Washington, D.C., June 12, 2009 – The Securities and Exchange Commission has obtained an emergency court order and asset freeze to shut down a fraudulent prime bank scheme that promised massive returns to investors nationwide and then offered a range of administrative excuses when investors had not received any payments.
The SEC alleges that husband and wife John and Marian Morgan of Sarasota, Fla., Stephen E. Bowman of Omaha, Neb., and Thomas D. Woodcock, Jr. of Rockwell, Texas, collectively raised more than $11 million for a fictitious investment program that purported to generate returns for investors through the trading of financial instruments among top financial institutions. Investors were lulled into believing that the trading program was successful and payment of their returns was imminent, but administrative problems were causing delays.
“These promoters used lulling statements to prolong their fraud and prevent unsuspecting investors from knowing the truth about their money,” said Donald Hoerl, Director of the SEC’s Denver Regional Office. “Investors were given a vague assortment of excuses ranging from Patriot Act scrutiny to their lawyer’s vacation schedule as reasons why payments of promised returns were delayed.”
The SEC’s complaint, filed in federal court in Tampa, Fla., also charges two companies operated by some of the defendants: Danish entity Morgan European Holdings ApS and Nebraska-based Bowman Marketing Group, Inc. Among other things, the emergency court order issued by Judge Richard A. Lazzara grants the SEC’s request for an asset freeze, an accounting, expedited discovery, and the repatriation of funds to the registry of the court.
The SEC’s complaint alleges that when investors complained about not receiving payments from the bank trading program, the Morgans and Bowman responded by reassuring investors that the trading program was successful, their funds were safe, and they would be paid as soon as various administrative issues were resolved. Among the excuses provided was that investors’ distributions would be made after payments to certain humanitarian project participants. But the defendants only repaid some investors their principal by using other investors’ funds. Other investors were not paid any amounts.
According to the SEC’s complaint, Bowman appears to have spent some investor funds on gambling expenses, commissions, and Ponzi-like payments to other investors. He also sent millions of dollars to a bank account in Denmark to invest in Morgan European Holdings’ bank trading program. John and Marian Morgan received millions of dollars back from this Danish account and used those funds to pay mortgages on real estate property.
The SEC’s complaint alleges that all of the defendants violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint also alleges that John Morgan, Marian Morgan, Bowman and Woodcock violated Section 15(a) of the Exchange Act.
The court granted the SEC’s motion for a temporary restraining order, asset freeze, and other remedies against Morgan European Holdings, John Morgan, Marian Morgan, Bowman Marketing Group, and Stephen Bowman. In addition to the emergency relief, the SEC seeks permanent injunctions, disgorgement plus pre-judgment interest, and financial penalties against all of the defendants.