SEC Takes Action Over Scam Targeting Wealthy Seniors
The US Securities and Exchange Commission last Thursday filed an emergency enforcement
action against Peter Dawson and two of his corporations to halt an ongoing fraud
in which the defendants had obtained over $2 million from several investors, most
of them senior citizens.
The Commission's complaint, filed in the Eastern District of New York in Brooklyn,
charged the defendants, Peter J. Dawson, BMG Advisory Services, Inc., and Ethan
Thomas Co., Inc., with making fraudulent solicitations and misappropriating
investor funds. The complaint alleged 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. According to the SEC, in connection with Dawson's advisory services, he made
materially false and misleading statements to his clients about their investments
and the use of their funds. Dawson promised a 12-15% 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. 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 allegedly withdrew over $100,000 of his clients' funds for his own benefit.
At the same time, he 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 sought 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 sought 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,
observed that: "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 Commission's investigation into the matter is ongoing. .
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