Litigation Release No. 17840 / November 15, 2002
Securities and Exchange Commission v. Von Christopher Cummings, et al., No. C2 02 629 (S.D. Ohio).
SEC Charges Six Additional People in Connection with Ohio-Based Ponzi Scheme, Including Four Licensed Stockbrokers Who Received Secret Compensation for Investor Referrals
The Securities and Exchange Commission today filed an amended complaint in federal district court in Columbus, Ohio, adding six new defendants who were responsible for introducing more than a dozen investors to Paramount Financial Partners, L.P., a purported hedge fund based in Columbus, Ohio. The Commission's amended complaint alleges that Kevin Hightower and his "downline" of marketers helped Paramount and its principal, Von Cummings, recruit investors and received large, secretive commissions in return.
The Commission's amended complaint adds the following defendants:
- Kevin D. Hightower, 34, of Reynoldsburg, Ohio;
- Mark D. Deyak, 41, a licensed broker from Rocky Point, New York;
- Michael L. Louis, 40, a licensed broker from East Setauket, New York;
- Michael L. Vogt, 30, a licensed broker from Riverhead, New York;
- John E. Hawley, Jr., 32, a licensed broker from Rocky Point, New York; and
- Omar Benaouda, 30, of New York, New York.
The Commission's amended complaint sets forth the following factual allegations. In October 2000, Hightower introduced Deyak and Vogt, two New York stockbrokers, to Von Cummings and pitched Paramount as an investment opportunity, and as an opportunity for the brokers to enrich themselves with large fees or commissions. Deyak informed Louis about the opportunity, and Vogt notified Hawley and Benaouda. Deyak and Louis made material misrepresentations to clients, including that they invested their own funds with Paramount, in the course of soliciting at least nine investors. Vogt, Hawley and Benaouda referred the names of at least five investors to Cummings. Hightower and his "downline" were ultimately responsible for bringing approximately $6.4 million into the Paramount scheme. Later, Hightower accepted $720,000 of investor funds from Paramount into his business account, approximately $583,000 of which he distributed to the brokers and Benaouda as commissions. Hightower kept the remaining funds, approximately $137,000, as his own fee.
The amended complaint further alleges that the licensed stockbrokers - Deyak, Louis, Vogt and Hawley - acted as unregistered broker-dealers in "selling away" from their firms and accepting compensation from Paramount.
The Commission's amended complaint charges that Deyak and Louis violated Section 17(a) of the Securities Act of 1933, Sections 10(b), 15(a) and 15(c) of the Securities Exchange Act of 1934 and Rules 10b-5 and Rule 15c1-2 thereunder.
The Commission's amended complaint charges that Hightower aided and abetted Cummings and Paramount's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, Hightower aided and abetted violations of Section 15(a) of the Exchange Act by Deyak, Louis, Vogt, Hawley and Benaouda.
The Commission's amended complaint further alleges that Vogt and Hawley violated Section 15(a) of the Exchange Act by accepting compensation from Paramount and "selling away" from their employer, a brokerage firm. The amended complaint also charges that Benaouda violated Section 15(a) of the Exchange Act by engaging in the securities brokerage business without a license.
The amended complaint seeks, among other things, permanent injunctions, civil penalties and disgorgement against all six additional defendants.
For further information about the Commission's action in SEC v. Cummings, et al., see Litigation Release no. 17581 (June 24, 2002) and Litigation Release no. 17598 (July 3, 2002).