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U.S. Securities and Exchange Commission v. Lunn

United States District Court, D. Colorado

January 8, 2018

U.S. SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
GEOFFREY H. LUNN, DARLENE A. BISHOP, and VINCENT G. CURRY, Defendants.

          ORDER

          RAYMOND P. MOORE UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on “Plaintiff's Renewed Motion for Order Setting Disgorgement, Prejudgment Interest and Civil Penalty against Defendant Geoffrey H. Lunn” (the “Renewed Motion”) (ECF No. 61), as supplemented by the “Supplemental Brief Regarding Disgorgement” (the “Supplement”) (ECF No. 63). For the reasons set forth below, the Renewed Motion is GRANTED as stated herein.

         I. BACKGROUND

         Briefly, according to Plaintiff U.S. Securities and Exchange Commission's (the “Commission”) Complaint, between February 2010 and February 2011, Defendant Geoffrey H. Lunn carried out a fictitious investment scheme through a fictitious business called Dresdner Financial. Through false statements, Defendant sought “Affiliates” to invest with Dresdner and market Dresdner's investment program to others. Describing the investment as “100% guaranteed, ” Defendant raised more than $5.77 million from at least 70 investors throughout the United States and several foreign countries. Such funds were deposited into an account in the name of WGC Group, Inc., which was owned and controlled by Defendant. Such funds were not used for investments as promised; instead, Defendant used the money to make cash withdrawals, pay Affiliates, pay $1 Million to a favored investor, provide money to three Las Vegas “call girls, ” and pay his personal and business expenses. Based on Defendant's conduct, the Commission asserted five claims against him and two Affiliates, alleging Defendant acted fraudulently and with scienter. Those claims are: Violations of Securities Act Sections 5(a) and 5(c); Violations of Exchange Act Section 10(b) and Rule 10b-5; Violations of Securities Act Section 17(a)(1); Violations of Securities Act Sections 17(a)(2) and 17(a)(3); and Violations of Exchange Act Section 15(a). The Commission sought injunctive relief, disgorgement, prejudgment interest, and civil monetary penalties.

         After the filing of the Complaint, a default judgment was entered against Co-Defendant Curry (an Affiliate) to disgorge $399, 930 in ill-gotten gains, plus $28, 914.11 in prejudgment interest, for a total of $428, 844.11. (ECF No. 27.) Thereafter, Defendant and the Commission reached a bifurcated settlement agreement. This agreement provided for the immediate entry of an order of permanent injunctive relief against Defendant, and for briefing to allow the Court to determine the amount of disgorgement, prejudgment interest, and civil penalty to award. On August 1, 2013, upon joint motion filed by the Commission and Defendant, and in accordance with the parties' agreement, the Court entered a consent judgment (the “Judgment”) against Defendant. (ECF Nos. 33, 39, 40.)

         Under the Judgment, Defendant was - and is - permanently enjoined from engaging in various actions and matters. In addition, Defendant agreed he would “pay disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)], ” as determined by the Court. (ECF No. 40, page 4 (brackets in original).) Defendant also agreed that he would pay prejudgment interest calculated from the date of violation based on the rate of interest used by the Internal Revenue Service, as set forth in 26 U.S.C. § 6621(a)(2).

         In order to determine the amount to be awarded against Defendant, the Judgment contemplated the Commission would file a motion, a hearing may be held on such motion, and discovery may also be had. The Judgment also stated the Court may determine the issues raised in the motion on the basis of affidavits and other documents. In addition, Defendant agreed that the allegations of the Complaint should be accepted and deemed true by the Court, and that he would be precluded from arguing that he did not violate the federal securities laws as alleged in the Complaint.

         As anticipated under the Judgment, the Commission filed a Motion for Order Setting Disgorgement, Prejudgment Interest and Civil Penalty against Defendant Geoffrey H. Lunn. (ECF No. 41.) However, before that motion was ruled upon, this case was administratively closed pending the conclusion of a parallel criminal matter against Defendant, U.S. v. Lunn, 14-cr-00161-REB-01, also pending in the District of Colorado. A judgment and a restitution order have now been entered against Defendant in the parallel criminal case. That order requires Defendant to pay restitution in the amount of $3, 922, 935, which is to be paid to the victims. The resolution of the criminal case gave rise to the reopening of this civil case and the Renewed Motion now before the Court. Defendant has filed no response to the Renewed Motion, or its Supplement.[1] The Renewed Motion is now ripe for resolution.

         II. ANALYSIS

         A. FACTS

         Based on Defendant's agreement, the Court deems - and, accordingly, finds - the allegations of the Complaint to be true, i.e., that Defendant fraudulently solicited and received more than $5.7 Million from at least 70 investors and misappropriated such funds for uses other than as represented. In addition, based on the affidavits and other materials submitted by the Commission, the Court finds of the $5, 770, 813 received by Defendant, $1, 094, 000 was used to pay three investors who had deposited a total of $303, 973 into the WGC account.

         B. NO HEARING

         As stated, the Judgment references a hearing as part of the process to determine the amount to be paid by Defendant. The Court does not read the parties' agreement or Judgment to require a hearing to be held. Moreover, no party has requested a hearing. Indeed, Defendant neither responded to the Renewed Motion nor updated his contact information. Finally, the Court finds upon review of the record that no hearing is required. For example, there is no indication that there will be any additional arguments or evidence to be presented on the issues at hand should a hearing be held. There is no any indication by any party that the record before the Court is incomplete. Accordingly, under such facts and circumstances, the Court finds a hearing is not required or necessary.

         C. DISGORGEMENT AND ...


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