UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17650 / August 1, 2002
SECURITIES AND EXCHANGE COMMISSION v. THOMAS M. DURKIN and JOHN E. ORIN, JR., U.S. District Court for the Northern District of Ohio, Civil Action No. 1:02 CV 1505 (N.D. Ohio August 1, 2002)
COMMISSION SUES INVESTMENT ADVISERS FOR $90 MILLION FRAUD
On August 1, 2002, the Securities and Exchange Commission filed a complaint against Thomas M. Durkin and John E. Orin, Jr. for a massive fraud that resulted in over $90 million in losses for their investment advisory clients. The complaint alleges that the defendants violated their fiduciary duties as investment advisers and fraudulently purchased for their clients, including retirees, risky investments in an internet start up. The clients lost virtually all their money. Durkin, a resident of Westlake, Ohio, and Orin, a resident of Rocky River, Ohio, were president and vice president, respectively, of Cashel Management Co., Inc., a now-defunct investment adviser based in Cleveland.
The Commission alleges that Durkin and Orin systematically invested most of their clients' money in RxRemedy, Inc., a failing internet company, while making material misrepresentations to their clients about the safety and liquidity of their investments and, in many cases, made the investments against their clients' express instructions. RxRemedy later filed for bankruptcy resulting in an almost total loss for Durkin and Orin's clients. Further, the Complaint alleges that Durkin lost $7.5 million he took from his brother's Cashel account and his sister-in-law's Cashel account by making unauthorized options trades.
Simultaneous with the filing of the complaint, Durkin and Orin have settled with the Commission. Both consented, without admitting or denying the allegations in the Complaint, to the entry of Final Judgments and Orders of Permanent Injunction and Other Relief (Final Judgment) which will enjoin them from future violations of Section 206(1) and (2) of the Investment Advisers Act of 1940 (Advisers Act) and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Final Judgment against Durkin will also enjoin him from future violations of Section 204 of the Advisers Act and Rule 204-1(a)(2) thereunder and require him to pay disgorgement of $280,000. The Final Judgments, however, waive payment of the disgorgement against Durkin and do not impose civil penalties against Durkin or Orin because of sworn representations they made to the Commission regarding their financial condition and because, in connection with their criminal convictions in June 2002, the United States District Court for the Northern District of Ohio entered orders against them requiring them to make restitution to their injured clients. The Court in the criminal case also sentenced Durkin to 64 months in prison and Orin to 24 months in prison.
The Commission wishes to thank the U.S. Attorney's Office for the Northern District of Ohio for its assistance in this matter.