U.S. Securities and Exchange Commission
Litigation Release No. 18634 / March 23, 2004
SEC v. J. Robert Dobbins, Dobbins Capital Corp., Dobbins Offshore Capital LLC, Dobbins Partners, L.P., and Dobbins Offshore, Ltd.,
Civ. Action No. 3-04-CV-605(H) (Northern District of Texas)
Today, the Securities and Exchange Commission filed an action in the United States District Court for the Northern District of Texas and was granted emergency relief against J. Robert Dobbins, two unregistered investment advisers under his control, Dobbins Capital Corp. and Dobbins Offshore Capital LLC (collectively "Dobbins Investment Advisers"), and two unregistered hedge funds, Dobbins Partners, L.P. and Dobbins Offshore, Ltd. (collectively, "Dobbins Hedge Funds") for violations of the antifraud provisions of the federal securities laws.
The Commission alleges that Dobbins, since at least January 1, 2000, raised at least $50 million from over 50 investors from around the world. The complaint alleges that Dobbins made false statements to Dobbins Hedge Funds investors concerning the funds' performance by arbitrarily overvaluing investments in thinly-traded and non-publicly traded securities. The complaint also alleges that Dobbins provided the false valuations to Fund investors, in some circumstances, at the time of their investment, in e-mail correspondence, telephone conversations, meetings, and reports posted on Dobbins' Internet website. The complaint alleges that then, using the fraudulently inflated valuations, Dobbins caused the funds to pay management and incentive fees of over $5.3 million to Dobbins and the Dobbins Investment Advisers. Further, the complaint alleges that Dobbins caused the Dobbins Hedge Funds to fraudulently pay unnecessary commission payments to a broker, who then kicked back a significant portion of the commissions to Dobbins.
The Complaint alleges that all of the defendants violated 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 complaint also alleges that Dobbins and the Dobbins Investment Advisers violated Section 206(1) and (2) of the Investment Advisers Act of 1940. Without admitting or denying the Commission's allegations, Defendants Dobbins, Dobbins Capital, Dobbins Offshore Capital, and Dobbins Offshore consented to the emergency relief sought. The Court today issued a preliminary injunction as well as an order freezing assets, requiring an accounting of all assets and investor funds, and prohibiting the destruction of documents.