SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17242 / November 19, 2001
SECURITIES AND EXCHANGE COMMISSION v. TERRY L. DOWDELL et al., U.S. District Court for the Western District of Virginia, Civil Action No. 3:01CV0011610557 (W.D. VA. Nov. 19, 2001)
On November 19, 2001, the Securities and Exchange Commission filed a Complaint in Federal District Court in Charlottesville, Virginia, to halt a Ponzi scheme operated by Terry L. Dowdell ("Dowdell"), a resident of Charlottesville, which has allegedly raised over $29 million during the last several years. On the same day, Judge James A. Michael, Jr., of the Western District of Virginia issued a Temporary Restraining Order, which included a prohibition against violations of federal securities laws and an asset freeze, against the defendants, including Dowdell, Birgit Mechlenburg a resident of Lenox, Massachusetts, Kenneth G. Mason, a resident of Wilmette, Illinois, and entity defendants Vavasseur Corp., a Bahamian corporation, and Dowdell, Dutcher & Associates, Inc., an inactive Florida corporation. The Complaint also alleges violations of the federal securities laws, but does not seek emergency relief, against Emerged Market Securities, DE-LLC and Daniel Derouard. The Complaint alleges that Dowdell offered fictitious "prime bank" securities through Vavasseur claiming that investors would earn gross returns of 4 percent per week for 40 weeks out of the year. The Complaint also alleges that Dowdell told investors that their money would be sent to the Bahamas in an account in their own name to trade "medium term debenture instruments... issued by one or more of the major money center banks of either North America or Western Europe." Instead, the Complaint alleges that Dowdell pooled the money in accounts he controlled in the United States and used the money to pay existing investors, pay commissions and pay personal expenses.
The Complaint alleges that the defendants violated 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. The Complaint also alleges that Mechlenburg sold securities and acted as an unregistered broker-dealer in violation of Section 15(a) of the Exchange Act and also committed violations of Section 15(c) of the Exchange Act and Rule 15c1-2 thereunder. In the Complaint, the SEC also seeks to recover assets from several relief defendants. Judge Michael also ordered a hearing on November 27, 2001 at 10:00 a.m.
This case is part of the SEC's continuing effort to combat prime bank fraud and to alert the public to the risks posed by these phony instruments. The risks of this type of fraud and warnings about how to avoid it are spelled out in the Interagency Advisory: Warning Concerning "Prime Bank" Notes, Guarantees, and Letters of Credit and Similar Financial Instruments (October 21, 1993), which is discussed on the SEC's Homepage at http://www.sec.gov/divisions/enforce/primebank.shtml.