U.S. Securities and Exchange Commission
Litigation Release No. 18216 / July 7, 2003
SEC Obtains Summary Judgment against Participant in Fraudulent Offerings
Securities and Exchange Commission v. Jean Baptiste Jean Pierre, Gabriel Toks Pearse and Darius L. Lee, 02 Civ. 253
On June 25, 2003, Judge Shirley Wohl Kram of the United States District Court for the Southern District of New York found defendant Darius L. Lee ("Lee") liable for participating in the fraudulent offering of securities of three related companies. The court granted the Securities and Exchange Commission's motion for summary judgment against Lee, finding that Lee violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The court permanently enjoined Lee from future violations of the antifraud and registration provisions of the securities laws, ordered Lee to disgorge $8,050 of ill-gotten gains derived from his fraudulent conduct, plus $2,641.13 in pre-judgment interest, and ordered Lee to pay a civil penalty of $25,000.
In its complaint, the Commission charged Lee, along with Jean Baptiste Jean Pierre ("Jean Pierre") and Gabriel Toks Pearse ("Pearse"), with participating in the fraudulent offering and selling of limited partnerships interests of JB Stanley Group, LP ("JB Stanley"), an unregistered hedge fund, and stock of JB Stanley's general partner, Cambridge Capital Holdings Management, LLC ("Cambridge"), and Cambridge's wholly-owned subsidiary, Union Transfer and Cargo Corporation ("UTC"), all of which were controlled by Jean Pierre. None of the offerings were registered with the Commission. Through these schemes, the defendants raised approximately $407,700 from at least fifteen investors, the majority of which was misappropriated by defendant Jean Pierre, with Lee receiving at least $8,050 from the offering proceeds.
The Commission alleged that Lee participated in the fraud by making numerous oral misrepresentations concerning the JB Stanley and Cambridge offerings, including that: (1) JB Stanley and Cambridge would conduct an initial public offering ("IPO"), at a specific price, with JB Stanley investors being able to sell their shares for a profit; (2) Jean Pierre had consistently achieved a 50% return from other funds that he managed; and (3) that JB Stanley is a hedge fund and money or asset management firm that pooled investor funds to purchase and sell securities. The Commission also alleged that Lee knew that a series of fraudulent written materials were being mailed to potential investors. The Commission further alleged that Lee did not investigate any of the offerings before soliciting investors and ignored "red flags" that a fraud was occurring.
Although Lee defaulted in response to the Commission's motion, the court separately found that on the basis of the evidence submitted, the Commission was entitled to judgment as a matter of law. The court previously entered judgments against the other defendants in this action. On March 5, 2003, the court entered a default judgment against Jean Pierre, permanently enjoining him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and Section 206(1) and (2) of the Investment Advisers Act of 1940, ordering Jean Pierre to pay $589,809.32, representing $407,700 in ill-gotten gains derived from his fraudulent conduct plus prejudgment interest of $182,809.32, and ordering him to pay a $407,000 civil penalty. On March 19, 2003, the court entered a final consent judgment against Pearse, permanently enjoining him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, imposing a civil penalty of $25,000, and ordering Pearse to pay $7,217.75, representing disgorgement of $5,700 in ill-gotten gains derived from his conduct plus prejudgment interest of $1,517.75.
See also Lit. Rel. No. 18045 (March 21, 2003); Lit. Rel. No. 17303 (January 10, 2002).