U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18029 / March 11, 2003
SEC v. Terry L. Dowdell, et al., Civil Action No. 3:01CV00116 (W.D. Va.) (Honorable James H. Michael, Jr.)
On March 5, 2003, the Honorable James H. Michael, Jr., Senior U. S. District Judge for the Western District of Virginia, Charlottesville Division, entered an order committing Terry Dowdell ("Dowdell") to the custody of the United States Marshal's Service for spending as much as $850,000 of investor funds that the Court had ordered frozen in a pending civil enforcement action brought against him by the United States Securities and Exchange Commission ("SEC"). Federal Marshals escorted Dowdell to jail the following day. The jailing of Dowdell comes in connection with an order the Court entered on February 6, 2002, finding Dowdell in civil contempt finding for violating the asset freeze provisions contained in a temporary restraining order that the Court had entered on November 19, 2001, and extended in subsequent orders, against Dowdell and other defendants named in the SEC's Complaint.
The SEC's 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 (the "Vavasseur 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. In June 2002, Dowdell admitted to the fraud in a consent and stipulation filed with the Court. In December 2002, in a related criminal action, Dowdell pled guilty to charges of securities fraud, wire fraud and money laundering. Dowdell is scheduled to be sentenced on May 5, 2003.
The contempt motion against Dowdell was filed in January 2003 by the law firm of DurretteBradshaw, PLC, which had previously been appointed as Receiver over all of Dowdell's assets. The motion arose from the Commission's discovery that, notwithstanding the existence of an asset freeze covering all investor assets that had been invested in the Vavasseur Program, Dowdell, through Shinder Gangar and Alan White, two of Dowdell's associates in Europe, caused in excess of $850,000 of Vavasseur investor funds to be repatriated into the United States into the bank account of three associates in California, Mark Smyth, Gregory Smyth and Jack Dempsey, who in turn dispersed approximately $450,000 of this amount, at Dowdell's instructions, to Dowdell, his wife, his daughter and to Authorized Auto Service, Inc., an automobile repair company that Dowdell had created for his family and funded entirely with stolen investor funds. All of this conduct occurred during a period of time in which Dowdell claimed to be cooperating with federal criminal and civil authorities.
At a hearing conducted by the Court on February 5, 2002 in connection with the contempt motion, Dowdell filed a consent and stipulation admitting to virtually all of the Receiver's allegations. When examined by the Commission about such matters as the current location of investor funds and the possibility of additional, unlawful post-freeze transfers of funds, Dowdell asserted his Fifth Amendment privilege, but nonetheless asserted that he had no current access to Vavasseur investor funds.
In the March 4 Order requiring Dowdell's incarceration, the Court found that "Dowdell has continuously played marbles on the coattails of the court. There can be no reasonable assurances by Dowdell at this time that he will not continue to violate this court's orders if given the opportunity or that he is unable to purge his contempt. Similarly, Dowdell's assertion that he is no longer has access to funds is rendered hollow by his demonstrated prior access to funds."
Citing to United States v. Rylander, 1983 Supreme Court decision, the Court reasoned that Dowdell could not assert inability to comply with a court order while at the same time refusing to answer further questions on the issue through invocation of the Fifth Amendment privilege. The Court found that Dowdell, by asserting his Fifth Amendment privilege, had waived any argument he may have as to inability to comply with the court's repatriation and freeze orders, or to purge himself of the contempt.
The Court ordered that Dowdell be incarcerated until such time that he fully and completely purges himself of contempt by repatriating and disgorging all Vavasseur funds and by telling the SEC and the Receiver where all Vavasseur's funds are located and how such funds may be obtained by the Receiver.
In addition to finding Dowdell in contempt, the Court, in a separate ruling entered on February 12, 2003 found Mark Smyth and Gregory Smyth in civil contempt for their role in the secret repatriation and dissipation of the $850,000, and subsequently, in an order entered on February 27, 2003 entered judgment against them for the sum of $785, 000, plus prejudgment interest.
Additional information concerning the SEC's lawsuit against Dowdell can be found in Litigation Release No. 17242, November 19, 2001; Release No. 17454, April 2, 2002; [Release No. 17553], June 10, 2002; [Release No. 17880], October 10, 2002; [Release No. 17881], October 10, 2002; [Release No. 17905], December 19, 2002, and [Release No. 17999], February 26, 2003.
Additional information about this lawsuit and about investor claims may be found at the Receiver's website, located at http://www.dowdell-receivership.com.
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 website.