U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18289 / August 14, 2003
SECURITIES AND EXCHANGE COMMISSION V. RAYMOND L. KOTROZO, PAMELA H. WILSON, AND WARNER PACIFIC FINANCIAL, INC., Civil Action No. CV 03-5781 FMC (CTx) (C.D. Cal.)
COMMISSION SUES BARRED BROKER FOR UNLAWFULLY ASSOCIATING WITH A BEVERLY HILLS BROKERAGE FIRM AND OTHERS FOR ASSISTING HIS VIOLATIONS
The Securities and Exchange Commission today filed a complaint in federal district court in Los Angeles against Raymond L. Kotrozo for violating an administrative order issued by the Commission in October 1990, and Pamela H. Wilson and Warner Pacific Financial, Inc. for aiding and abetting Kotrozo's violations. The Commission had previously barred Kotrozo, age 56, of Beverly Hills, California, from associating with any broker-dealer, with the right to reapply after five years. Despite this bar order, the complaint alleges, Kotrozo associated with two Beverly Hills broker-dealers.
In 1990, the Commission sued Kotrozo and his former brokerage firm, RL Kotrozo, Inc., for operating a Ponzi scheme, among other things. Kotrozo was enjoined by a federal court in Arizona from committing future violations of the federal securities laws and ordered to pay over $1 million in ill-gotten gains. The Commission's order barring Kotrozo from associating with a broker-dealer was based on that injunction.
The complaint alleges that from January 1999 through September 2001, Kotrozo violated the 1990 bar order by associating with the Beverly Hills branch office of Grattan Financial Securities, Inc. ("Grattan Branch Office"), a registered broker-dealer, and Warner Pacific Financial, Inc., an unregistered broker-dealer. The complaint alleges that Kotrozo associated with these entities by, among other things: (1) participating in the hiring, training and mentoring of brokers; (2) conducting investment seminars to obtain brokerage clients; (3) drafting and reviewing portfolio recommendations which were presented to prospective brokerage clients; and (4) participating in meetings with and making investment recommendations concerning specific mutual funds and variable annuity investments to prospective brokerage clients, some of who subsequently became actual clients. During this time period, Kotrozo had not reapplied to be associated with a broker or dealer and received compensation of at least $400,000 derived from the Grattan Branch Office's securities-related business.
The complaint further alleges that Wilson, age 43, of Burbank, California, and Warner Pacific, based in Beverly Hills, California, knowingly and substantially assisted Kotrozo's unlawful association with both the Grattan Branch Office and Warner Pacific by: (1) attempting to conceal Kotrozo's association with Grattan by characterizing Kotrozo as a Warner Pacific consultant who provided general economic advice and performed clerical tasks; (2) participating in meetings with prospective brokerage clients, including in meetings in which Kotrozo made investment recommendations; and (3) allowing Kotrozo to participate in Grattan Branch Office finances and compensating him for securities-related activities. As a result of Kotrozo's unlawful association, Wilson received over $400,000 in compensation. The Complaint also alleges that Warner Pacific unlawfully acted as an unregistered broker-dealer in violation of Section 15(a) of the Securities Exchange Act of 1934.
The complaint seeks injunctions, disgorgement and civil penalties against Kotrozo for violating the bar order and Section 15(b)(6)(B)(i) of the Exchange Act and against Wilson and Warner Pacific for aiding and abetting Kotrozo's violations of Section 15(b)(6)(B)(i) of the Exchange Act. The Complaint also alleges that Warner Pacific acted as an unregistered broker-dealer in violation of Section 15(a) of the Exchange Act.