SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16455 / February 25, 2000
Securities and Exchange Commission v. William H. Black (a.k.a. Tank Black), James A. Franklin, Jr., Professional Management, Inc., Professional Management Consulting, Inc., and Silverline Development Corporation, LLC, No. 8:00CV383-T-26B (M.D. Fla.)
SEC OBTAINS ASSET FREEZE AND RESTRAINING ORDER AGAINST PROMINENT SPORTS AGENT; ALLEGES THAT ATHLETES WERE DEFRAUDED OF MILLIONS IN A SERIES OF INVESTMENT SCAMS, INCLUDING A CAYMAN ISLANDS-BASED PONZI SCHEME
The Securities and Exchange Commission ("Commission") today announced that on February 24, 2000 it filed a civil action in federal court in Tampa, Florida arising from a series of frauds perpetrated on professional athletes by their agent, his business partner and the entities that they control. The Commission requested and obtained a temporary restraining order that, among other things, freezes the Defendants' assets and requires them to account for proceeds of the alleged fraud.
Named in the Commission's Complaint are:
WILLIAM H. "TANK" BLACK ("Black"), age 42, of Columbia, South Carolina, the Chairman and Chief Executive Officer of co-defendant PMI, which he founded in 1988. During relevant time periods, Black was a registered agent with the National Football League Players Association and the National Basketball Players Association.
JAMES A. FRANKLIN, JR. ("Franklin"), age 32, of Columbia, South Carolina, the General Counsel for PMI and Executive Vice President and Chief Operating Officer of co-defendant PMC. Franklin holds both a law and an MBA degree.
PROFESSIONAL MANAGEMENT, INC. ("PMI"), a Columbia, South Carolina sports management firm, owned by Black, that represents professional athletes in the National Football League and the National Basketball Association in contract negotiations with their respective teams.
PROFESSIONAL MANAGEMENT CONSULTING, INC. ("PMC"), a PMI affiliate that is co-owned by Black and Franklin and purportedly was established to provide legal and business consulting services to PMI clients.
The Complaint makes the following allegations:
In three schemes beginning in early 1996 and continuing through the present, Black, along with his business partner Franklin, defrauded some two-dozen PMI client-athletes, reaping for themselves at least $5 million in ill-gotten gains.
The Fraudulent Schemes
- First, Black fraudulently obtained free stock in a small public company, BAOA, Inc., by falsely promising that his clients would provide promotional services to the issuer. He then advised his clients to invest in that company and sold them the very stock that had been issued in their names for free, with Black misappropriating the proceeds.
- In the second scheme, Black and Franklin defrauded PMI client-athletes by encouraging them to invest millions of dollars in a purported program to fund a car title loan business (which was, in fact, an offshore Ponzi scheme), all the while reaping undisclosed commissions almost equal to the returns received by PMI's clients. In so doing, Black and Franklin conducted no due diligence into the safety of the underlying investment or the soundness of the business; the recommendations were instead motivated by Black and Franklin's desire to access client funds and to skim a substantial part of their clients' monthly investment returns.
- Finally, in a third scheme that refined on the second, Black and Franklin insinuated themselves into the ongoing Ponzi scheme and, using Cayman Islands entities that they secretly controlled, diverted for their own purposes some or all of the periodic interest payments made by the Ponzi promoter on their clients' investments. Further, in some instances, Black and Franklin misappropriated or diverted client funds that they falsely claimed had been invested. On still other occasions, Defendants utilized their access to client checking accounts (intended for PMI to pay periodic client bills) to commingle client assets with each other and to commingle client assets with their own personal funds.
Violations of the Securities Laws
- Black, Franklin, PMI and PMC rendered investment advice to their client-athletes concerning the purchase and sale of securities, managed these investments, and received, directly and through related entities, various fees, undisclosed commissions and other transaction-based compensation for placing its clients in these fraudulent investments. In all instances, Black, Franklin, PMI and PMC abused the position of trust and confidence that they enjoy with their client-athletes and have variously acted as unregistered investment advisers and unregistered broker-dealers. Accordingly, the Commission's complaint charges them with multiple violations of Section 17(a) of the Securities Act of 1933; Sections 10(b), 15(a), and 15(c) of the Securities Exchange Act of 1934, Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Rules 10b-5 and 15c1-2 thereunder. Additionally, the Complaint names Silverline Development Corporation, LLC ("Silverline") as a relief defendant. Silverline, a South Carolina entity controlled by Black and Franklin, was unjustly enriched when it received the proceeds of certain PMI client investments and diverted or misappropriated those funds.
In its Order, the United States District Court for the Middle District of Florida, Tampa Division: froze the accounts of Black, Franklin, PMI, PMC and Silverline; restrained Defendants and their employees from exercising any control over their clients' depository accounts (without freezing the client-athletes' accounts); directed Defendants to provide an accounting and to repatriate all assets held offshore, including assets held in the Cayman Islands; granted the Commission's request for expedited discovery and restrained Defendants from violations of the antifraud and broker-dealer registration provisions of the federal securities laws.