SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17288 / December 20, 2001
SECURITIES AND EXCHANGE COMMISSION v. RICHARD T. TAYLOR, INDIVIDUALLY AND DOING BUSINESS AS TRANSWORLD BANKERS, AND KEVIN M. DEVOTO, INDIVIDUALLY AND DOING BUSINESS AS FIRST FIDELITY FINANCIAL, ET AL. (U.S.D.C., Northern District of Texas, Dallas Division, Civil Action No. 3:01-CV2683-X)
On December 20, 2001, Judge Kendall of the United States District Court for the Northern District of Texas, issued a temporary restraining order halting an on-going securities scam which targeted senior citizens and involved the sale of bogus certificates of deposit. The Court also issued an order freezing the assets of one of the defendants and a company, which he controlled. Named in the Commission's lawsuit are:
- Defendant Richard T. Taylor, age 50, a resident of Spring, Texas. Taylor does business as Transworld Bankers and is the sole shareholder, director, officer and control person of GRI Group, Inc. The Court has frozen his assets.
- Defendant Kevin M. Devoto, age 39, a resident of Dallas, Texas. Devoto does business as First Fidelity Financial. He sold the bogus CDs on behalf of Taylor.
- Relief Defendant GRI Group, Inc., a Texas corporation with its principal place of business in Spring, Texas. GRI is controlled by Taylor and received at least $100,000 of investor funds from him. The Court has frozen its assets.
In its action, the Commission accuses Taylor and Devoto of offering bogus CDs to the general public through newspaper advertisements. Taylor and Devoto lured their investors with promises of above-market rates on 30-month CDs purportedly issued by either Chase Bank (now J.P. Morgan Chase) or NationsBank (now Bank of America). In fact, Taylor either did not purchase the CDs or he purchased short-term CDs with much lower interest rates, which he subsequently liquidated, transferring the funds into accounts that he controlled. Taylor also used investor funds to make ponzi payments of interest and principal to investors. He still owes at least $1 million in principal, plus accrued interest, to investors. During the course of the scheme, over $7 million was raised from investors throughout the country.
The Commission's complaint charges Taylor with violating the antifraud provisions found in Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Taylor and Devoto are charged with violations of the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. Devoto is further charged with violations of Section 15(a) of the Exchange Act, by acting as unregistered broker. The complaint seeks a temporary restraining order, preliminary and permanent injunctions, an asset freeze (only as to Taylor and GRI), interim accounting, disgorgement with prejudgment interest and a civil money penalty against each defendant and the relief defendant. Finally, the Commission also seeks an order prohibiting the movement, alteration and destruction of books and records, and expedited discovery. In addition to the TRO and asset freeze orders, the Court also today granted the Commission's request for an interim accounting, expedited discovery and for a prohibition against moving, altering and/or destroying evidence.
The Commission would like to thank the Texas State Securities Board, the Dallas offices of the United States Attorney, United States Postal Inspection Service and the Federal Bureau of Investigation for their assistance in the investigation of this matter.