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SEC Takes Action Over Scam Targeting Wealthy Seniors

by Glen Shapiro, LawAndTax-News.com, New York

04 December 2006


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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