LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
There is little new about another investment fund fraud
or Ponzi scheme case except of course the victims. For whatever reason, these
cases were rare prior to the time Bernard Madoff was arrested. Since the King
of Ponzi schemes was trotted off to jail however the Commission has brought
dozens - perhaps hundreds - of these cases in a seemingly never ending stream.
Most are variations on a theme. The scam solicits investors with promises of
high and often guaranteed returns. Later they learn that there are no returns
except to the promoter who lives high and well for a time.
The SEC's latest offering is no different. In SEC v.
Aubrey, Civil Action No. SACV 11-1564 (C.D. Cal. Filed Oct. 12, 2011)
brothers Jerry and Timothy Aubrey and their salesmen, Brian Cherry and Aaron
Glasser raised millions from investors through high pressure cold calls,
selling shares in now-defunct Progressive Energy Partners, LLC. The promise was
annual returns of 50% or more. There were no returns, only big, undisclosed
commissions for the salesmen and a lavish house, L.A. Lakers box seats and
vacations in Hawaii, Las Vegas and Palm Springs for the brothers Aubrey - along
with an SEC enforcement complaint alleging violations of Securities Act
Sections 5 and 17(a) and Exchange Act Section 10(b).
Despite the filing of Aubrey and a numerous of
similar cases, the U.S. Attorney's Office for the Eastern District of Virginia
uncovered an investment fund fraud action with a new wrinkle: The defendants
are a former FBI agent and his wife living in Fredericksburg, Virginia. John
Graves and his wife Sara were indicted for defrauding investors.
Following his resignation from the FBI in 1999, Mr.
Graves founded Brook Point Management. He served as president. The firm sold insurance,
performed real estate and tax planning services and recruited and advised
investment clients. Mr. Graves held the requisite degrees and securities
registrations as a certified financial planner with Series 7 and 65
Between June 2008 and July 2011 Mr. Graves and his wife
defrauded 11 investors out of about $1.1 million, according to the court
papers. The husband and wife team made a series of misrepresentations to
investors regarding the safety of the investments as well as the use of the
funds. The money was diverted to their use to acquire real estate and pay
personal expenses, including credit card bills. Portions of the investor funds
were also used to repay other investors. Mr. Graves continued to make
misrepresentations to investors and the SEC even after the scheme was
The couple have been charged with one count of conspiracy
to commit mail and wire fraud, one count of mail fraud and four counts of wire
fraud. Mr. Graves was also charged with three counts of investment adviser
fraud and one count of making false statements. The case is pending. U.S. v.
Graves (E.D.Va. Filed Oct. 11, 2011).
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
For more information about LexisNexis
products and solutions connect with us through our corporate site.