SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16764 / October 12, 2000
Court Enters Preliminary Injunction Against Investment Adviser
SECURITIES AND EXCHANGE COMMISSION v. ROBERT C. SEARS (United States District Court for the District of Massachusetts, C.A. No. 00 CV 30170-FHF (September 26, 2000)
On October 6, 2000, after a hearing, the United States District Court for the District of Massachusetts entered a Preliminary Injunction, Order Continuing Freeze and Attachment of Assets and Order for Other Equitable Relief in a case against Robert C. Sears of Northampton, Massachusetts, based on allegations that Sears defrauded his investment advisory clients of over $1.9 million. The Court's Order, among other things, continues the previously ordered freeze of assets of Sears and others who received proceeds of Sears' fraud.
The Commission's complaint, which was filed on September 26, alleges that Sears, an unregistered investment adviser, misappropriated funds from several clients' brokerage accounts and fraudulently induced other clients to transfer funds to an entity he controlled. Sears obtained over two thirds of the funds from elderly clients over 65. According to the Complaint, Sears accomplished his misappropriation by forging clients' signatures on at least 13 Letters of Authorization directing brokerage firms to transfer client funds to his own corporation and forging client signatures on margin agreements to obtain unauthorized margin loans. Sears transferred his clients' money to Last Minute Concessions Inc., a Massachusetts corporation of which he is president and co-owner with James W. Casagrande of Pelham, Massachusetts. Last Minute used the fraudulently obtained money to buy a controlling interest in Cold Spring Golf Course Inc., a company developing a golf course near Belchertown, Massachusetts. Last Minute also used money from Sears' clients to buy an interest in Cold Spring Development Inc., which is building a condominium project associated with the golf course. The Complaint named Casagrande, Last Minute and the two Cold Spring companies as relief defendants, alleging that they were unjustly enriched through their receipt of illegally obtained funds from Sears. Casagrande and Last Minute consented to entry of the preliminary injunction.
On September 26, 2000, the Honorable Frank H. Freedman of the U.S. District Court for the District of Massachusetts granted the Commission's motion for an ex parte order temporarily restraining Sears' fraudulent activities, freezing Sears' assets and the assets of the relief defendants obtained from Sears' clients, and imposing other equitable relief.
The Commission's complaint alleged that Sears violated the antifraud provisions the federal securities laws, including Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, 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.
For further information, please see Litigation Release No. LR-16735 (September 28, 2000)