U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21073 / June 9, 2009
SEC v. John M. Donnelly, et al., Civil Action No. 03:09CV0015 (W.D. Va., filed March 11, 2009)
Federal Court Enjoins John Donnelly, Tower Analysis, Inc., Nasco Tang Corp., and Nadia Capital Corp. From Committing Securities Fraud
The Securities and Exchange Commission announced that on June 5, 2009, the Honorable Judge Glen E. Conrad, United States District Judge for the Western District of Virginia, entered a judgment against John M. Donnelly and three entities that he controlled, Tower Analysis, Inc., Nasco Tang Corp., and Nadia Capital Corp. The judgment permanently restrains Donnelly and the other defendants from violating the antifraud provisions of 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. Judge Conrad also ordered the defendants to pay disgorgement of ill-gotten gains, prejudgment interest, and civil penalties in amounts to be determined by the Court upon motion of the Commission at a later date. Although Donnelly and the other defendants consented to the entry of the judgment without admitting or denying the allegations in the Commission's complaint, the allegations in the complaint will be deemed admitted for purposes of the Commission's motion for disgorgement, prejudgment interest and civil penalties, and defendants will be precluded from arguing that they did not violate the federal securities laws.
In its complaint filed on March 11, 2009, the Commission alleged that from at least 1998, Donnelly fraudulently raised at least $11 million from as many as 31 investors through the sale of securities in the form of limited partnership interests in three investment funds. The Commission further alleged that Donnelly orchestrated the scheme through three entities, Tower Analysis Inc., Nasco Tang Corp., and Nadia Capital Corp. Donnelly told investors that he would pool their funds to invest in, among other things, stock and bond index derivatives. According to the complaint, despite representations to investors that he had generated annual returns of as much as 22%, Donnelly had done almost no securities trading. The Commission further alleged that instead of using investor funds to execute trades, Donnelly used investor funds to repay other investors, and paid himself approximately $1 million in salary and fees during the last three years alone. The Commission also alleged that Donnelly was in the process of soliciting investors for a new fund called Nadia Capital Partners, LP based on misrepresentations about his past trading results.
In a related criminal action arising from the same conduct alleged in the Commission's complaint, on May 11, 2009 Donnelly pled guilty to charges of wire fraud, securities fraud, fraud in connection with futures contracts, and impeding administration of internal revenue laws. Donnelly is scheduled to be sentenced on September 14, 2009.
The Commission acknowledges the assistance of the United States Attorney's Office for the Western District of Virginia, the Federal Bureau of Investigation, the Internal Revenue Service, the U.S. Department of Justice Tax Division, and the U.S. Commodity Futures Trading Commission.