U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21429 / March 3, 2010
Securities and Exchange Commission v. Ross Owen Haugen, Civil Action No. 1:09-CV-0129 (ND Ga.)
The Securities and Exchange Commission ("Commission") announced today that the Honorable Orinda D. Evans, United States District Judge for the Northern District of Georgia, entered final judgment on February 17, 2010 (with a later amendment thereto) against defendant Ross Owen Haugen ("Haugen") of Minneapolis, Minnesota. The judgment arises from an order granting the Commission's motion for summary judgment against Haugen, which also ordered that he pay disgorgement in the amount of $1,242,742.79, with prejudgment interest thereon in the amount of $125,316.63. The amended final judgment dated February 25, 2010, further ordered Haugen to pay a civil penalty in the amount equal to his ordered disgorgement. Haugen had previously been permanently enjoined from future violations of Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in an order entered on February 5, 2009.
The Court made significant findings of fact and conclusions of law in the final judgment and amended final judgment against Haugen. Specifically, the Court concluded that Haugen engaged in fraud in connection with sales of securities interests in four offerings identified as Coadum Capital Fund 1, LLC ("Coadum 1"), Coadum Capital Fund II, LP ("Coadum II"), Coadum Capital Fund III, LP ("Coadum III") and Mansell Acquisition Company LP ("MAC"). Approximately $30 million was raised from investors in the four offerings from early 2006 through January 2008. The Court also concluded that Haugen while acting as vice president of sales and marketing for Coadum Advisors, Inc. ("Coadum"), served as the primary salesman for the offerings on behalf of Coadum and Mansell Capital Partners III, LLC ("Mansell").
In its final judgment, the Court found that Haugen directly solicited and sold more than 50% of the Coadum securities in the offerings. The private placement memoranda for the four offerings ("PPMs"), all of which made similar representations, described an investment objective involving "risk-controlled" strategies consisting of purchasing AA or better rated securities at one price, and simultaneously selling the securities at a higher price, generating a profit on the price difference, which Coadum and Mansell referred to as "commercial trading programs." Coadum and Mansell invested the majority of the funds through a Malta based "investment platform" which in turn invested the funds in related entities which never began operation or provided any returns. Further, Coadum and Mansell falsely represented in monthly account statements to investors that the investors had been earning approximately four percent per month and that all or most of the investors' principal was in escrow. The Court found that Haugen told investors, falsely, that their investment principal was risk free, insured and never left the escrow account or was otherwise guaranteed against loss. In fact, Haugen knew that investors' funds were being invested in off-shore trading programs. Moreover, although the PPMs represented that no commissions were paid on the investments and that the promoters were compensated based on a percentage of earnings, Haugen personally was paid substantial commissions from investor funds prior to earnings on those funds, which never occurred. This is a companion case to SEC v. Coadum Advisors, Inc., et al., Civil Action File No. 1:08-CV-0011-ODE (N.D. Ga.), a civil action filed on an emergency basis on January 3, 2008.
See also: L.R. 20422 (January 3, 2008); L.R. 20444 (January 29, 2008); and L.R. 20859 (January 21, 2009); L.R. 20886 (February 6, 2009); and L.R. 21406 (February 3, 2010).