U.S. Securities and Exchange Commission
Litigation Release No. 18886 / September 15, 2004
SECURITIES AND EXCHANGE COMMISSION V. FIRST UNITED FINANCIAL GROUP, LLC, CIV. ACTION NO. 04-1601 (United District Court for the District of Columbia) (Judge Kotelly)
SEC CHARGES DISTRICT OF COLUMBIA PUBLIC OFFICIAL AND OTHERS WITH OPERATING A PONZI SCHEME
On September 15, 2004, the U.S. Securities and Exchange Commission filed an action in the United States District Court for the District of Columbia, against First United Financial Group, LLC, Robert L. Hall, Jr., and Carletus Willis, alleging that they defrauded customers by operating a "Ponzi" scheme.
Hall, 32, is a District of Columbia resident, and was the founder, President and Chief Executive Officer of First United. Hall is Chairman of D.C. Advisory Neighborhood Commission 6C, an elected DC governmental position.
First United is a Washington, DC limited liability corporation incorporated in 2001. In promotional materials sent to investors, First United purported to be a "multi-million dollar DC based [financial services] consulting firm."
Willis, 30, is also a Washington, DC resident and was the Chief Operating Officer of First United from May 2001 to November 2002.
The Commission's Complaint alleges that, from at least June 2001 until August 2003, the defendants offered and sold securities called "Asset Placement Agreements" in unregistered transactions to more than 150 investors in at least 18 states. Through cold calls, seminars, sales agents and newspaper advertisements, First United raised over $1.38 million. In connection with the offer and sale of securities, according to the complaint, Hall and Willis made misrepresentations and omissions of material fact to investors concerning, among other things, the use of investor funds, expected returns, and the investment risks, including the following.
The Commission alleges that the proposed defendants violated 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. The Commission is seeking permanent injunctions, disgorgement with prejudgment interest and civil penalties from each of the proposed defendants. The Commission also seeks a permanent conduct-based injunction enjoining Hall from participating in any sale or offer of any security in an unregistered transaction.
The Commission acknowledges the assistance and cooperation of the United States Attorney's Office for the District of Columbia and the United States Postal Inspection Service in this matter. The United States Attorney's Office for the District of Columbia is filing a two count criminal information charging Carletus Willis with conspiracy to commit mail fraud and mail fraud in the United States District Court for the District of Columbia.