U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16524 \ April 21, 2000
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 ("Commission") announced that on April 13, 2000, the Honorable William J. Rea, United States District Judge for the Central District of California, issued a Judgment against Tessa Financial Group, Inc. ("Tessa") and Richard Hamilton ("Hamilton"). Tessa and Hamilton consented to the entry of Judgment without admitting or denying the Commission's allegations.
The Commission's complaint, filed on September 30, 1999, alleged that the Defendants fraudulently raised over $1.9 million from investors nationwide in an investment program called Capital Management Agreement ("CMA"). The Complaint alleged that Defendants lied to investors about certain material facts concerning 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 also 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. Finally, 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 Judgment against Tessa and Hamilton enjoins them from future violations of the antifraud provisions, 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 Judgment additionally orders that Tessa shall pay disgorgement in the amount of $925,037.53, plus prejudgment interest. Payment of disgorgement and prejudgment interest, however, is waived as to Tessa and civil penalties will not be assessed against Tessa and Hamilton based upon their demonstrated inability to pay.http://www.sec.gov/litigation/litreleases/lr16524.htm