UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
vs.
GLOBAL HEALTH, GLOBAL CLEARING,
GLOBAL STRATEGIES,
GOLDMAN QUINTERO & ASSOCIATES,
VINCE DORY, and JOSHUA ADAMS,
Defendants.
COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Plaintiff Securities and Exchange Commission (“Commission”) alleges as follows:
JURISDICTION AND VENUE
1. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(1)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1), 78u(d)(3)(A), 78u(e) & 78aa. Defendants have, directly or indirectly, made use of the means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged in this complaint.
2. Venue is proper in this district pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and Section 27 of the Exchange Act, 15 U.S.C. § 78aa, because certain of the transactions, acts, practices, and courses of conduct constituting violations of the federal securities laws occurred within this district.
SUMMARY
This case involves the ongoing fraudulent and unregistered offering of securities in the form of stock, targeted at the elderly, by Global Health and its unregistered brokers (“brokers”): Global Clearing, Global Strategies, Goldman Quintero & Associates (“Goldman”), Vince Dory, and Joshua Adams (collectively, the “defendants”). The brokers cold call prospective investors to invest in Global Health stock. They have claimed that Global Health has developed a cancer treatment that is on the verge of receiving FDA approval, and subsequently they have claimed that the FDA has approved the treatment. To convince investors to buy Global Health stock, or add to their investment, the brokers provide letters on FDA stationery that describe the cancer treatment’s progress through the approval process. Subsequent letters state that the treatment has been approved by the FDA and that Global Health can soon begin marketing it. The FDA letters, however, are forgeries, and the claims are false. No one from the FDA has authored or signed the letters, and the FDA has no record of Global Health or any product purportedly manufactured by it. Furthermore, the addresses for the brokers, where investors are instructed to send their funds, are merely commercial mail receiving agencies (i.e., mail drops) from which the defendants take investors’ checks across the border to Mexico, where they either cash or deposit them in an account at a Mexican bank in Tijuana.
4. The defendants, by engaging in the conduct described in this complaint, have violated, and unless enjoined will continue to violate, the securities registration provisions of the Securities Act. Additionally, the brokers have violated, and unless enjoined will continue to violate, the antifraud provisions of the Securities Act and the Exchange Act and also the broker-dealer registration provisions of the Exchange Act. By this complaint, the Commission seeks a temporary restraining order, an asset freeze, accountings, a repatriation order, an order prohibiting the destruction of documents, an order expediting discovery, preliminary and permanent injunctions, disgorgement with prejudgment interest, and civil penalties.
THE DEFENDANTS
5. Global Health purports to be a biotechnology company engaged in the development of cancer treatments. It does not appear to be organized as any form of business in any state, based upon a review of publicly available information. Global Health has never been registered with the Commission or the National Association of Securities Dealers (“NASD”) in any capacity. No registration statement has been filed with the Commission or is in effect with respect to the offering of the securities of Global Health.
6. Global Clearing purports to operate as a brokerage firm. It does not appear to be organized as any form of business in any state, based upon a review of publicly available information. Global Clearing has never been registered with the Commission or the NASD in any capacity. As of October 2003, it maintained a commercial mail drop address in San Diego, California.
7. Global Strategies purports to operate as a brokerage firm. It does not appear to be organized as any form of business in any state, based upon a review of publicly available information. Global Strategies has never been registered with the Commission or the NASD in any capacity.
8. Goldman Quintero & Associates (“Goldman”) purports to operate as a brokerage firm. It does not appear to be organized as any form of business in any state, based upon a review of publicly available information. Goldman has never been registered with the Commission or the NASD in any capacity. As of July 2004, it maintained a commercial mail drop address in San Diego, California.
9. Vince Dory, age unknown, has, at various times since at least 2003, purportedly acted as a broker for Global Clearing, Global Strategies and Goldman, and he is Global Clearing’s supervisor. Dory has, on behalf of these entities, solicited investors to invest in Global Health. Dory has never been registered with the Commission in any capacity.
10. Joshua Adams, age unknown, has, at various times since at least 2003, purportedly acted as a broker for Global Clearing, Global Strategies and Goldman. Adams has, on behalf of these entities, solicited investors to invest in Global Health. Adams has never been registered with the Commission in any capacity.
THE FRAUDULENT SCHEME
THE STOCK OFFERING
11. Beginning as early as January 2003, the defendants have offered and sold stock in Global Health. Global Clearing, Global Strategies and Goldman, through Dory and Adams, have solicited investors to purchase stock in Global Health. The brokers have solicited mostly elderly investors in at least four states. Financial statements do not accompany or follow these solicitations.
12. Global Clearing, Global Strategies and Goldman act as the purported brokers, and Dory and Adams hold themselves out as account representatives of these entities. Dory and Adams instruct investors to mail their checks to one of two locations in San Diego, California. They then usually send investors stock certificates that purportedly represent their investments. Global Strategies has sent purported confirmation statements to investors, and Global Clearing, Global Strategies and Goldman have sent periodic account statements.
MISREPRESENTATIONS AND OMISSIONS: THE BROKERS FALSELY CLAIM
THAT GLOBAL HEALTH’S CANCER TREATMENT IS ABOUT TO, AND HAS,
RECEIVED FDA APPROVAL, AND THEY SEND FORGED FDA APPROVAL
LETTERS TO THAT EFFECT
13. The brokers pitch Global Health as being the developer of a new cancer treatment, which in their initial solicitations was on the verge of receiving FDA approval. In subsequent solicitations, the brokers claim that Global Health has received FDA approval. To convince potential investors that Global Health is a legitimate company that has obtained FDA approval of its new cancer treatment, Dory and Adams provide investors with copies of letters -- on FDA letterhead –- purportedly signed by employees and representatives of the FDA, regarding FDA’s clinical trials of the purported treatment. At least four separate letters have been mailed to investors. The letters contains positive statements regarding the purported treatment and the cancer treatment’s progress through the approval process.
14. Each of the letters, however, was forged. They were not authored or sent by any FDA employee or representative. Moreover, the statements contained in the letters are false. In fact, the FDA has no record of the existence of Global Health or of its purported cancer treatment.
15. For example, at least one investor was provided with a letter, dated August 26, 2003, purportedly from the director of the FDA’s Research Section – Approvals Committee, which stated that the results of a clinical trial “demonstrate the effectiveness of this specific therapy, with little or no side effects.” The letter further states that the Approvals Committee recommends “to approve this genetic immunotherapy for public consumption.” At least two investors received other letters, dated September and October 2003, purportedly from the office of an FDA Commissioner, stating that the Approvals Committee “has recommended approval” of Global Health’s cancer treatment and that Global Health may begin marketing its product in thirty days.
16. At least one investor received another letter, dated October 22, 2003, from Dory, Global Clearing’s supervisor. Although the letter was on FDA letterhead, it was addressed “Dear Shareholder” and was purportedly signed by the chairman of Global Health’s board. It stated that the approval of Global Health’s cancer treatment was recently made official and that “experts” purportedly believed that the product would generate over $1 billion in revenues within a year. The letter is suspicious, for it is on FDA letterhead but is addressed “Dear Shareholder” and is signed by Global Health’s chairman. Dory, therefore, was on notice that the materials that he used, and the statements made in them, were questionable. Nevertheless, he continued to solicit investors.
17. None of these letters were legitimate, and the statements that they contained were false. The FDA has no record of Global Health or of any product purportedly made by it.
MISREPRESENTATIONS AND OMISSIONS: THE BROKERS HAVE
TRANSFERRED INVESTOR FUNDS TO MEXICAN BANK ACCOUNTS
18. Investors are instructed to send their checks to Global Clearing or Goldman at one of two San Diego addresses. Investors are not told that these addresses are just commercial mail drops within a mile or two of the Mexican border. Investor checks are taken across the border and are cashed or deposited in an account with a Mexican bank in Tijuana.
THE BROKERS’ LULLING ACTIVITIES
19. After investors make their investments, the brokers lull them into continuing to believe that the FDA was in the process of approving, and had approved, Global Health’s cancer treatment. For example, one investor received the purported FDA letters shortly after he had invested nearly $50,000 in Global Health. By disseminating these letters, the brokers mislead investors into believing that the company is legitimate, that its product is about to be approved by the FDA, and that it had received approval. The brokers also engage in additional lulling activities by providing updates on the telephone and periodically sending investors account statements that falsely represent that their investments have increased significantly in value. These lulling efforts are part of the brokers’ fraudulent scheme.
ONGOING CONDUCT
20. The defendants are engaged in ongoing offers and sales of Global Health stock. Specifically, Adams, on behalf of Global Health, Global Clearing, Global Strategies and Goldman, continues to contact investors, offering them additional Global Health stock. As recently as mid-July 2004, Adams solicited at least one existing investor, who purchased additional shares of Global Health stock in late July 2004 but was able to stop payment on his check.
FIRST CLAIM FOR RELIEF
UNREGISTERED OFFER AND SALE OF SECURITIES
Violations of Sections 5(a) and 5(c) of the Securities Act
(Against All Defendants)
21. The Commission realleges and incorporates by reference paragraphs 1 through 20 above.
22. The defendants, and each of them, by engaging in the conduct described above, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce or of the mails, to offer to sell or to sell securities, or to carry or cause such securities to be carried through the mails or in interstate commerce for the purpose of sale or for delivery after sale.
23. No registration statement has been filed with the Commission or has been in effect with respect to the offering alleged herein.
24. By engaging in the conduct described above, each of the defendants violated, and unless restrained and enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c).
SECOND CLAIM FOR RELIEF
FRAUD IN THE OFFER OR SALE OF SECURITIES
Violations of Section 17(a) of the Securities Act
(Against Defendants Global Clearing,
Global Strategies, Goldman, Dory and Adams)
25. The Commission realleges and incorporates by reference paragraphs 1 through 20 above.
26. Defendants Global Clearing, Global Strategies, Goldman, Dory and Adams, and each of them, by engaging in the conduct described above, directly or indirectly, in the offer or sale of securities by the use of means or instruments of transportation or communication in interstate commerce or by use of the mails: a. with scienter, employed devices, schemes, or artifices to defraud; b. obtained money or property by means of untrue statements of a material fact or by omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or c. engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchaser. 27. By engaging in the conduct described above, defendants Global Clearing, Global Strategies, Goldman, Dory and Adams, and each of them, violated, and unless restrained and enjoined will continue to violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).
THIRD CLAIM FOR RELIEF
FRAUD IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against Defendants Global Clearing,
Global Strategies, Goldman, Dory and Adams)
28. The Commission realleges and incorporates by reference paragraphs 1 through 20 above.
29. Defendants Global Clearing, Global Strategies, Goldman, Dory and Adams, and each of them, by engaging in the conduct described above, directly or indirectly, in connection with the purchase or sale of a security, by the use of means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange, with scienter: a. employed devices, schemes, or artifices to defraud; b. made untrue statements of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or c. engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon other persons.
30. By engaging in the conduct described above, defendants Global Clearing, Global Strategies, Goldman, Dory and Adams, and each of them, violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
FOURTH CLAIM FOR RELIEF FAILURE TO REGISTER AS A BROKER-DEALER
Violations of Section 15(a) of the Exchange Act
(Against Defendants Global Clearing,
Global Strategies, Goldman, Dory and Adams)
31. The Commission realleges and incorporates by reference paragraphs 1 through 20 above.
32. Defendants Global Clearing, Global Strategies, Goldman, Dory and Adams, and each of them, by engaging in the conduct described above, directly or indirectly, made use of the mails or means or instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to induce, the purchase or sale of securities, without being registered as brokers or dealers in accordance with Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a). 33. By engaging in the conduct described above, defendants Global Clearing, Global Strategies, Goldman, Dory and Adams, and each of them, violated, and unless restrained and enjoined will continue to violate, Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a).
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that the defendants committed the alleged violations.
II.
Issue a judgment, in a form consistent with Fed. R. Civ. P. 65(d), temporarily, preliminarily and permanently enjoining Global Health and its officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the judgment by personal service or otherwise, and each of them, from violating Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) & 77e(c).
III.
Issue judgments, in a form consistent with Fed. R. Civ. P. 65(d), temporarily, preliminarily and permanently enjoining defendants Global Clearing, Global Strategies, Goldman, Dory, and Adams and their officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the judgment by personal service or otherwise, and each of them, from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, 15 U.S.C. §§ 77e(a), 77e(c) & 77q(a), and Sections 10(b) and 15(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) & 78o(a), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
IV.
Issue, in a form consistent with Fed. R. Civ. P. 65, a temporary restraining order and a preliminary injunction freezing the assets of each of the defendants, directing the assets of each of the defendants to be repatriated to the United States, prohibiting each of the defendants from destroying documents, expediting discovery, and requiring accountings from each of the defendants.
V.
Order each defendant to disgorge all ill-gotten gains from their illegal conduct, together with prejudgment interest thereon.
VI.
Order each of the defendants to pay civil penalties under Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and that defendants Global Clearing, Global Strategies, Goldman, Dory and Adams pay civil penalties under Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).
VII.
Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
VIII.
Grant such other and further relief as this Court may determine to be just and necessary.
DATED: September 10, 2004
_______________________________
MICHAEL A. PIAZZA
LISA A. GOK
DAVID J. VAN HAVERMAAT
ROBERTO A. TERCERO
Attorneys for Plaintiff
This page was posted on October 3, 2004.