SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17130 / September 17, 2001
SEC FILES SETTLED ACTION FOR SECURITIES FRAUD AGAINST REGISTERED REPRESENTATIVE
Securities and Exchange Commission v. Morgan Financial Services, Inc. and Charles F. Morgan, Case No. 8:01-CV-1667-T-23 TGW (M.D. Fla., Tampa Division) (complaint filed September 4, 2001)
The Securities and Exchange Commission (SEC) announced today that it filed and simultaneously settled an action for securities fraud in the United States District Court for the Middle District of Florida against Morgan Financial Services, Inc. (MFS), a Florida corporation, and Charles F. Morgan, both of Tampa, Florida. In its complaint the SEC alleges that Morgan is the owner and president of MFS, and that, from September 1985 to August 2000, Morgan was employed as a registered representative with firms which were registered with the SEC as broker-dealers and as investment advisers.
The SEC further alleges in its complaint that between December 1991 and June 2000, Morgan and MFS raised more than $2.4 million from 17 investors both within and outside of Florida by guaranteeing the safety of their invested principal and an annual return, in the form of monthly interest payments, of at least 10 percent. According to the SEC's complaint, instead of investing the funds as promised, Morgan and MFS used the investors' funds to make interest payments to other investors, to pay their own expenses and operating costs, and to purchase a controlling interest in a bankrupt, privately held company which had limited revenues, poor management and no history of profits. The SEC alleges that to conceal and perpetuate the fraud, Morgan provided to the investors false account statements purporting to show that their investments were safe and profitable. The SEC also alleges that no registration statement was filed with the Commission or was in effect in connection with the MFS securities.
Without admitting or denying the allegations in the SEC's complaint, except as to jurisdiction, Morgan and MFS consented to the entry of a final judgment of permanent injunction which would enjoin them from future violations of Sections 5(a), 5(c) and 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, Morgan and MFS have consented to a judgment which would require them to disgorge, jointly and severally, $1,736,699, plus prejudgment interest, provided, however, that the SEC waive payment of the disgorgement and interest based on Morgan's and MFS' demonstrated financial inability to pay.
The Commission acknowledges the assistance of the Florida Department of Banking and Finance in this matter.