SEC Announces Emergency Action to Halt Ongoing Fraud Against Senior Citizens
SEC Seeks Temporary Restraining Orders, Asset Freezes and Accountings
FOR IMMEDIATE RELEASE
Washington, D.C., Nov. 30, 2006 - The Securities and Exchange Commission today filed an emergency enforcement action against Peter J. Dawson and two of his corporations to halt an ongoing fraud in which the defendants have obtained over $2 million from at least seven investors, most of them senior citizens.
The Commission's complaint, filed in the Eastern District of New York in Brooklyn, charges the defendants, Peter J. Dawson, BMG Advisory Services, Inc., and Ethan Thomas Co., Inc., with making fraudulent solicitations and misappropriating investor funds. The Commission seeks temporary restraining orders freezing the defendants' assets, requiring them to provide accountings and prohibiting them from committing future violations of the federal securities laws. The Commission's complaint also seeks a final judgment assessing civil penalties and ordering the defendants to disgorge their ill-gotten gains.
Mark K. Schonfeld, Director of the Commission's Northeast Regional Office, stated, "Taking advantage of elderly investors is particularly tragic. In this case we have moved quickly against the defendants to put a stop to this fraud and prevent further harm."
The complaint alleges that the defendants obtained more than $2 million from at least seven investment advisory clients. Dawson, the president and sole shareholder of BMG and Ethan Thomas, targeted primarily elderly investors living on Long Island, and advised these clients to surrender existing variable annuity policies, mortgage their residences, and transfer the proceeds to Ethan Thomas for Dawson to manage through BMG, his investment advisory firm.
In connection with Dawson's advisory services, Dawson made materially false and misleading statements to his clients about their investments and the use of their funds. Dawson promised between a 12 and 15 percent guaranteed return on each investment, and he assured clients that he would arrange to pay their mortgages and/or pay monthly "returns" on the investments. To the extent that the 12 to 15 percent return exceeded the client's mortgage obligation, Dawson promised that excess return would be accrued in the client's account.
As recently as Oct. 25, 2006, Dawson, through BMG, assured investors in writing that their accounts contained a "certified balance" of the initial funds entrusted to him plus the guaranteed interest. Rather than investing the money as promised, Dawson abused his clients' trust and misappropriated, and is continuing to misappropriate, their funds for his own use within the last several months. Dawson withdrew over $100,000 of his clients' funds for his own benefit. At the same time, Dawson failed to make investors' mortgage payments as he had promised. During the past month, because some investors received notices that their mortgages were not being paid, they complained to Dawson, who has since refused to return their calls and closed BMG's office.
The Commission's investigation into this matter is continuing.
The Commission is committed to protecting older Americans from investment fraud. In July 2006, the SEC held its first-ever Seniors Summit, where the SEC joined with state regulators and others to examine how to best protect older Americans from investment fraud. A webcast of the July 17, 2006, event is available at http://www.sec.gov/news/otherwebcasts.shtml. Materials related to the Seniors Summit are located at: http://www.sec.gov/spotlight/seniors/seniors_summit.htm.
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Helene Glotzer, Associate Regional Director, 212-336-0078
Gerald Gross, Assistant Regional Director, 212-336-0085
Nancy Brown, Senior Trial Counsel, 212-336-1023
Northeast Regional Office
U.S. Securities and Exchange Commission
Additional materials: Litigation Release 19927; Complaint