U.S. Securities and Exchange Commission
Litigation Release No. 18400 / October 8, 2003
Securities and Exchange Commission V. American Financial Group of Aventura, Inc., et al., Case No. 02-22198-CIV-MARTINEZ (S.D. Fla.)
District Court Finds Defendant David H. Siegel In Civil Contempt For Failing To Comply With Order Requiring Repatriation Of Assets
The Securities and Exchange Commission (SEC) announced that on September 30, 2003, the United States District Court for the Southern District of Florida issued an Order finding Defendant David H. Siegel (Siegel) in civil contempt for his failure to comply with the Court's prior repatriation order. The Court conducted an evidentiary hearing over the course of three days after an Order to Show Cause was issued upon the SEC's and Receiver's Joint Motion, filed on September 27, 2002. The Court held that the SEC and Receiver presented clear and convincing evidence that Siegel controls, or at one time controlled assets of investors which were transferred offshore, and that Siegel has failed to repatriate any of those assets and deposit them in the Court's registry as previously ordered by the Court. The Court further held that Siegel, who invoked his Fifth Amendment right against self-incrimination at the hearing, failed to produce any evidence showing he made reasonable efforts in good faith to repatriate those assets. Siegel's invocation of his rights under the Fifth Amendment did not, according to the Court, discharge his burden of producing evidence that he was unable to comply with the Court's repatriation order. The Court has requested the parties to file briefs concerning the appropriate sanctions for Siegel's contempt.
The contempt proceeding arises from the SEC's emergency action, filed on July 24, 2002, against American Financial Group of Aventura, Inc. (AFG), a Florida corporation, and Siegel, AFG's senior vice president and director of investments, and relief defendant American Wealth Management of Aventura, Inc., a Florida corporation, in connection with an alleged fraudulent securities offering. The SEC alleged that Siegel and others had been fraudulently offering and selling investment contracts in the form of fractional participation in a restricted stock loan program, from its Aventura, Florida office. The SEC's complaint alleges that AFG enticed investors with promises of high returns with low risk because investments were purportedly over-collateralized with restricted stock. The SEC's complaint further alleges that Siegel, a recidivist securities laws violator, misappropriated investor monies and issued false statements to investors falsely showing high returns when, in fact, the investments were losing value because Siegel was misappropriating the money raised by AFG. The SEC's complaint also alleges that AFG misled investors by failing to disclose in its offering materials and website that Siegel had a long history of securities laws violations, including an injunction entered against him in 1987 for participating in a stock manipulation scheme. The SEC charged AFG and Siegel with violations of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
On July 25, 2002, the Court granted the SEC's request for a Temporary Asset Freeze Order (TAF), and other emergency relief. The TAF provided, among other things that Siegel repatriate assets. On August 15, 2002, the Court entered an Order of Temporary Asset Freeze (Order), by consent, against Siegel. The Order required Siegel to comply with the repatriation provision contained in the TAF. Because Siegel failed to comply with that Order, on September 27, 2002, the SEC and Receiver jointly moved for an Order to Show Cause why he should not be held in contempt.