U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22835 / October 7, 2013
Securities and Exchange Commission v. James C. Mulholland, Jr. and Thomas S. Mulholland, Civil Action No. 12-cv-14663 (E.D. Mich., filed October 22, 2012)
COURT ENTERS FINAL JUDGMENTS AGAINST BROTHERS THOMAS AND JAMES MULHOLLAND
The Securities and Exchange Commission today announced that, on October 4, 2013, the Honorable Thomas L. Ludington, United States District Court Judge for the Eastern District of Michigan, entered final judgments against James C. Mulholland, Jr., of St. Pete Beach, Florida, and Thomas S. Mulholland, of Saginaw, Michigan. The final judgments permanently enjoin the Mulhollands from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. The final judgments further order the Mulhollands jointly and severally liable for $760,718 in disgorgement and prejudgment interest, and order each of them to pay a $150,000 civil penalty. James and Thomas Mulholland consented to the entry of the final judgments without admitting or denying the allegations in the SEC's complaint.
The SEC's complaint, filed on October 22, 2012, alleged that from January 2009 through January 2010, the Mulhollands offered and sold approximately $2 million of demand notes to approximately 75 investors to fund the Mulhollands failing real estate business, which involved buying, maintaining, and renting residential real estate in Michigan. The Mulhollands told these investors that their real estate business was profitable, they would earn 7% per year on their investment, the returns would be generated by profits of the real estate business, and that the investors could get their money back upon 30 days' written notice. The SEC also alleged that the Mulhollands acted as unregistered broker-dealers in connection with the offer and sale of the demand notes.
The SEC's complaint further alleged that the Mulhollands' statements to investors were false and/or misleading. In reality, the real estate business was losing money during this period, needed new investor funds to pay its bills and to pay interest to previous investors, and did not have the means to refund investors' principal within 30 days even if a small number of them asked for their money back. The Mulhollands never told investors that they were experiencing financial hardship, that they were having difficulty meeting financial obligations critical to the real estate operation, or that they were contemplating filing for bankruptcy.
For further information, see Litigation Release No. 22518 (October 23, 2012)