U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21746 / November 17, 2010
SEC v. Merendon Mining (Nevada) Inc., Larry Lee Adair, Milowe Allen Brost a/k/a Milo Brost, M.B. Gonne or Phillip K. Collins, Ward K. Capstick, Bradley Dean Regier, Gary Allen Sorenson a/k/a Don Grey Fox, Martin M. Werner, Syndicated Gold Depository Inc., now known as Bahama Resources Alliance Ltd., Merendon Mining Corp. Ltd., Institute For Financial Learning Group of Companies, Inc., [Case 2:10-cv-00955]
SEC Obtains Permanent Injunctions Against Sorenson and Brost in Merendon Mining Ponzi Scheme
The Securities and Exchange Commission announced that on November 12, 2010, the Honorable Richard A. Jones of U.S. District Court for the Western District of Washington entered a default judgment, asset freeze, and permanent injunction against defendants Gary Allen Sorenson and Milowe Allen Brost, both of Calgary, Alberta, Canada, enjoining them from violating the anti-fraud and registration provisions of the federal securities law contained in Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, and ordering them to pay disgorgement of over $210 million of ill-gotten gains as a result of operating a Ponzi scheme alleged in the Commission's complaint and a civil penalty of $100 million jointly and severally. The court permanently barred Sorenson and Brost from serving as officers or directors of public companies with securities registered with the SEC. The court previously entered a permanent injunction on August 30, 2010, against Bradley Regier of Calgary, enjoining him from violating the anti-fraud and registration provisions of the federal securities law contained in Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, and barred him from serving as an officer or director of a public company. The court also entered default judgment against Thelma Sorenson, the wife of Gary Sorenson, ordering her to pay disgorgement of $959,560 received out of proceeds from the fraudulent conduct. Final judgments against these defendants will be entered at a later date.
Pending determination of the case on the merits, the court also entered preliminary injunctions against the corporate defendants, Merendon Mining (Nevada), Inc., Syndicated Gold Depository Inc., Institute For Financial Group of Companies, Inc. (IFFL) and Merendon Mining Corporation Ltd., and against individual defendants, Larry Lee Adair and Martin M. Werner, both Florida attorneys, and Ward K. Capstick, a resident of Seattle, Washington, preliminarily enjoining all of them from violating the anti-fraud and registration provisions of the federal securities law contained in Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5, and also enjoining IFFL and Capstick from violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act.
The SEC's complaint alleged that Brost and Sorenson were the primary architects and beneficiaries of a Ponzi scheme that persuaded more than 3,000 investors across the U.S. and Canada to invest their savings, retirement funds and even home equity. Brost and his sales team presented themselves as an independent financial education firm operating under the name IFFL that had discovered profitable investment opportunities with companies involved in gold mining. They held seminars where they promised investors could earn 18 to 36 percent annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold. The complaint alleged that unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson. Investors' funds were transferred through numerous bank accounts, and then used to make "interest payments" to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme. A trial has been set to begin June 4, 2012 to resolve issues remaining in the case.