U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21007 / April 20, 2009
Securities and Exchange Commission v. David A. Williams, Sherwood Secured Income Fund, LLC, WFG Holdings, Inc., and Williams Financial Group, LLC, United States District Court for the Central District of California, Civil Action No. CV 09-2709 FMC (JCx)
SEC CHARGES OWNER OF CALIFORNIA BROKER-DEALER WITH MISAPPROPRIATING MILLIONS IN INVESTOR FUNDS
The Securities and Exchange Commission today filed securities fraud charges against the owner and CEO of Morgan Peabody, Inc., a Sherman Oaks, California-based broker-dealer formerly registered with the Commission, for misappropriating millions of dollars of investor funds raised during three securities offerings.
The SEC's complaint, filed in U.S. District Court in Los Angeles, charges Davis A. Williams and three entities he controls with conducting fraudulent securities offerings that were sold to more than 100 customers in nine states between January 2007 and September 2008. According to the complaint, Williams directed registered representatives of Morgan Peabody to offer and sell debentures and promissory notes issued by WFG Holdings, Inc. and Sherwood Secured Income Fund, LLC. The SEC alleges that Williams, who owns and controls WFG Holdings and Sherwood, used millions of the approximately $9 million raised from investors to fund his lavish lifestyle, including spending (1) nearly $50,000 a month in rent for his personal residence, (2) at least $175,000 on personal travel, and (3) more than $200,000 on meals and entertainment.
According to the SEC's complaint, WFG Holdings investors were told that funds raised would be used to invest in the operations of Morgan Peabody. Sherwood investors were told that at least 90% of funds raised would be used to invest in real estate. As alleged in the complaint, however, Williams transferred millions of dollars of investor funds into bank accounts he controlled, including a bank account held by Williams Financial Group, LLC (an entity owned by Williams), and then used the money on personal expenses.
The SEC's complaint charges Williams, WFG Holdings, Sherwood, and Williams Financial Group with 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 seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties.
