SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16323 / September 30, 1999
SECURITIES AND EXCHANGE COMMISSION v. TESSA FINANCIAL GROUP, INC. and RICHARD HAMILTON, Civil Action No. CV 99-10015 WJR (CWx) (C.D. Cal.).
The Securities and Exchange Commission filed today a Complaint in federal district court in Los Angeles against Tessa Financial Group, Inc. (Tessa), of Harbor City, California, and Richard Hamilton (Hamilton), of Anaheim, California. The Complaint alleges that the Defendants fraudulently raised over $1.9 million from investors nationwide in an investment program called Capital Management Agreement (CMA).
The Complaint alleges that Defendants lied to investors about certain material facts connected with CMA:
- Defendants represented that Tessa would pool CMA funds into a brokerage account and invest CMA funds in various public and private investments. Defendants further represented that the CMA program would pay a return equivalent to the prime interest rate. In fact, Defendants used virtually all CMA funds to operate Tessa and its related companies, and these companies generated no profits with which to repay investors their principal and stated return;
- Defendants represented that CMA was a low-risk, insurance-protected investment, that had protection similar to a savings account. In fact, CMA was a high-risk investment, the vast majority of CMA funds were not protected by insurance, and CMA had no protections remotely similar to savings accounts; and
- Defendants represented that Tessa would repay investors their principal and stated return upon seven days written notice. In fact, Tessa had little or no ability to repay investors, much less upon the required seven days.
The Complaint alleges that Defendants violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Complaint seeks permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties.