SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17076 / July 24, 2001
SEC. v. Charles Richard Homa, et al., 99 C 6895 (N.D. IL)
BANK OF BERMUDA AGREES TO $67.5 MILLION PROPOSED SETTLEMENT IN LAWSUITS ARISING FROM SEC ACTION SHUTTING DOWN CASH 4 TITLES PONZI SCHEME
The Commission reported that Phillip S. Stenger, the court appointed receiver in SEC v. Charles R. Homa, et al., 99 C 6895 (N.D. IL), has reached a proposed $67.5 million joint settlement with the Bank of Bermuda in Stenger v. Bank of Bermuda, Ltd., 00 C 5740, (N.D. IL). The Bank of Bermuda's proposed settlement will also settle a class action lawsuit filed in Florida, Wolf v. Cash 4 Titles, et al., 00 0542 CIV, (S.D. FL). The two actions filed against the Bank of Bermuda relate to the Commission's action in October 1999 (SEC v. Homa) shutting down a massive Ponzi scheme operated through C4T Management, Inc. (C4T) (a/k/a Cash 4 Titles). The Bank of Bermuda has agreed to pay 50% of verified net investor claims, attorneys' fees and costs up to a maximum of $67.5 million. The proposed settlement will be considered in a hearing in the class action lawsuit on October 12, 2001, in federal district court in Miami, Florida. On June 28, 2001, Judge Guzman, who is presiding over SEC v. Homa, authorized Mr. Stenger to enter into the proposed settlement.
On October 15, 1999, the Commission filed an action and obtained, among other things, a temporary restraining order and asset freeze against C4T, Charles Richard Homa (Homa), Michael Gause (Gause) and 23 others individual and entity defendants. On June 1, 2000, the Commission added 16 defendants to its action, bringing the total number of defendants charged in the case to 42. The Commission alleged that the 42 defendants, led by Homa and Gause, engaged in a massive Ponzi scheme through the sale of notes and bonds and raised approximately $300 million dollars from approximately 2,500 investors. Investors were told that the money would be loaned to C4T, for use in its car title and payday loan business. The Commission alleged that only a small fraction of the money was used for its intended purpose, and instead, the funds were transferred to the Cayman Islands and used to pay existing investors, commissions to marketers and personal expenses. The Commission has obtained permanent injunctions against all but two of the individual defendants and the entities they control. The Bank of Bermuda was not named as a defendant in the Commission's action. Additionally, Homa and Gause have pled guilty to securities fraud, wire fraud and money laundering charges brought by the U.S. Attorney's Office for the Southern District of New York.
On November 2, 1999, Judge Guzman in SEC v. Homa appointed Mr. Stenger as receiver to locate, protect and liquidate the assets of the Defendants and to pursue other legal claims for the benefit of investors. On September 18, 2000, Mr. Stenger filed an action against the Bank of Bermuda (Stenger v. Bank of Bermuda, Ltd.) alleging that high ranking employees of the Bank's Cayman Islands subsidiary touted the C4T investment and were instrumental in setting up the bank accounts and fund transfers that were integral to the scheme. Moreover, the complaint alleged that Bank employees received commissions for marketing the C4T investments. Additionally, on August 2, 2000, a class action was filed against the Bank of Bermuda and others (Wolf v. Cash 4 Titles, et al.) alleging that the Bank, through certain officers, assisted Homa, Gause and others in a massive scheme to misappropriate investor funds. The class action complaint alleges that the Bank of Bermuda served as a conduit for many offshore C4T financial transactions and certain Bank officers vouched for the credibility of Homa and Gause and the legitimacy of the C4T investment. As part of the proposed settlement of the Stenger and class actions, the Bank of Bermuda has denied liability and no court has entered a finding with respect to the legal claims.
In addition to the money obtained in settlement from the Bank of Bermuda, Mr. Stenger and the Commission are pursuing other assets of the defendants from which to repay investors. Mr. Stenger has also been appointed joint liquidator in Cayman Islands proceedings relating to the C4T scheme.
In SEC v. Homa, the Commission has obtained permanent injunctions of the antifraud provisions (Section 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) by consent against the following defendants: Gause (January 14, 2000); Bill J. Short, II, Philip A. Sharpton, BilCin Enterprises, Inc. (BilCin), PAS, Inc., PAS Holdings, Inc., Gulfcoast Holdings, LLC (March 8, 2000); Homa, Sunset Financial Services, LLC, C4T, T/P Funding Services, LLC (March 13, 2000); Jimmy B. Roof, Robert C. Ellenburg, Jimmy B. Roof, LLC (JBR, LLC), R. Ellenburg, LLC (RE, LLC), R&E Associates Ltd. d/b/a Roof & Ellenburg, LLC (R&E, LLC), R&E Ltd. d/b/a JB Roof & Associates, LLC, J&R Financial Services, Ltd., J. Roof & R. Ellenburg, LLC (June 22, 2001); D. Dean Pearson, Global Management Enterprises, LLC (Global), Pearson Enterprises Trust, Paramount Holdings, LLC, Premiere Holdings, LLC (July 31, 2000); John Telford Snipes, Preferred Returns, Inc., JTP, Inc. (November 1, 2000), Joseph F. Denson, Jr., (November 20, 2000); John Martin Carlson, Carlson National Brokers, Ltd. (CNB), Tradewinds Holdings, LLC, Peak Holdings, LLC, Harbor Holdings, LLC (January 12, 2001). Additionally, the following defendants were enjoined from violating Sections 15(a) and 15(c) of the Exchange Act and Rule 15c1-2 thereunder: Short, Roof, Ellenburg, Sharpton, Pearson, Snipes Denson, BilCin, JBR, LLC, RE, LLC, R&E, LLC, PAS, Inc., PAS Holdings, Inc. and Global. Finally, defendant CNB was also enjoined from violating Section 15(c) of the Exchange Act and Rule 15c1-2 thereunder.