U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21399 / February 1, 2010
Securities and Exchange Commission v. David W. Wehrs and Maryland Title and Escrow Co., Inc., Case No.: 10-CV-0242-BEL
SEC Files Settled Offering Fraud Case Against Annapolis, Maryland Escrow Agent
The Securities and Exchange Commission announced today that it filed a civil action in the United States District Court for the District of Maryland against David W. Wehrs ("Wehrs") and Maryland Title and Escrow Co., Inc. ("MTE"), a title and escrow company Wehrs owns and operates, alleging an offering fraud in which Wehrs persuaded at least 13 investors to participate in a purported FDIC-insured fund. Wehrs resides and MTE is headquartered in Annapolis, MD. The SEC also submitted for the Court's consideration a proposed settlement.
Simultaneous with the filing of the SEC action, the U.S. Attorney's Office for the District of Maryland filed a criminal information charging Wehrs with wire fraud arising out of the same conduct that is the subject of the Commission's Complaint.
The SEC's Complaint alleges that through at least July 2009, Wehrs acted as an investment adviser and fraudulently induced at least 13 investors to provide him with at least $1.96 million for investment into a purported FDIC-insured money market fund that Wehrs "guaranteed" would pay 10.85 percent interest annually. The SEC alleges that, at times, Wehrs also represented to potential investors that the investment he offered was affiliated with "American Funds," the mutual fund company. In fact, these representations were false.
Instead, according to the Commission's Complaint, Wehrs misappropriated and used the investment principal for personal and business reasons, including: (1) to day trade funds in a brokerage account in the name of his business, MTE; (2) to support his home improvement company, Show-Me, Inc. (3) to make escrow payments for his title company; (4) to buy real estate and personal property; (5) to vacation in the British Virgin Islands; and (6) to make Ponzi-like payments to investors.
The SEC Complaint further alleges that to conceal his fraudulent scheme, Wehrs fabricated and issued account statements to investors on his businesses' letterhead purporting to show investors' balances in their "accounts" and the interest gained on their "investments." The scheme appears to have depleted substantially all of the investors' monies.
The Complaint alleges that Wehrs and MTE violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Complaint also alleges that Wehrs and MTE violated Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rule 206(4)-8 thereunder. The Commission seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties.
Without admitting or denying the Commission's allegations, Wehrs consented to entry of a permanent injunction from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), (2), and (4) of the Advisers Act and Rule 206(4)-8 thereunder. Wehrs has also consented to the entry of a follow-on administrative order in a separate administrative proceeding by the Commission, without admitting or denying the findings therein, that will permanently bar him from association with an investment adviser based on the anticipated entry of the injunction. This proposed settlement, which has been submitted to the Court for its consideration, does not include disgorgement, prejudgment interest, or civil money penalties based upon the federal criminal forfeiture or restitution orders and federal criminal statutory penalties that Wehrs is subject to in the parallel criminal proceeding.
The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the District of Maryland, the Federal Bureau of Investigation, the Maryland Attorney General's Office, and the Maryland Insurance Administration.
See Also: SEC Complaint