and that Graham failed to disclose that he intended to and did take approximately 30% of investors' funds for himself. The Commission alleged that Graham and Braintree, through their fraud, obtained at least $9 million of investor funds and diverted approximately $3 million for Graham's personal use. The Commission also alleged that Graham and others at his direction led investors to believe that investing in their offerings was not risky, falsely assuring some investors that Braintree had never offered interests in oil or gas wells that did not produce, and that investors' monies were safer than if they had invested in certificates of deposit. The complaint alleged that, in fact, most investors have received no profits and most have not even recovered their initial investments.
Without admitting or denying the substantive allegations in the Commission's complaint, Graham consented to the entry of a final judgment ordering him to pay $3,269,903.60. In addition, the final judgments against Graham and Braintree impose permanent injunctions prohibiting Graham and Braintree from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") 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 Ontario Securities Commission, the Massachusetts Securities Division and the Pennsylvania Securities Commission.
For further information, please see: Litigation Release No. 20011 (February 21, 2007).