 UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 17242 / November 19, 2001
SECURITIES
AND EXCHANGE COMMISSION v. TERRY L. DOWDELL et
al., U.S. District Court for the Western District
of Virginia, Civil Action No. 3:01CV0011610557
(W.D. VA. Nov. 19, 2001)
On
November 19, 2001, the Securities and Exchange
Commission filed a Complaint in Federal District
Court in Charlottesville, Virginia, to halt a
Ponzi scheme operated by Terry L. Dowdell ("Dowdell"),
a resident of Charlottesville, which has allegedly
raised over $29 million during the last several
years. On the same day, Judge James A. Michael,
Jr., of the Western District of Virginia issued
a Temporary Restraining Order, which included
a prohibition against violations of federal securities
laws and an asset freeze, against the defendants,
including Dowdell, Birgit Mechlenburg a resident
of Lenox, Massachusetts, Kenneth G. Mason, a resident
of Wilmette, Illinois, and entity defendants Vavasseur
Corp., a Bahamian corporation, and Dowdell, Dutcher
& Associates, Inc., an inactive Florida corporation.
The Complaint also alleges violations of the federal
securities laws, but does not seek emergency relief,
against Emerged Market Securities, DE-LLC and
Daniel Derouard. The Complaint alleges that Dowdell
offered fictitious "prime bank" securities
through Vavasseur claiming that investors would
earn gross returns of 4 percent per week for 40
weeks out of the year. The Complaint also alleges
that Dowdell told investors that their money would
be sent to the Bahamas in an account in their
own name to trade "medium term debenture
instruments... issued by one or more of the major
money center banks of either North America or
Western Europe." Instead, the Complaint alleges
that Dowdell pooled the money in accounts he controlled
in the United States and used the money to pay
existing investors, pay commissions and pay personal
expenses.
The
Complaint alleges that the defendants violated
Section 17(a) of the Securities Act of 1933 and
Section 10(b) of the Securities Exchange Act of
1934 (Exchange Act) and Rule 10b-5 thereunder.
The Complaint also alleges that Mechlenburg sold
securities and acted as an unregistered broker-dealer
in violation of Section 15(a) of the Exchange
Act and also committed violations of Section 15(c)
of the Exchange Act and Rule 15c1-2 thereunder.
In the Complaint, the SEC also seeks to recover
assets from several relief defendants. Judge Michael
also ordered a hearing on November 27, 2001 at
10:00 a.m.
This
case is part of the SEC's continuing effort to
combat prime bank fraud and to alert the public
to the risks posed by these phony instruments.
The risks of this type of fraud and warnings about
how to avoid it are spelled out in the Interagency
Advisory: Warning Concerning "Prime Bank"
Notes, Guarantees, and Letters of Credit and Similar
Financial Instruments (October 21, 1993), which
is discussed on the SEC's Homepage at http://www.sec.gov/enforce/pbank/pbnkhome.htm.
from:
http://www.sec.gov/litigation/litreleases/lr17242.htm
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