U.S. Securities and Exchange Commission
Litigation Release No. 18198 / June 20, 2003
SEC v. Terry L. Dowdell, et al., Civil Action No. 3:01CV00116 (W.D. Va.) (Honorable James H. Michael, Jr.) (filed November 19, 2001)
Court Enters $130 Million Judgment Against Charlottesville, Virginia Securities Swindler, Also Enters Judgments Against Family Members
The Securities and Exchange Commission announced that on Wednesday, June 6, 2003, the Honorable Judge James H. Michael, Senior U.S. District Court Judge for the Western District of Virginia, Charlottesville Division, entered an order setting disgorgement, prejudgment interest and civil penalty amounts against Terry L. Dowdell, the mastermind of a massive international Ponzi scheme. The Court also entered judgments against Dowdell's wife and daughter, as relief defendants in this action, requiring them to disgorge all of the ill-gotten gains that Dowdell transferred to them, including their residences. In a related criminal matter, Dowdell previously pled guilty to criminal charges of securities fraud, wire fraud and money laundering stemming from this scheme, and is awaiting sentencing. He is currently incarcerated in connection with his violation of the Court's asset freeze orders in this case.
The judgment requires Dowdell to pay disgorgement of $121,235,000, plus $8,611,214.42 in prejudgment interest. The court also imposed a $1,000,000 civil penalty. The Court had previously entered a permanent injunction order against Dowdell prohibiting future violations of the federal securities laws and has appointed Roy M. Terry Jr. and the laws firm of DurretteBradshaw, PLC as Receiver to oversee the liquidation of all of Terry Dowdell's assets. Thus far, the Receiver has marshaled approximately $23 million of investor funds located in U.S. banks under Dowdell's control, and has obtained an additional approximately $1.4 million in May 2003 through the auction of Dowdell's residence and personal possessions in Charlottesville. The disgorgement and civil penalty amounts entered against Dowdell are identical to the amounts the Court previously entered against Vavasseur Corporation.
The SEC's enforcement action arises out of a fictitious investment program that Dowdell operated through Vavasseur Corporation, a Bahamian company controlled by Dowdell. Dowdell, along with his marketers, represented to investors that the money would be wired to a bank account in the Bahamas invested in a trading program managed by Vavasseur that involved the purchase and sale of private foreign bank trading instruments, such as medium term debentures. Dowdell and his associates represented to investors that the program would generate annual returns of as much as 160%, with little or no risk to principal.
As Dowdell now admits, there were no "trades" or "investments" made by Vavasseur, but rather investors were paid their promised profits in a typical Ponzi scheme fashion from new investor funds diverted to Dowdell's AmSouth accounts. In the course of the fraud, Dowdell diverted millions of dollars of investor funds for himself, his associates and his family and friends.
On June 4, 2002, exactly one year prior to the Court's order setting disgorgement and civil penalty amounts, Dowdell admitted to the fraud in the SEC's action in a Consent and Stipulation, and the Court entered an order the same day permanently enjoining Dowdell from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The permanent injunction order provided for the future determination of disgorgement and civil penalty amounts, which are now incorporated in the June 4, 2003 order.
In his Consent and Stipulation, Dowdell admitted that foreign nationals, including Shinder Gangar and Alan White, citizens of the United Kingdom, have continued to raise investor funds in connection with the Vavasseur program even after November 19, 2001, and further admitted that various foreign banks have been used in furtherance of the fraud, including Overseas Development Bank & Trust and Investors Bank & Trust in Dominica, the Bank of Ireland in Ireland, Banamex Bank in Mexico, Butterfield Bank in the Commonwealth of Guernsey, Investec Bank in Israel, Fortis Bank in Belgium and Cathay Bank in Belize. In its judgment order against Defendant Vavasseur Corporation, entered earlier this year, the Court ordered the repatriation of all Vavasseur funds held in overseas accounts. The Receiver is working with foreign enforcement authorities to accomplish this.
The Receiver has also filed a proposed plan of distribution to establish a claims process whereby injured investors may participation in the distribution of funds disgorged by Dowdell, Vavasseur and the other defendants in this lawsuit against whom judgments have or will be entered.
The SEC and Department of Justice have been coordinating their enforcement efforts with law enforcement authorities in the United Kingdom and other countries, including the U.K. Serious Fraud Office (SFO), the Leicestershire Constabulary, the U.K. Financial Services Authority (FSA), the Antwerp Police, and Ireland's Criminal Asset Bureau. In related enforcement actions, the SFO and the Leicestershire Constabulary have arrested Gangar, White and others suspected of involvement of the Vavasseur Program and other fraudulent investment programs, and the FSA filed civil charges and obtained a worldwide asset freeze against White, Gangar and their accounting firms "Dobb White & Co" and "Morris White & Co.," accusing them of running an unlawful investment scheme.
Additional information concerning the SEC's lawsuit against Dowdell can be found in Litigation Release No. 17242, November 19, 2001; Litigation Release No. 17454, April 2, 2002; [Litigation Release No. 17553], June 10, 2002; [Litigation Release No. 17880], October 10, 2002; [Litigation Release No. 17881], October 10, 2002; and [Litigation Release No. 17905], December 19, 2002, [Litigation Release No. 17999], February 26, 2003, [Litigation Release No. 18029], March 11, 2003 and [Litigation Release No. 18143], May 19, 2003.
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, at the Receiver's website, located at (http://www.dowdell-receivership.com).