U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19231 / May 19, 2005
Securities and Exchange Commission v. Gary L. Harden, Sr. et al., Civil Action No. 105CV354 (W.D. Mich.) (May 19, 2005).
SEC FILES FRAUD CHARGES AGAINST GARY L. HARDEN, SR. AND PHILIP E. LOWERY IN CONNECTION WITH THE UNREGISTERED OFFERS AND SALES OF INTERNET-RELATED RLLPS
The United States Securities and Exchange Commission announced today that it has filed a securities fraud lawsuit in the United States District Court for the Western District of Michigan against Gary L. Harden, Sr. and Philip E. Lowery, both of whom participated in the unregistered sales of RLLPs that were supposed to profit from online casinos.
The Commission alleges in its complaint that between January 1999 and March 2001, Harden and Lowery violated the antifraud and registration provisions of the federal securities laws in connection with the sale of $5.8 million of Colorado Registered Limited Liability Partnership (“RLLP”) units. According to the complaint, Harden formed the RLLPs and sold the units to investors ostensibly to provide them with an opportunity to share in the profits of Internet casinos, which were to be formed and operated by Lowery. Harden and Lowery solicited more than eighty investors to purchase partnership units in ten RLLPs. None of the offers or sales of these units were registered with the Commission as required by Section 5 of the Securities Act of 1933.
The Commission’s complaint further alleges that Harden and Lowery used high-pressure sales practices to target uneducated and financially unsophisticated, elderly investors, many of whom liquidated retirement accounts and other conservative investments to invest in the RLLPs. According to the complaint, Harden and Lowery made false and misleading statements in connection with their selling efforts, including the provision of unrealistic profit projections and representations that the investments were guaranteed and the money would be used for partnership and casino business expenses. The complaint alleges that, in fact, most of the funds were used to pay for Harden and Lowery’s personal expenses. Eventually, investors lost all of their money after the casinos were shut down due to operational problems.
The Commission’s action seeks permanent injunctions, orders of disgorgement and civil penalties against Harden and Lowery for violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The Commission also seeks disgorgement, as relief defendants, from Erma Lowery (Lowery’s wife), Cyberspace, Ltd. and Development Investments and Associates, Inc. (entities through which Harden managed the RLLPs) and Princeton Holdings, LLC and Palancar, LLC (entities through which Lowery managed the online casinos).