SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16416 / January 21, 2000
SECURITIES AND EXCHANGE COMMISSION V. CHEMICAL TRUST, ET. AL., Case No. 00-8015-CIV-RYSKAMP (S.D. Fla.)
The Securities and Exchange Commission announced that on January 13, 2000, the Honorable Kenneth L. Ryskamp, United States District Judge for the Southern District of Florida, preliminarily enjoined defendants Chemical Trust (Chemical), U.S. Guarantee Corp (U.S. Guarantee), United Marketing Trust (United), Virgil W. Womack (Womack), Clifton Wilkinson (Wilkinson), Lewey L. Cato, III (Cato), and Alvin A. Tang (Tang), from offering or selling investment contracts in what the SEC alleges to be an elaborate Ponzi scheme. The preliminary injunction enjoins the defendants from violating the registration and anti-fraud provisions of the federal securities laws, namely Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Orders of Preliminary Injunction also continue the freeze of defendants' assets.
On January 7, 2000, the Commission filed a complaint against Chemical and its principals, among others, seeking emergency relief. On January 13, 2000, the Court entered a temporary restraining order and asset freeze against the defendants.
According to the SEC's complaint, the defendants made material misrepresentations and omissions in connection with the sale of at least $17 million in investment contracts to the investing public. The contracts promised investors returns of between 9.25% to 15% annually, depending upon the amount invested. The complaint further alleges that Chemical represented to investors that their funds would be used to purchase U.S. Treasury notes and distressed properties and that the investment was 100% guaranteed through a security bond issued by U.S. Guarantee. In fact, according to the Commission's complaint, Chemical has not purchased any U.S. treasury notes or distressed properties, and investor funds are not secured as promised. Instead, the complaint alleges that millions of dollars in investor monies were misappropriated and expatriated to offshore bank accounts by the defendants. The complaint alleges that in a classic Ponzi scheme fashion, Chemical was using new investor funds to pay interest to existing investors. The complaint further alleges that the defendants have made material misrepresentations and omissions to investors concerning, among other things, the assets of U.S. Guarantee and the background of its principals.
In addition to a permanent injunction, the SEC's action also seeks disgorgement of ill-gotten profits and civil penalties. Named as relief defendants in the Commission's action were Three Rivers Trust, Prestige Accounting Services, Inc., ACC Capital Consultants, Inc., The Falcon Trust Co. Ltd., America's Fidelity Assurance Co. Ltd., Merrit Pierce Trust and U.C.B.M. (Bahamas) Ltd. The Preliminary Injunction Order continues the freeze of their assets.
A separate criminal action was filed by the U.S. Attorney and the Federal Bureau of Investigation in South Carolina. As a result, Womack and Wilkinson were arrested. The Court in
South Carolina also appointed a receiver who immediately secured the defendant's premises and is now in possession of their offices and books and records.