U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18568 / February 6, 2004
SECURITIES AND EXCHANGE COMMISSION v. WILLIAM R. KERR and CHINA INVESTMENT GROUP, LTD., Civil Case No. 02-9659 (U.S.D.C., C.D. Cal.)
SEC SETTLES FRAUD CHARGES AGAINST PROMOTER OF PRIME BANK SECURITIES FRAUD, AND ISSUES BAR ORDER AGAINST
On February 3, 2004, the United States District Court for the Central District of California entered final judgments against William R. Kerr and the China Investment Group, Ltd., in a "prime bank" case arising from the promotion of a fraudulent high-yield investment program to investors throughout the United States, as well as in Canada. Without admitting or denying the allegations of the Commission's complaint, the defendants consented to the entry of final judgments that permanently enjoin them from violating the antifraud, securities registration, and broker-dealer registration provisions of the federal securities laws. The defendants' disgorgement obligations were waived, and no civil penalties were imposed against them, based on their financial conditions, and in the case of Kerr, based also on recognition of his $10,757,775 restitution order in a parallel criminal case. In related proceedings, the Commission issued an administrative order on February 6, 2004, to which Kerr consented, which bars Kerr from associating with any broker or dealer in the future.
In its complaint in federal court, which it filed on December 19, 2002, the Commission alleged that Kerr and his company induced more than sixty investors throughout the United States, as well as in Canada, to invest over $12 million in his fraudulent investment program, which Kerr falsely promised would yield exorbitant returns within a matter of weeks or months. The complaint further alleged that, in furtherance of this scheme, Kerr posed as a wealthy, politically connected businessman and made numerous false and materially misleading representations to his investor victims and to various intermediaries whom he knew would echo his false claims to other investor victims. These false and materially misleading representations, according to the complaint, included claims (i) that Kerr had control of a $200 million trust; (ii) that Kerr could use the trust as leverage to trade in medium term bank notes ("MTNs"); (iii) that this MTN trading would yield profits of more than 13,000% of the amount invested; (iv) that Kerr's company, CIG, conducted the MTN trading; (v) that the World Bank supported Kerr's trading program; and (vi) that Kerr's investment program was safe and was backed by Kerr's personal guarantee. Further, the complaint alleged that, instead of investing his victims' funds as he had represented, Kerr misappropriated it, and failed to return either profits or principal to his investor victims. (See Securities and Exchange Commission v. William R. Kerr and China Investment Group, Ltd., Civil Case No. 02-9659 (C.D. Cal.); Lit. Rel. No. 17908/December 20, 2002.)
The court's final judgments permanently enjoin both of the defendants from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rule 10b-5.
The above-described final judgments and bar order conclude this litigation.
In a related criminal matter brought by the United States Attorney's Office for the Central District of California, Kerr pleaded guilty to mail fraud and securities fraud charges stemming from the same fraudulent scheme that is the subject of the Commission's complaint, and is currently serving a 57-month prison sentence imposed on him in that case. See United States v. William R. Kerr, No. CR 02-1281 (C.D. Cal.). As noted above, Kerr was also ordered to pay $10.7 million in restitution as part of his criminal sentence.
The Commission wishes to thank the United States Attorney's Office for the Central District of California, the Los Angles Office of the Federal Bureau of Investigation, the California Department of Corporations, and the Division of Securities of the Utah Department of Commerce for their assistance in connection with this matter.
[For related cases, see also Lit. Rel. Nos. 17281/December 19, 2001, 17909/December 23, 2002, and 18462/November 17, 2003; for further information regarding "prime bank" fraud in general, see the SEC's Homepage at http://www.sec.gov/divisions/enforce/primebank.shtml].