SEC Charges Prominent Pastor, Financial Planner in Scheme to Defraud Elderly Investors
Litigation Release No. 24089 / March 30, 2018
Securities and Exchange Commission v. Kirbyjon Hines Caldwell et al., Civil Action No. 5:18-cv-00434 (W.D. LA. filed March 29, 2018)
Securities and Exchange Commission v. Shae Yatta Harper, Civil Action No. 5:18-cv-00436 (W.D. LA. filed March 29, 2018)
The Securities and Exchange Commission yesterday charged the pastor of one of the largest Protestant churches in the country and a self-described financial planner in a scheme to defraud elderly investors by selling them interests in defunct, pre-Revolutionary Chinese bonds.
The SEC's complaint alleges that, in 2013 and 2014, Kirbyjon Caldwell, Senior Pastor at Windsor Village United Methodist Church in Houston, and Gregory Alan Smith, a self-described financial planner who FINRA has barred from the broker-dealer business since 2010, targeted vulnerable and elderly investors with false assurances that the bonds-collectible memorabilia with no meaningful investment value-were worth millions of dollars. Caldwell and Smith raised at least $3.4 million from 29 mostly elderly investors, some of whom liquidated their annuities to invest in this scheme. Caldwell and Smith are alleged to have taken approximately $1.8 million of investor funds to pay for personal expenses, including mortgage payments in the case of Caldwell and luxury automobiles in the case of Smith. Offshore individuals received most of the remaining funds.
The SEC's complaint alleges that Caldwell and Smith violated Sections 5(a), 5(c), and 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 Smith violated Sections 206(1) and (2) of the Investment Advisers Act of 1940. The Commission's complaint seeks permanent injunctions, civil penalties, and disgorgement with prejudgment interest against Caldwell and Smith, and an officer and director bar against Caldwell.
In a separate complaint the SEC charged attorney Shae Yatta Harper of Monmouth Junction, New Jersey, with violating Sections 5(a) and 5(c) of the Securities Act and aiding and abetting Caldwell's and Smith's violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.. Harper agreed to settle the SEC's complaint against her without admitting or denying the SEC's allegations. Among other things, Harper agreed to pay a $60,000 civil penalty and to the issuance of an administrative order pursuant to Rule 102(e)(3) of the Commission's Rules of Practice that suspends her from appearing or practicing as an attorney before the Commission with the right to request that the Commission consider her reinstatement after five years.
The SEC's investigation was conducted by Jacqueline M. O'Reilly and Andre J. Zamorano, with assistance from Allen J. Genaldi, and supervised by Thierry Olivier Desmet in the SEC's Miami Regional Office. The litigation will be led by Wilfredo Fernandez.