Securities and Exchange Commission
Litigation Release No. 17781 / October 10, 2002
SEC v. Terry L. Dowdell, et al., Civil Action No. 3:01CV00116 (W.D. Va.) (Honorable James H. Michael, Jr.)
The SEC today announced that it had resolved two contempt motions that it had filed against Terry Dowdell, various of his family members, and a family-owned auto repair business on February 7, 2002 and April 5, 2002 in a lawsuit pending before the Honorable James H. Michael, Jr., Senior U. S. District Judge for the Western District of Virginia, Charlottesville Division.
The lawsuit stems from a massive international Ponzi scheme orchestrated by Terry L. Dowdell, in which Dowdell, utilizing various marketers, raised more than $70 million from investors in the U.S. and abroad for a fictitious trading program purportedly involving the purchase and sale of foreign bank instruments and purportedly being operated by Vavasseur Corporation, a Bahamian corporation that is also named as a defendant in this action. Dowdell previously admitted the fraud, and consented to the disgorgement of all of his assets.
Dowdell's family members, including his wife Mary Dowdell, and his children Adam Dowdell and Rebecca Dowdell are named as relief defendants in this lawsuit. The SEC alleges that Dowdell diverted some of the investors' funds to them. The family-owned business, Authorized Auto Service, Inc., is also named as a relief defendant in this suit. The SEC alleges that Dowdell set up Authorized Auto for his children and funded it with $1 million of investor money.
The contempt motion related to the transfer of $500,000 of investor funds to an account in the name of Authorized Auto in violation of an asset freeze order that the Court entered on November 19, 2001. The SEC's motion alleged that Dowdell and his family members made this transfer on the day after Dowdell received notice of the asset freeze order. According to the motion, Authorized Auto proceeded to spend virtually the entire $500,000 on start-up costs prior to the SEC's discovery of the unlawful transfer. The company, which operates an auto repair shop in Charlottesville, Virginia, opened for business in January 2002.
In lieu of hearing on the SEC's contempt motion, the parties reached a settlement, in which Authorized Auto consented to the entry of an order, entered by the Court on September 12, 2002, requiring it to disgorge the entire $1 million that Dowdell transferred to the company, plus prejudgment interest. Authorized Auto also agreed to the appointment of a Receiver over all of its assets, in order to facilitate the liquidation of the company's assets.
Additional information on how prime bank and other banking-related investment schemes work can be found at the SEC's Prime Bank Fraud Information Center (http://www.sec.gov/divisions/enforce/primebank.shtml) in the enforcement section of the SEC's Web site. See previous Litigation Release No. 17242, November 19, 2001 and Release No. 17454, April 2, 2002.