U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19395 / September 26, 2005
Securities and Exchange Commission v. William Edward Sears and Patricia Jean Sears Million, Case No. CV-05-1473 CO (D. Ore.)
SEC CHARGES TWO PORTLAND, OREGON SECURITIES BROKERS WITH FRAUDULENT SALES PRACTICES
The Securities and Exchange Commission announced the filing of civil fraud charges against William Sears, 56, and his wife Patricia Jean Sears-Million, 50, former registered stock brokers who sold more than $35 million of stocks and bonds issued by Metropolitan Mortgage & Securities, Co. ("Metropolitan") and a related company to their clients, many of whom were retired seniors residing in the Portland, Oregon area. The Sears are charged with selling inappropriate and risky securities issued by Metropolitan and a related entity, Summit Securities (Summit), to their elderly and risk-averse clients. Metropolitan filed for bankruptcy protection in February 2004, causing devastating losses to nearly 10,000 investors throughout the Pacific Northwest who had invested approximately $450 million in the company.
According to the complaint, Sears and Sears-Million fraudulently induced their clients to invest in the high-risk securities of Metropolitan and Summit despite being aware that the securities carried a high risk of loss and were not suitable for elderly, unsophisticated investors seeking secure investments for retirement. The Complaint also alleges that in order to persuade their clients to invest large amounts of their savings and retirement funds in Metropolitan and Summit securities, the Sears falsely misrepresented that the investments had little or no risk and were as safe as bank deposits. According to the Commission, Sears and Sears-Million falsified documents to make it appear that their customers had the net worth and risk tolerance to qualify for the speculative Metropolitan investments.
The Commission's civil complaint alleges that through their fraudulent sales practices, Sears and Sears-Million violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The Commission seeks injunctive relief, civil monetary penalties, and disgorgement of ill-gotten gains.
In a separate action, the United States Attorney's Office for the District of Oregon, together with the U.S. Postal Inspection Service and the Internal Revenue Service, Criminal Investigation Division announced the filing of criminal fraud and money laundering charges against Sears and Sears-Million. The Commission acknowledges the assistance of the National Association of Securities Dealers in this matter.