SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16207 / July 12, 1999
Securities and Exchange Commission v. Stewart, et al., Civil Action No. 98 CIV 2636 (S.D.N.Y.)
Default Judgments Entered Against Four Defendants
The Securities and Exchange Commission announced that the Honorable Loretta A. Preska of the United States District Court of the Southern District of New York has entered a final judgment against four defendants in a "prime bank" scheme. The defendants are Salim El Hage and three entities he controlled: Eastland American Bank Limited, Foreign Trade Bank, and Mecis Insurance and Reinsurance Company (the "El Hage defendants").
The El Hage defendants, along with others, fraudulently obtained more than $1.7 million from at least three individuals by offering and selling securities in the form of participations in investment programs purportedly to trade prime bank instruments. The El Hage defendants played a key role in the prime bank scheme by posing as financial intermediaries who could supply so-called credit facilities that would enable the investors to trade multi-million dollar bank instruments. The trading was to result in spectacular profits for investors--returns of ten to fifty times their initial investments in two months to two years--at no risk. The investment programs were scams, the instruments themselves bogus. Instead of using the money as promised, the promoters of the scheme misappropriated the investors' funds for their own benefit, transferring portions of the money to at least one bank account under the control of the El Hage defendants.
When it was advised that the defendants had abandoned their last known place of operation in Paris, France, the Court authorized the Commission to serve the defendants by publication through the Wall Street Journal (European Edition) and the International Herald Tribune. After their failure to respond, notwithstanding their foreign location, the Court asserted personal jurisdiction over these defendants based on their conduct in the U.S. and the impact of that conduct on U.S. citizens.
The judgment was entered by default and permanently enjoins each of the El Hage defendants from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the defendants were held jointly and severally liable to pay $799,873 of disgorgement and $498,073 of prejudgment interest. The Court also imposed maximum statutory penalties of $396,667 for El Hage and $500,000 for each of his entities.
Litigation continues as to the remaining defendants and relief defendants.http://www.sec.gov/litigation/litreleases/lr16207.htm