IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
| _______________________________________________________ | ||
| ) | ||
| COMMODITY FUTURES TRADING COMMISSION, | ) | Civil Action No. 97 C 7061 |
| Plaintiff, | ) | |
| ) | ||
| v. | ) | |
| ) | ||
| FTI FINANCIAL GROUP. et al., | ) | Judge: Harry D. Leinenweber |
| Defendants. | ) | |
| _______________________________________________________ | ) |
CONSENT ORDER OF PERMANENT INJUNCTION
AND OTHER EQUITABLE RELIEF AGAINST
FTI FINANCIAL GROUP, SAMUEL H. FOREMAN,
MARK G. STEVENS AND CAROLYN F. MUNN
I.
INTRODUCTION
1. On October 9, 1997, Plaintiff Commodity Futures Trading Commission ("Commission") filed a Complaint against FTI Financial Group, Samuel H. Foreman, Mark G. Stevens and Carolyn F. Munn1 seeking preliminary and other equitable relief for violations of the Commodity Exchange Act, as amended ("the Act"), 7 U.S.C. ��1 et seq. (1994). On that same date, the Court entered a Consent Order of Preliminary Injunction and Other Equitable Relief ("Preliminary Consent Order"). The FTI Defendants did not admit or deny the allegations of the Complaint for purposes of the Preliminary Consent Order.
2. On January 28, 1998, the Commission filed an Amended Complaint, naming four additional defendants. There were no additional averments or counts alleged against the FTI Defendants.
3. To effect settlement of the matters alleged in the Amended Complaint against the FTI Defendants without a trial on the merits, the FTI Defendants and the Commission consent to the entry of this Consent Order of Permanent Injunction and Other Equitable Relief Against FTI Financial Group, Samuel H. Foreman, Mark G. Stevens and Carolyn F. Munn ("Consent Order"). The FTI Defendants also: (1) acknowledge service of the Summons and Amended Complaint; (2) admit both personal and subject matter jurisdiction of this Court in this action; (3) admit that venue properly lies with this Court; and (4) generally waive the entry of findings of fact and conclusions of law in this action pursuant to Rule 52 of the Federal Rules of Civil Procedure, except as provided in Part II below.
4. By consenting to the entry of this Consent Order, the FTI Defendants neither admit nor deny any of the Findings of Fact contained in this Consent Order except as to jurisdiction and venue. Notwithstanding the above, the FTI Defendants further agree and the parties to this Consent Order intend that all of the findings of fact made by the Court in this Consent Order shall be taken as true and correct and be given preclusive effect without further proof in any subsequent bankruptcy proceeding filed by, on behalf of or against FTI, Foreman, Stevens and/or Munn for the purpose of determining whether the restitution and/or other payments ordered herein are excepted from discharge. The FTI Defendants shall also provide immediate notice of any bankruptcy proceeding filed by, on behalf of or against any of them in the manner required by Section V, paragraph 1 of this Consent Order.
5. The FTI Defendants agree that: (1) they will not take any action or make or permit to be made any public statement denying, directly or indirectly, any finding or conclusion contained in this Consent Order or creating, or tending to create, the impression that this Consent Order is without a factual basis; and (2) no agent or employee of the FTI Defendants acting under the FTI Defendants' authority or control shall take any action or make or permit to be made any public statement denying, directly or indirectly, any of the findings or conclusions in this Consent Order or creating, or tending to create, the impression that this Consent Order is without factual basis and the FTI Defendants shall undertake all steps necessary to assure that all of the FTI Defendants' agents and employees understand and comply with this agreement. Nothing in this provision affects the FTI Defendants': (1) testimonial obligations; or (2) right to take legal positions in other proceedings to which the Commission is not a party.
6. The FTI Defendants waive: (1) all claims that they may possess under the Equal Access of Justice Act ("EAJA"), 5 U.S.C. � 504 (1994) and 28 U.S.C. � 2412 (1994), as amended by Pub. L. No. 104-121, �� 231-32, 110 Stat. 862-63, and Part 148 of the Commission's Regulations, 17 C.F.R. �� 148.1, et seq. (1999), relating to or arising from this action and any right under EAJA to seek costs, fees and other expenses relating to or arising from this proceeding; (2) any claim of Double Jeopardy based upon the institution of this proceeding or the entry in this proceeding of any order imposing a civil monetary penalty or any other relief; and (3) all rights of appeal from this Consent Order.
7. The FTI Defendants also consent to the continued jurisdiction of the Court for the purpose of enforcing the terms and conditions of this Consent Order and for any other purposes relevant to this case.
8. The FTI Defendants agree to cooperate fully with the Commission in its prosecution of the Amended Complaint in this proceeding, in any ongoing investigations related to the subject matter of the Amended Complaint, and in all other proceedings arising from such investigations by, among other things: (1) responding promptly, completely, and truthfully to any inquiries or requests for information and otherwise cooperating fully with discovery; (2) providing authentication of documents; (3) testifying completely and truthfully; and (4) not asserting privileges under the Fifth Amendment of the United States Constitution in connection with any testimony the FTI Defendants are asked to provide.
9. The FTI Defendants further affirm that they have read this Consent Order and agree to this Consent Order voluntarily, and that no promise or threat of any kind has been made by the Commission or any member, officer, agent or representative thereof, or by any other person, to induce the FTI Defendants to consent to this Consent Order, other than as set forth specifically herein.
10. The FTI Defendants acknowledge that, based upon the sworn representations contained in their Accounting Filed Pursuant to Consent Order dated November 27, 1997, their monthly accountings and other evidence provided by the FTI Defendants regarding their financial condition, the Court is not ordering payment of restitution or disgorgement, other than as required by Section IV, paragraphs 1 and 2, or a civil monetary penalty pursuant to Section 6c of the Act, 7 U.S.C. ��13a-1, and Rule 143.8 of the Commission's Regulations, 17�C.F.R.���143.8. The determination not to order payment of restitution or disgorgement, other than as required by Section IV, paragraphs 1 and 2, or a civil monetary penalty is contingent upon the accuracy and completeness of the accountings and other evidence provided by the FTI Defendants regarding their financial condition. If at any time following the entry of this Consent Order, the Commission obtains information indicating that any of the FTI Defendants' representations to the Commission concerning their financial condition were fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, the Commission may, in its sole discretion and without prior notice to the FTI Defendants, petition this Court for an order requiring the FTI Defendants immediately to pay restitution, disgorgement and/or a civil monetary penalty. In connection with any such petition, the only issues shall be whether the financial information provided by any FTI Defendant was fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, and the amount of civil monetary penalty to be imposed. In its petition, the Commission may request that this Court consider all available remedies, including, but not limited to, ordering any FTI Defendant to pay funds or transfer assets, directing the forfeiture of any assets, imposing sanctions for contempt of this Consent Order and/or the Commission may also request additional discovery. The FTI Defendants may not, by way of defense to such petition, challenge the validity of their consent to this Consent Order, contest the allegations in the Amended Complaint filed by the Commission or the Findings of Fact or Conclusions of Law contained in this Consent Order, contest the amount of restitution, disgorgement and/or interest, or assert that payment of restitution, disgorgement and/or a civil monetary penalty should not be ordered.
11. The Court, being fully advised in the premises, finds that there is good cause for the entry of this Consent Order and that there is no just reason for delay. The Court therefore directs the entry of findings of fact, conclusions of law and a permanent injunction and ancillary equitable relief, pursuant to � 6c of the Act, 7 U.S.C. � 13a-1 (1994), as set forth herein.
II.
FINDINGS OF FACT
The Court hereby makes the following findings of fact:
1. This Court has subject matter jurisdiction over this action and the allegations in the Amended Complaint pursuant to Section 6c of the Act, 7�U.S.C. � 13a-1 (1994).
2. This Court has personal jurisdiction over FTI, Foreman, Stevens and Munn, each of whom has acknowledged service of the Amended Complaint and consented to the Court's jurisdiction over each of them.
3. The Commission and the FTI Defendants have agreed to this Court's retention of continuing jurisdiction over each of them for the purpose of enforcing the terms of this Consent Order.
THE PARTIES
4. Plaintiff Commission is an independent federal regulatory agency charged with the responsibility for administering and enforcing the provisions of the Act, 7 U.S.C. �� 1 et seq. (1994), and the Regulations promulgated thereunder, 17 C.F.R. �� 1 et seq. (1999).
5. Defendant FTI, an Ohio general partnership, was located at 5565 Airport Highway, Suite 200, Toledo, Ohio 43615. From about June 1996 to June 1997, FTI engaged in the solicitation, acceptance and pooling of money from investors for the purpose of commodity futures and options on futures ("commodity interest") trading. FTI had three general partners, Mark G. Stevens, Samuel H. Foreman, and Carolyn F. Munn. FTI has never been registered with the Commission in any capacity.
6. Defendant Foreman was a general partner of FTI. He was a registered representative of a securities broker-dealer between 1985 and August 1999, and was president of Financial Strategies, Inc., a registered securities investment advisor. Foreman has never been registered with the Commission in any capacity.
7. Defendant Stevens was a general partner of FTI and the sole general partner of CMS�Partners II, L.P. He was a registered representative of a securities broker-dealer between 1993 and April 1999, and was president of Geoffrey Mark, Inc., a registered securities investment advisor. Stevens has never been registered with the Commission in any capacity.
8. Defendant Munn was a general partner of FTI. She was a registered representative of a securities broker-dealer between 1988 and August 1999, and was vice president of Financial Strategies, Inc., a registered securities investment advisor. Munn has never been registered with the Commission in any capacity.
THE FTI DEFENDANTS' OPERATIONS:
THE SECURED INVESTMENT AGREEMENTS ("SIA")
9. From in or about June 1996 to in or about February 1997, the FTI Defendants used a written document entitled "Secured Investment Agreement" ("SIA") to solicit and accept approximately $834,000.00 from at least fifteen investors ("SIA Investors"). This money was pooled by the FTI Defendants until June 1997, when, pursuant to an agreement with the Commission, the remaining funds were distributed to the SIA Investors. The SIA provided that investment money would be placed in "non-securities related investments which offer a high return with minimum risk," that "all investments are secured at least one hundred percent by assets�.�.�. to be acquired with the proceeds," and that "the specific funds will remain on deposit with Harris Trust and Savings Bank, Chicago, IL."
10. During all relevant times, the FTI Defendants failed to disclose to the SIA Investors the material fact that their money would be used to trade commodity interests and subject to substantial risk.
11. During all relevant times, the FTI Defendants failed to disclose to the SIA Investors the material fact that the interest FTI paid monthly was not the result of earnings from the SIA Investors' invested principal but was, in fact being paid from the SIA Investors' principal.
12. During all relevant times, the FTI Defendants failed to disclose to the SIA Investors the material fact that their principal was being depleted.
13. During all relevant times, the FTI Defendants failed to disclose to the SIA Investors the material fact that at least $211,709.46 of their investments would be used to pay the FTI Defendant's business related expenses, including operating and promotional expenses and fees.
THE CMS I AND II POOLS
14. From in or about July 1996 to in or about August 1996, FTI and Foreman used a written limited partnership document ("CMS I Agreement") to solicit and accept approximately $200,000.00 from at least three investors in CMS I ("CMS I Investors"). This money was pooled by the FTI Defendants until June 1997, when, pursuant to an agreement with the Commission, the remaining funds were distributed to the CMS I Investors.
15. In addition, from in or about August 1996 to in or about December 1996, FTI, Stevens and Foreman used a written limited partnership document ("CMS II Agreement") to solicit and accept approximately $191,000.00 from at least twelve investors in CMS II ("CMS II Investors). This money was pooled by the FTI Defendants until June 1997, when, pursuant to an agreement with the Commission, the remaining funds were distributed to the CMS II Investors.
16. Under the CMS I Agreement, the pool was to pay at least 6% of each month's realized profits to FTI as the general partner and commodity pool operator ("CPO"), 4% of each month's realized profits to an "advisory board," and up to 6% of profits to FTI and pool participants for introducing other participants to the pool. Similarly, under the CMS II Agreement, that pool was to pay at least 6% of each month's realized profits to Stevens as the general partner and CPO, 4% of each month's realized profits to an "advisory board," and up to 6% of profits to Stevens and pool participants for introducing other participants to the pool. This information was disclosed to CMS I and CMS II Investors. However, during all relevant times, the FTI Defendants failed to disclose to the CMS I and II Investors the material facts that these fees were much higher than typical commissions and that the pools would have to achieve substantial minimum earnings before the investors would earn any profits.
THE TRADING OF THE FTI, CMS I AND CMS II POOLS
17. The FTI Defendants deposited the money they accepted from SIA Investors, CMS�I Investors and CMS II Investors (referred to collectively as "the Ohio Partnership Investors") into bank accounts for which Foreman, Stevens and Munn had signature authority.
18. In or about July 1996, the FTI Defendants opened commodity trading accounts at a futures commission merchant ("FCM"), in the name of FTI, CMS I and CMS II (referred to collectively as the "Ohio Partnership Pools"). Foreman, Stevens and Munn personally guaranteed these trading accounts and signed the account agreements with the FCM.
19. From about May 1996 until June 1997, the FTI Defendants acted as CPOs without being registered with the Commission.
20. In or about July 1996, the FTI Defendants hired a trader ("Trader A") to direct the trading in the Ohio Partnership Pool accounts opened at the FCM and entered into an agreement to pay him at least 30% of the monthly realized profits from his trading in these accounts. To this end, the FTI Defendants granted powers of attorney to Trader A.
21. During all relevant times, the FTI Defendants failed to disclose to the Ohio Partnership Investors the material fact that they had agreed to pay Trader�A 30% of the realized profits.
22. During all relevant times, the FTI Defendants failed to disclose to the Ohio Partnership Investors the material fact that because of the agreement to pay Trader A 30% of the realized profits, the pools would have to achieve substantial minimum earnings before the investors would earn any profits.
23. On or about October 1, 1996, the FTI Defendants signed powers of attorney authorizing an employee of the FCM to direct the trading for the Ohio Partnership Pool accounts. Nevertheless, they continued to allow Trader A to direct trading for those accounts until approximately December 18, 1996, even though they knew he was not registered with the Commission in any capacity. Trader A directed trading from these trading accounts from early August 1996 to approximately December 18, 1996.
24. On or about December 18, 1996, the FTI Defendants notified the FCM that they themselves would trade the Ohio Partnership Pool accounts from then on. However, instead of directing the trades themselves, from on or about December�18, 1996 to March 15, 1997, the FTI Defendants allowed a new trader ("Trader B") to direct trading for these accounts. Trader B was not registered with the Commission as a commodity trading advisor until January 27, 1997, and the FTI Defendants knew or should have known that Trader B was not registered until this date.
25. During all relevant times, the FTI Defendants failed to disclose to the Ohio Partnership Investors the material fact that their accounts were not being traded as the FTI Defendants had represented when they solicited the investors.
THE STATEMENTS OF ACCOUNT
26. The FCM sent daily and month-end account statements to the FTI Defendants. These account statements showed the activity in the Ohio Partnership Pool trading accounts. From on or about August 1996 through June 1997 (when the trading accounts were closed), trading in the Ohio Partnership Pool accounts resulted in a net loss of approximately $717,000.00.
27. Beginning on or about August 8, 1996 (at the inception of the trading), daily account statements were prepared by others for the Ohio Partnership Pool accounts that were false and misleading in that the statements misrepresented the value of the investments and failed to disclose the substantial unrealized losses on the open positions in the accounts. These daily statements were given to the FTI Defendants, who, with the assistance of Trader B, prepared, and issued monthly statements to the Ohio Partnership Investors.
28. During all relevant times, the FTI Defendants issued monthly statements to the SIA Investors that misrepresented the actual value of their investments by showing "interest" purportedly paid in their accounts, but failing to disclose that the investments were losing money.
29. During all relevant times, the FTI Defendants issued statements to the CMS I and CMS II Investors that misrepresented the actual value of their investments by stating realized profits and losses but failing to disclose substantial unrealized losses on the open positions in the accounts.
30. The acts and omissions described in these Findings of Fact were effected by use of the mails and other means or instrumentalities of interstate commerce, directly or indirectly.
31. The conduct of the FTI Defendants, as set forth above, was made in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, for or on behalf of other persons where such contracts for future delivery were or may have been used for (a) hedging any transaction in interstate commerce in such commodity, or the products or byproducts thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof.
32. The FTI Defendants made each and every fraudulent misrepresentation and omission either knowingly or with reckless disregard for the truth and the FTI Defendants willfully made each and every false report or statement.
33. With respect to each and every Finding of Fact, the Ohio Partnership Investors reasonably, justifiably and detrimentally relied on the FTI Defendants' acts, omissions, false reports and statements.
NOW THEREFORE, IT IS ORDERED THAT:
1. The FTI Defendants are permanently restrained, enjoined and prohibited from:
a. cheating or defrauding or attempting to cheat or defraud other persons, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof, in violation of Section 4b(a)(i) of the Act, 7�U.S.C. ��6b(a)(i);
b. willfully making or causing to be made to such other person any false report or statement thereof, in violation of Section 4b(a)(ii) of the Act, 7�U.S.C. ��6b(a)(ii);
c. acting as a CPO without being registered under the Act and using the mails or any means or instrumentality of interstate commerce in connection with conducting business as a CPO, in violation of Section 4m(1) of the Act, 7�U.S.C. � 6m(1);
d. acting as an associated person of a CPO without being registered under the Act, in violation of Section 4k(2) of the Act, 7 U.S.C. � 6k(2); and/or
e. employing any device, scheme, or artifice to defraud any client or participant or prospective client or participant, or engaging in any transaction, practice or course of business which operates as a fraud or deceit upon any participant or prospective participant while acting as a CPO by use of the mails or any means or instrumentality of interstate commerce, in violation of Section 4o(1) of the Act, 7�U.S.C. ��6o(1).
2. The FTI Defendants are further permanently restrained, enjoined and prohibited from:
a. soliciting, accepting or receiving any funds or property from any person in connection with the purchase or sale of any commodity futures and options on futures ("commodity interest") contracts; placing orders, giving advice or price quotations or other information in connection with the purchase or sale of commodity interest contracts for themselves or others; introducing customers to any other person engaged in the business of commodity interest trading; issuing statements or reports to others concerning commodity interest trading and/or otherwise engaging in any business activities related to commodity interest trading;
b. engaging in, controlling or directing the trading for any commodity interest transaction account for or on behalf of any other person or entity, whether by power of attorney or otherwise;
c. entering into any commodity futures or options transaction for their own personal account, for any account in which they have a direct or indirect interest and/or having any commodity interests traded on their behalf; and/or
d. seeking registration or claiming exemption from registration with the Commission in any capacity under the Act; acting in any capacity for which registration or exemption from registration with the Commission is required under the Act; and/or acting as a principal, employee, officer or agent of any person registered, exempted from registration or required to be registered under the Act.
3. The injunctive provisions of this Consent Order shall be binding upon the FTI�Defendants, upon any person insofar as he or she is acting in the capacity of officer, agent, servant, employee or attorney of any of the FTI Defendants and upon any person who receives actual notice of this Consent Order, by personal service or otherwise, insofar as he or she is acting in active concert or participation with any FTI Defendant.
IV.
ORDER FOR OTHER EQUITABLE RELIEF
IT IS FURTHER ORDERED THAT:
1. Restitution and Disgorgement: The FTI Defendants are ordered to pay restitution in the amount of $723,946.38, which includes disgorgement in the amount of $211,709.46 ("Disgorgement Amount"). The FTI Defendants are also ordered to pay pre-judgment interest in the amount of $136,498.41 for total restitution in the amount of $860,444.79 ("Restitution Amount"), to be paid for the purpose of compensating persons whose funds were solicited, received or disposed of by the FTI Defendants in violation of the statutory and other provisions identified in this Consent Order.
FTI, Foreman, Stevens and Munn shall be jointly and severally liable for payment of the Restitution Amount.
Exhibit A, attached hereto and incorporated by reference, is a listing of Ohio Partnership Investors. Exhibit A includes,inter alia, the Commission's calculation of the total amount of restitution owed each investor. Omission from Exhibit A shall in no way limit the ability of any Ohio Partnership Investor from seeking recovery from any FTI Defendant or any other person or entity. Further, the amounts contained in Exhibit A shall not limit the ability of any Ohio Partnership Investor from proving that a greater amount is owed from any FTI Defendant or any other person or entity, and nothing herein shall be construed in any way to limit or abridge the rights of any Ohio Partnership Investor that exist under state or common law. Restitution shall be paid in accordance with the provisions of paragraph 2 below.
2. Payment of Restitution: Restitution shall be made as follows:
a. Each FTI Defendant shall make an annual payment ("Annual Payment") to an account designated by a monitor determined by the Commission ("the Monitor") of: (1) a percentage of his/her adjusted gross income (as defined by the Internal Revenue Code) earned or received by him/her during the previous calendar year, plus (2) all other cash receipts, cash entitlements or proceeds of non-cash assets received by him/her during the previous calendar year. The Annual Payment shall be made on or before June 30 of each calendar year, starting in calendar year 2001 and continuing for five years or until the Restitution Amount is paid in full from any source, whichever occurs sooner.
b. The National Futures Association shall be designated as the Monitor for the period beginning with the date of entry of this Consent Order and continuing until distribution of the last payment called for by this Consent Order or until the Restitution Amount is paid in full and distributed, whichever occurs first.
c. Each FTI Defendant shall provide the Monitor with a sworn Financial Disclosure Statement and complete copies of his/her signed and filed federal income tax returns, including all schedules and attachments thereto (e.g., IRS Forms W-2) and Forms 1099, as well as any filings he/she is required to submit to any state tax or revenue authority, on or before May 15 of each calendar year, or as soon thereafter as the same are filed, starting in calendar year 2001 and continuing for five years or until the Restitution Amount is paid in full, whichever occurs first. If, during the same time period, any FTI Defendant elects to file a joint tax return, such defendant shall provide all documents called for by this sub-paragraph c. including the signed and filed joint tax return, plus a draft individual tax return prepared on IRS form 1040 containing a certification by a licensed certified public accountant that the "Income" section (currently lines 7-22 of the form 1040) truly, accurately and completely reflects all of the defendant's income, that the "Adjusted Gross Income" section (currently lines 23-33 of the form 1040) truly, accurately and completely identifies all deductions that the defendant has a right to claim, and that the deductions contained in the "Adjusted Gross Income" section are equal to or less than 50% of the deductions that the defendant is entitled to claim on the joint tax return provided however that the defendant may claim 100% of the deductions contained in the "Adjusted Gross Income" section that are solely his/hers. Such individual tax return shall include all schedules and attachments thereto (e.g., IRS Forms W-2) and Forms 1099, as well as any filings required to be submitted to any state tax or revenue authority.
d. Based on the information contained in the FTI Defendants' tax returns, the Monitor shall calculate the Annual Payment to be paid by each FTI Defendant for that year and the specific amounts payable to each of the Ohio Partnership Investors. On or before June 15 of each year and starting in calendar year 2001, the Monitor shall send written notice to each FTI Defendant with instructions to pay the Annual Payment on or before June�30 to an account designated by the Monitor. The Monitor shall then disburse any payment by each FTI Defendant to the Ohio Partnership Investors in the appropriate amounts, unless, in its sole discretion, based upon the amount of funds available for distribution, the Monitor decides to defer distribution. If at the end of the five year payment period, any of the Annual Payments has not been distributed or remains unclaimed, the Monitor shall either: (1) distribute the funds to the Ohio Partnership Investors; (2) make a recommendation to the Commission providing for distribution of the funds to any other individual whose funds were solicited, received or disposed of by any other defendant in this matter; or (3) make a recommendation to the Commission that the funds become a civil monetary payment pursuant to Section 6(c) of the Act. Any of the Annual Payments that become a civil monetary payment shall be paid to the Commodity Futures Trading Commission for deposit to the United States Treasury, and addressed to Dennese Posey, or her successor, Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington D.C. 20581, under cover of a letter that identifies the FTI Defendants and the name and docket number of this proceeding. A copy of the cover letter and the form of payment shall be simultaneously transmitted to Phyllis J. Cela, Acting Director, Division of Enforcement, Commodity Futures Trading Commission, or her successor, at the following address: 1155 21st Street, N.W., Washington D.C. 20581.
e. The Annual Payments shall be calculated as follows:
Where Adjusted Gross Income Plus Net Cash Receipts Total: Percent of total to be paid by each FTI Defendant to persons listed in Exhibit�A is: Under $50,000.00 0% $50,000.00 up to and including $100,000.00 30% of the amount above $50,000.00
Above $100,000.00 $15,000.00 (which represents 30% of the amount between $50,00.00 and $100,000.00) plus 40% of the amount above $100,000.00.
f. In addition to the Annual Payments called for above, each FTI Defendant will make the November and December payments called for by the Order of this Court entered on October 14, 1998. Within sixty (60) calendar days after the December payment, the funds frozen for the benefit of the Ohio Partnership Investors in the following accounts shall be distributed to the Ohio Partnership Investors pursuant to the Division's instruction and under its supervision:
Checking Account # 2026870 (Financial Strategies)
Checking Account # 2026763 (FTI Financial Group)
Checking Account # 2026771 (Samuel H. Foreman)
Savings Sweep Account # 619106 (Samuel H. Foreman)
Checking Account # 2025039 (Carolyn Munn)
Savings Sweep Account # 619098 (Carolyn Munn)
Checking Account # 2025047 (Mark Stevens)
Savings Sweep Account # 619114 (Mark Stevens)
Checking Account # 2026995 (Geoffrey Marks)
g. Each FTI Defendant shall cooperate fully and expeditiously with the Monitor and the Commission in carrying out all duties with respect to restitution. They shall cooperate fully with the Monitor and the Commission in explaining their financial income and earnings, status of assets, financial statements, asset transfers and tax returns, and shall provide any information concerning themselves as may be required by the Commission and/or the Monitor. Furthermore, each FTI Defendant shall provide such additional information and documents with respect thereto as may be requested by the Commission and/or the Monitor.
h. No FTI Defendant nor his/her spouse or child is entitled to restitution in any amount for any funds invested in the Ohio Partnership pools.
3. Pursuant to Rule 71 of the Federal Rules of Civil Procedure, the Ohio Partnership Investors are explicitly made intended third party beneficiaries of this Consent Order and, after the date the last payment called for by this Consent Order is due, may enforce obedience of this Consent Order to obtain satisfaction of any portion of the Restitution Amount which has not been paid by any FTI Defendant, to ensure continued compliance with any provision of this Consent Order and to hold any FTI Defendant in default and/or contempt for any past violation of any provision of this Consent Order.
4. Collateral Agreements: Each FTI Defendant shall immediately notify the Commission and the Monitor if he/she makes or has previously made any agreement with any Ohio Partnership Investor obligating him/her to make payments outside of the plan set forth in this Consent Order. Each FTI Defendant shall also provide immediate evidence of any payments made pursuant to such agreement in the manner required by Section V, paragraph 1.
5. Default: Any failure by any FTI Defendant to carry out any of the terms, conditions or obligations under any paragraph of this Consent Order shall constitute an Event of Default under this Consent Order. If any Event of Default occurs and, if capable of being cured, is not cured within ten (10) calendar days following the Commission's (or its designee) mailing of notice of such Event of Default to the FTI Defendants, the Commission (or its designee) and/or the Ohio Partnership Investors shall be entitled to:
a. an order granting immediate payment of restitution in the amount of $723,946.23 plus pre-judgment interest of $136,498.41 less any payments made;
b. petition the Court to consider all available remedies including, but not limited to, imposing sanctions for contempt of this Consent Order;
c. enforce and take all legal steps necessary to satisfy the Permanent Injunction and otherwise declare the terms and conditions contained in this Consent Order null, void and without legal force;
d. pursue any FTI Defendant for any and all additional claims and causes of action of any nature, in law or in equity, which the Commission or the Ohio Partnership Investors have, may have or may have had against any FTI Defendant; and/or
e. use any statement heretofore or hereafter made by any FTI Defendant as evidence against him/her or them.
The FTI Defendants expressly agree and this Court orders that upon the occurrence of an Event of Default, they will be barred: (1) from asserting any defense, including expiration of any statute of limitations, waiver, estoppel or laches, where such defense is based on the alleged failure of the Commission or any Ohio Partnership Investor to pursue such claims or causes of action during the pendency of this civil action, during the negotiation of the FTI Defendants' agreement to this Consent Order or while this Consent Order remains in effect; and/or (2) from objecting to, defending against or otherwise disputing the non-dischargeability of their obligations, including their obligations under this Consent Order.
6. Reliance On Financial Disclosure: Based upon the sworn representations of the FTI Defendants contained in their Accounting Filed Pursuant to Consent Order dated November�27, 1997, their monthly accountings and other evidence provided by the FTI Defendants regarding their financial condition, the Court is not ordering payment of the Restitution Amount or the Disgorgement Amount, other than as required by Section IV, paragraphs 1 and 2, or a civil monetary penalty pursuant to Section 6c of the Act, 7 U.S.C. ��13a-1, and Rule 143.8 of the Commission's Regulations, 17�C.F.R.���143.8. The determination not to order immediate payment of the Restitution Amount or the Disgorgement Amount, other than as required by Section IV, paragraphs 1 and 2, or a civil monetary penalty is contingent upon the accuracy and completeness of the Financial Disclosure Statements and other evidence provided by the FTI Defendants regarding their financial condition. If at any time following the entry of this Consent Order, the Commission obtains information indicating that any of the FTI Defendants' representations to the Commission concerning their financial condition were fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, the Commission may, in its sole discretion and without prior notice to the FTI Defendants, petition this Court for an order requiring the FTI Defendants immediately to pay the Restitution Amount, the Disgorgement Amount and/or a civil monetary penalty. In connection with any such petition, the only issues shall be whether the financial information provided by any FTI Defendant was fraudulent, misleading, inaccurate or incomplete in any material respect as of the time such representations were made, and the amount of civil monetary penalty to be imposed. In its petition, the Commission may request that this Court consider all available remedies, including, but not limited to, ordering any FTI Defendant to pay funds or transfer assets, directing the forfeiture of any assets, imposing sanctions for contempt of this Consent Order and/or the Commission may also request additional discovery. The FTI Defendants may not, by way of defense to such petition, challenge the validity of their consent to this Consent Order, contest the allegations in the Amended Complaint filed by the Commission or the Findings of Fact or Conclusions of Law contained in this Consent Order, contest the Restitution Amount, the Disgorgement Amount and/or interest, or assert that payment of the Restitution Amount, the Disgorgement Amount and/or a civil monetary penalty should not be ordered.
7. Transfer of Assets: No FTI Defendant shall transfer or cause others to transfer funds or other property to the custody, possession, or control of any members of his or her family or any other person for the purpose of concealing such funds from the Court, the Commission, the Monitor or any Ohio Partnership Investor until the Restitution Amount has been paid in full.
V.
MISCELLANEOUS PROVISIONS
1. Notices: All notice required to be given by any provision in this Consent Order shall be sent certified mail, return receipt requested, as follows:
Notice to Commission:
|
Regional Counsel |
Notice to the Monitor:
Vice President, Compliance
National Futures Association
200 West Madison Street
Chicago, Illinois 60606
Notice to the Defendants:
John F. Gibbons
Altheimer & Gray
10 South Wacker Drive, #4000
Chicago, Illinois 60606
In the event that any of the FTI Defendants change their residential or business telephone number(s) and/or address(es) at any time, they shall provide written notice of the new number(s) and/or address(es) to the Monitor and to the Commission within ten (10) calendar days thereof.
2. Entire Agreement and Amendments: This Consent Order incorporates all of the terms and conditions of the settlement among the parties hereto. Nothing shall serve to amend or modify this Consent Order in any respect whatsoever, unless: (1)�reduced to writing; (2)�signed by all parties hereto; and (3)�approved by order of this Court.
3. Waiver: The failure of any party hereto or of any Ohio Partnership Investor at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same or any other provision of this Consent Order. No waiver in one or more instances of the breach of any provision contained in this Consent Order shall be deemed to be or construed as a further or continuing waiver of such breach or waiver of the breach of any other provision of this Consent Order.
4. Successors and Assigns: This Consent Order shall inure to the benefit of and be binding upon the successors, assigns, heirs, beneficiaries and administrators of the parties hereto.
5. Acknowledgements: Upon being served with copies of this Consent Order after entry by this Court, the FTI Defendants shall sign acknowledgments of such service and serve such acknowledgments on this Court and the Commission within seven (7) calendar days.
Upon being served with copies of this Consent Order after entry by the Court, the Commission shall serve a copy of the Consent Order upon the Monitor and all persons identified in Exhibit A within seven (7) calendar days.
6. Invalidation: If any provision of this Consent Order, or the application of any provisions or circumstances is held invalid, the remainder of the Consent Order and the application of the provision to any other person or circumstance shall not be effected by the holding.
7. Jurisdiction of this Court: This Court shall retain jurisdiction of this cause to assure compliance with this Consent Order and for all other purposes related to this action.
8. Dismissal: Upon entry of this Consent Order, the provisions of the Court's October 9, 1997 Preliminary Consent Order against FTI Financial Group, Samuel H. Foreman, Mark G. Stevens and Carolyn F. Munn and other orders modifying that order, including the order entered by this Court on October 14, 1998, shall be superceded and nullified and the Complaint and Amended Complaint for Injunction and Other Relief is hereby dismissed with respect to the FTI Defendants only.
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DONE AND ORDERED, ADJUDGED AND DECREED this 24th day of March, 2000.
The Honorable Harry D. Leinenweber
United States District Judge
CONSENTED TO AND APPROVED BY:
| PLAINTIFF | DEFENDANTS | |
| Elizabeth E. Durbin | Samuel H. Forman | |
| Trial Attorney | Individually and as a general partner of FTI Financial Group | |
|
. |
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| Scott R. Williamson | Mark G. Stevens | |
| Deputy Regional Counsel | Individually and as a general partner of FTI Financial Group | |
|
. |
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| COMMODITY FUTURES TRADING | Carolyn F. Munn | |
| COMMISSION | Individually and as a general partner of FTI Financial Group | |
| 300 S. Riverside Plaza, Suite 1600N | ||
| Chicago, Illinois 60606-6615 | John F. Gibbons | |
| (312) 886-6303 | Attorney for Defendants | |
| (312) 353-4502 facsimile | Altheimer & Gray | |
| 10 S. Wacker Drive, #4400 | ||
| Chicago, IL 60606 | ||
|
. |
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| DATED:� March 24, 2000 |
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NOTES:
1 When referred to collectively, FTI Financial Group, Samuel H. Foreman, Mark G. Stevens and Carolyn F. Munn shall be referred to as "the FTI Defendants." When referred to singly these parties shall be referred to as FTI, Foreman, Stevens and Munn, respectively.