U. S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21759 / December 1, 2010
Securities and Exchange Commission v. Jennifer L. Dodge, Grant M. Carroll, Tamara M. Davis, and The Cornerstone TKD, LLC, Civil Action No. 1:10-cv-00913, United States District Court for the Western District of Texas (Austin Division).
SEC Files Civil Charges against Jennifer L. Dodge, Grant M. Carroll, Tamara M. Davis, and The Cornerstone TKD, LLC for Offering Fraud
On November 29, 2010, the Securities and Exchange Commission (Commission) filed a civil action in United States District Court in Austin, Texas against Jennifer Dodge, Grant Carroll, Tamara Davis, and The Cornerstone TKD, LLC (Cornerstone). The Commission's complaint alleges that, from April 2007 to May 2008, the defendants raised approximately $9 million from 20 investors nationwide by selling unregistered, high-yield interests in a Prime Bank scheme through the now-defunct company, Quantum Funding Strategies, LLC. Prime Bank schemes lure investors with the promise of astronomical profits and the chance to be a part of an exclusive, international investing program.
The Commission's complaint alleges that investors were told that their funds would be pooled and placed with an escrow agent and then used to secure money from high-net worth "funders." That money would be held in a "blocked funds account" and would be used as collateral for "traders" to buy and sell bank notes and other instruments. Dodge, together with Carroll, Davis and her company, Cornerstone, promised investors they would receive between 25% and 100% weekly returns on their investments, without risking loss of investment principal. According to the complaint, Dodge also misled investors about her past success with similar trading schemes, and Carroll misrepresented that he was a licensed securities broker and that he had verified the validity of the Private Placement program. The complaint further alleges that investors never earned any returns because the defendants never completed the promised transactions.
The Commission's complaint alleges that Dodge and Carroll 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 further alleges that all the defendants violated Sections 5(a) and 5(c) of Securities Act, and 15(a)(1) of the Exchange Act. The complaint seeks disgorgement from Dodge and Carroll, and injunctive relief and civil money penalties from all the defendants. Without admitting or denying the Commission's allegations, Dodge partially settled the Commission's charges by consenting to the entry of an agreed judgment enjoining her from violating Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder. Dodge also consented to a court order providing that, upon motion of the Commission, the court will determine the appropriateness and amounts of disgorgement, prejudgment interest and civil money penalty.