IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
| _______________________________________________________ | ||
| ) | ||
| COMMODITY FUTURES TRADING COMMISSION, | ) | Civil Action No. 99 C 2357 |
| Plaintiff, | ) | |
| ) | ||
|
vs. |
) | |
| ) | ||
| JOSEPH P. McGIVNEY, Sr., | ) | Magistrate Judge Denlow |
|
EDWIN A. KOZIOL, Jr., |
) | |
| CAPITAL STRATEGIES, INC., | ) | |
| JPM2, INC., | ) | |
| JPM COMMODITIES, INC., | ) | |
| J.P.M INVESTMENTS, INC., | ) | CONSENT ORDER OF PERMANENT |
| JPM TRADERS, INC. and | ) | INJUNCTION AND OTHER |
| JPM, INC., | ) | EQUITABLE RELIEF AGAINST |
|
Defendants; |
) | JPM, INC. |
| ) | ||
| - and - | ) | |
| ) | ||
| J.P.M.R., INC., | ) | |
| J. TRADERS, INC., | ) | |
| LESLIE WNUKOWSKI and | ) | |
| MARITA McGIVNEY, | ) | |
| ) | ||
|
Relief Defendants. |
) | |
| _______________________________________________________ | ) |
I.
Plaintiff, Commodity Futures Trading Commission ("CFTC" or "Commission"), filed a complaint against defendants Joseph P. McGivney, Sr. ("McGivney"), Edwin A. Koziol, Jr. ("Koziol"), Capital Strategies, Inc. ("Capital"), JPM2, Inc. ("JPM2"), JPM Commodities, Inc. ("JPMC"), JPM Investments, Inc. ("Investments"), JPM Traders, Inc. ("Traders") and JPM, Inc. ("JPM") and relief defendants J.P.M.R., Inc. ("JPMR"), J. Traders, Inc. ("J. Traders"), Leslie Wnukowski ("Wnukowski") and Marita McGivney ("M. McGivney") on April 12, 1999, seeking injunctive and other equitable relief for violations of the Commodity Exchange Act, as amended ("Act"), 7�U.S.C. ���1 et seq. (1994), and the Commission Regulations promulgated thereunder, 17�C.F.R. ���1 et seq. (1998). On April 12, 1999, this Court entered a Statutory Restraining Order against the defendants and relief defendants. This order was subsequently modified, in part, to permit certain of the defendants to continue to issue and to solicit subscribers for the JPM hotline.
II.
CONSENTS AND AGREEMENTS
To effect settlement of the matters alleged in the complaint against JPM without a trial on the merits or any further judicial proceedings, defendant JPM:
1. Consents to the entry of this Consent Order of Permanent Injunction and Other Equitable Relief Against JPM ("Order").
2. Affirms that JPM has agreed to this Order voluntarily, and that no promise or threat has been made by the Commission or any member, officer, agent or representative thereof, or by any other person, to induce consent to this Order, other than as set forth specifically herein.
3. Acknowledges service of the Summons and Complaint.
4. Admits jurisdiction of this Court over it and the subject matter of this action pursuant to Section 6c(a) of the Act, 7�U.S.C. ��13a-1(a) (1994).
5. Admits that venue properly lies with this Court pursuant to Section 6c of the Act, 7�U.S.C. ��13a-1 (1994).
6. Waives:
a. all claims which it may possess under the Equal Access to Justice Act, 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 Regulations, 17 C.F.R. ��148.1, et seq. (1998), relating to, or arising from, this action;
b. 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;
c. the entry of findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure, except as provided in paragraph 10 below and set forth in Section III; and
d. all rights of appeal from this Order.
7. Acknowledges that, pursuant to Section 6c of the Act, 7�U.S.C. ��13a-1, the Court is not ordering the payment of a civil monetary penalty based upon the accuracy and completeness of JPM's sworn representations to the Commission concerning its financial condition. JPM further consents that if at any time following the entry of this Order, the Commission obtains information indicating that JPM's representations concerning its financial condition were fraudulent, misleading, inaccurate or incomplete in any material respect at the time they were made, the Commission may, at its sole discretion and without prior notice to JPM, petition the Court for an order requiring JPM to pay a civil monetary penalty. In connection with any such petition, the only issues shall be whether the financial information provided by JPM was fraudulent, misleading, inaccurate or incomplete in any material respect at the time such representations were made and the amount of civil monetary penalty to be ordered. In any such petition, the Commission may move the Court to consider all available remedies, including, but not limited to, ordering JPM to pay funds or assets, directing the forfeiture of any assets, or sanctions for contempt of this Order, and the Commission may also request additional discovery. JPM may not, by way of defense to such petition, challenge the validity of its consent to this Consent Order, contest the allegations in the Complaint filed by the Commission or the Findings of Fact or Conclusions of Law contained in this Consent Order, or, assert that a civil monetary penalty should not be ordered.
8. Agrees that JPM's agents or employees under its authority or control shall not take any action or make any public statement denying, directly or indirectly, any findings or conclusions in the Order, or creating or tending to create, the impression that the Order is without a factual basis; provided, however, that nothing in this provision shall affect JPM's right to take legal positions in other proceedings to which the Commission is not a party. JPM will undertake all steps necessary to assure that all of its agents and its employees understand and comply with this agreement.
9. Stipulates that the record basis on which this Order may be entered shall consist solely of the Complaint and the findings contained in this Order.
10. JPM neither admits nor denies the allegations of the Complaint and the findings of fact in this Order. However, JPM agrees that the parties to this Order intend that all of the findings of fact in this Order shall be given preclusive effect without further proof in any subsequent bankruptcy proceeding filed by, on behalf of, or against JPM for the purpose of determining whether the restitution obligations of JPM and/or other payments ordered against him are excepted from discharge. JPM also consents to the use of the findings contained in this Order, in this proceeding and in any other proceedings brought by the Commission or to which the Commission is a party. JPM shall provide immediate notice of any bankruptcy proceeding filed by, on behalf of or against JPM in the manner required by Section VI. Part A. of this Order.
11. Consents to the continued jurisdiction of this Court for the purpose of enforcing the terms and conditions of this Order and for any other purposes relevant to this case.
III.
It further appearing to this Court that there is no just reason for delay, and the Court being fully advised in the premises, the Court finds the following:
1. This Court has jurisdiction over JPM and the subject matter of this action pursuant to Section 6c(a) of the Act, 7 U.S.C. � 13a-1(a) (1994).
2. Venue properly lies with this Court pursuant to Section 6c of the Act, 7 U.S.C. ��13a-1 (1994).
3. The Commission is an independent federal regulatory agency which is 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. (1998).
4. JPM is a Nevada corporation whose address is 14500 John Humphrey Drive, Orland Park, Illinois 60462. JPM was incorporated on May 29, 1998 and was revoked on April 1, 1999. JPM has never been registered with the Commission in any capacity. At all relevant times, McGivney was the president and Koziol was the vice-president of JPM.
5. In February 1999, McGivney and JPM began soliciting investors for investment in a commodity pool called the "performance rebate."
6. McGivney and JPM represented to potential participants in this pool that:
a. This pool would be funded by diverting one-half of JPM's commodity hotline subscriber fees for investment in commodity futures;
b. The investors' funds would be placed into a specific corporate trading account;
c. The objective for this trading account was "10 to 1 in 12 months."
The Court finds that McGivney knew or recklessly disregarded that these statements had no basis in fact at the time that he made them.
7. Prospective participants in the performance rebate pool relied upon the representations set forth in paragraph 6 in deciding whether to invest in this commodity pool.
8. McGivney and JPM never deposited the performance rebate investors' funds in a specific corporate trading account and never traded commodity futures with their funds.
9. McGivney, Koziol and JPM commingled investor funds from the performance rebate pool with JPM's funds and their personal funds and thereby misappropriated those funds. Among other things, McGivney and Koziol used performance rebate investor funds to compensate themselves, to pay for the operating expenses of JPM, the personal living expenses of McGivney, and to make payments to Wnukowski and M. McGivney.
10. A total of $49,000 is owed to 63 participants in the performance rebate pool.
11. McGivney and Koziol knew that JPM had not engaged in any profitable futures trading or any revenue-generating activities sufficient to repay investors.
RELIEF DEFENDANTS
12. From 1993 to the present, McGivney and, in part, JPM paid relief defendant Wnukowski a net amount of $168,920.48 from investor funds. Wnukowski does not have any legitimate entitlement, as an investor or otherwise, to receive the Pools' investors funds.
13. From 1993 to the present, McGivney and, in part, JPM paid relief defendant M. McGivney a net amount of $100,000 from investor funds, and M. McGivney does not have any legitimate entitlement, as an investor or otherwise, to receive the Pools' investors funds.
IV.
ORDER FOR PERMANENT INJUNCTION
IT IS HEREBY ORDERED THAT:
1. JPM is permanently RESTRAINED, ENJOINED AND PROHIBITED from directly or indirectly:
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) (1994);
b. willfully making or causing to be made to another person any false report or statement thereof, in violation of Section 4b(a)(ii) of the Act, 7 U.S.C. ��6b(a)(ii) (1994);
c. acting as a CPO without being registered with the Commission, in violation of Section 4m(1) of the Act, 7 U.S.C. ��6m(1) (1994);
d. acting as a CTA where registration as a CTA is required, without being registered with the Commission as a CTA, in violation of Section 4m(1) of the Act, 7 U.S.C. � 6m(1) (1994);
e. employing any device, scheme, or artifice to defraud any participant or client or prospective client or participant, or engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or prospective participant while acting as a CPO or a CTA, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly, in violation of Section 4o(1) of the Act, 7 U.S.C. � 6o(1);
f. failing to operate a commodity pool as an entity cognizable as a separate legal entity, in violation of Regulation 4.20(a)(1), 17 C.F.R. � 4.20(a)(1);
g. commingling the property of any pool that it operates or intends to operate with the property of any other person, in violation of Regulation 4.20(c), 17 C.F.R. ��4.20(c); and
h. failing to deliver to prospective pool participants a pool Disclosure Document containing the information set forth in Regulation 4.24, 17�C.F.R. ��4.24, in violation of Regulation 4.21, 17 C.F.R. � 4.21.
2. JPM shall be permanently restrained, enjoined and prohibited from directly or indirectly:
a. trading on or subject to the rules of any contract market;
b. engaging in, controlling or directing the trading for any commodity interest account for on behalf of any person or entity, whether by power of attorney or otherwise; and
c. applying for registration or seeking exemption from registration with the Commission in any capacity, and engaging in any activity requiring such registration or exemption from registration, or acting as an agent or officer of any person registered, exempted from registration or required to be registered with the Commission. This includes, but is not limited to, soliciting, accepting or receiving any funds, revenue or other property from any person, giving commodity trading advice based on, or tailored to, the commodity interest or cash market positions or other circumstances or characteristics of the particular clients, or soliciting prospective customers, related to the purchase or sale of any commodity futures or options on commodity futures contracts; provided, however, that this shall not apply to the provision of only impersonal commodity trading advice disseminated through media such as Internet web sites, facsimiles and periodicals, if JPM does not exercise discretionary control over its clients' accounts, the advice is not tailored to the financial situation of any specific client, JPM does not have personal contact with its clients concerning investments in commodity futures or commodity options, and all of the information provided to each client is identical.
3. The injunctive provisions of this Order shall be binding upon JPM, upon any person insofar as he or she is acting in the capacity of officer, agent, servant or employee of JPM, and upon any person who receives actual notice of this Order, by personal service or otherwise, insofar as he or she is acting in active concert or participation with JPM.
ORDER FOR OTHER EQUITABLE RELIEF
IT IS FURTHER ORDERED THAT:
1. RESTITUTION: JPM shall be jointly and severally liable with McGivney and Koziol to pay restitution in the amount of forty-nine thousand dollars ($49,000) (Rebate Pool Restitution Amount), plus prejudgment interest of three thousand six hundred and ninety-three dollars ($3,693), to compensate the persons whose funds JPM received and disposed of in connection with the Performance Rebate pool in violation of the statutory and other provisions identified herein. JPM shall pay postjudgment interest from the date of this Order until the Rebate Pool Restitution Amount is paid in full, at the Treasury Bill rate prevailing on the date of this Order, pursuant to 28�U.S.C. ��1961(a). The persons to whom the Rebate Pool Restitution Amount shall be paid and the principal amounts of restitution owed to each are set forth in Appendix B. Omission from Appendix B shall in no way limit the ability of any investor from seeking recovery from JPM or any other person or entity. Further, the amounts contained in Appendix B shall not limit the ability of any investor from proving that a greater amount is owed from JPM or any other person or entity, and nothing herein shall be construed in any way to limit or abridge the rights of any investor that exist under state or common law.
2. THIRD-PARTY BENEFICIARIES: Pursuant to Rule 71 of the Federal Rules of Civil Procedure, each of the individuals identified in Appendix B is explicitly made an intended third-party beneficiary of this Order and may enforce obedience of this Order to obtain satisfaction of any portion of the Rebate Pool Restitution Amount which has not been paid by JPM, McGivney or Koziol, to ensure continued compliance with any provision of this Order and to hold JPM in contempt for any past violations of any provision of this Order.
3. Neither McGivney, Koziol, Wnukowski, nor M. McGivney, nor any member of their immediate families are entitled to restitution in any amount for any funds invested in JPM, the Performance Rebate Pool or any McGivney commodity pool.
4. COLLATERAL AGREEMENTS: JPM shall immediately notify the Commission if it makes or has previously made any agreement with any Pool Investor obligating it to make payments outside of this Order. JPM shall also provide immediate evidence of any payments made pursuant to such agreement in the manner required by Section VI. paragraph A. Upon being notified of any payments made by JPM to pool investors outside of this Order, the Commission will have the right to reduce and offset JPM's obligation to specified investors, on an annual basis, and to make any other changes in the restitution distribution schedule that they deem appropriate.
5. DISGORGEMENT: JPM is ordered to pay forty-nine thousand dollars ($49,000) in disgorgement, representing the amount JPM was unjustifiably enriched from the pools' investors' funds. Payment of disgorgement may be satisfied dollar-for-dollar by its payment of Restitution pursuant to paragraph 1 of this Section, or by payments of disgorgement by relief defendants M. McGivney or Wnukowski.
6. TRANSFER OF ASSETS: JPM shall not transfer or cause others to transfer funds or other property to the custody, possession, or control of any other person for the purpose of concealing such funds from the Court, the Commission, or any investor or until the Restitution Amounts have been paid in full.
7. CIVIL MONETARY PENALTY: The Court is not ordering the payment of a civil monetary penalty, pursuant to Section 6c of the Act, 7�U.S.C. ��13a-1, based upon the accuracy and completeness of JPM's sworn representations to the Commission concerning its financial condition. If at any time following the entry of this Order, the Commission obtains information indicating that JPM's representations concerning its financial condition were fraudulent, misleading, inaccurate or incomplete in any material respect at the time they were made, the Commission may, at its sole discretion and without prior notice to JPM, petition the Court for an order requiring JPM to pay a civil monetary penalty. In connection with any such petition, the only issues shall be whether the financial information provided by JPM was fraudulent, misleading, inaccurate or incomplete in any material respect at the time such representations were made and the amount of civil monetary penalty to be ordered. In any such petition, the Commission may move the Court to consider all available remedies, including, but not limited to, ordering JPM to pay funds or assets, directing the forfeiture of any assets, or sanctions for contempt of this Order, and the Commission may also request additional discovery. JPM may not, by way of defense to such petition, challenge the validity of its consent to this Consent Order, contest the allegations in the Complaint filed by the Commission or the Findings of Fact or Conclusions of Law contained in this Consent Order, or assert that a civil monetary penalty should not be ordered.
8. DEFAULT: Any failure by JPM to carry out any of the terms, conditions or obligations under any paragraph of this Order shall constitute an Event of Default under this 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 JPM, the Commission (or its designee) and/or any pool participant identified in Appendix B shall be entitled to:
a. petition the Court to consider all available remedies including, but not limited to, imposing sanctions for contempt of this Order;
b. enforce and take all legal steps necessary to satisfy the Permanent Injunction and otherwise declare the terms and conditions contained in this Order null, void and without legal force;
c. pursue JPM for any and all additional claims and causes of action of any nature, in law or in equity, which the Commission or any pool participant have, may have or may have had against JPM; and
d. use any statement heretofore or hereafter made by JPM as evidence against it.
JPM expressly agrees and this Court orders that upon the occurrence of an Event of Default, JPM will be barred from: (1) 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 Pool Investor to pursue such claims or causes of action during the pendency of this civil action, during the negotiation of JPM's agreement to this Consent Order or while this Consent Order remains in effect; and/or (2) objecting to, defending against or otherwise disputing the non-dischargeability of his obligations, including his obligations under this Consent Order.
VI.
MISCELLANEOUS PROVISIONS
A. NOTICES. All notices required by any provision in this Order shall be sent by certified mail, return receipt requested, as follows:
| Notice to Commission: |
Director, Division of
Enforcement Commodity Futures Trading Commission 1155 21st Street, N.W. Washington, D.C. 20581 And
Scott R. Williamson |
| Notice to Defendant: |
JPM, Inc. 14500 Humphrey Drive Orland Park, Illinois 60462 |
| Notice to Defendant's Attorney: |
Richard C. Leng 55 W. Monroe St., Suite 2350 Chicago, IL 60603 |
The defendant must give notice to the Commission within 30 days of any change of its mailing address.
B. ENTIRE AGREEMENT, AMENDMENTS and SEVERABILITY. This Order incorporates all of the terms and conditions of the settlement among the parties. Nothing shall serve to amend or modify this Order in any respect whatsoever, unless: (1)�reduced to writing, (2)�signed by all parties, and (3)�approved by order of the Court. If any provision of this Order or the application of any provision or circumstance is held invalid, the remainder of this Order shall not be affected by the holding.
C. WAIVER. The failure of any party 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 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 Order.
D. SUCCESSORS AND ASSIGNS. This Order shall inure to the benefit of and be binding on the parties' successors, assigns, heirs, beneficiaries and administrators.
E. ACKNOWLEDGMENT. Upon being served with copies of this Order after entry by the Court, JPM shall sign an acknowledgment of such service and serve such acknowledgments on the Commission within seven (7) calendar days.
F. Upon being served with copies of this Order after entry by the Court, the Commission shall serve a copy of the Order upon all persons identified as investors in Appendix B, within seven (7) calendar days.
G. JURISDICTION. This Court shall retain jurisdiction of this cause to assure compliance with this Order and for all other purposes related to this action.
There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Consent Order of Permanent Injunction and Other Equitable Relief Against JPM
ORDERED this 17th day of July, 2000.
________________________________
UNITED STATES DISTRICT JUDGE
�
|
Consented to and Approved for Entry by:
DEFENDANT ______________________________
Joseph P. McGivney,
Sr. Dated: ________________________ ______________________________
Richard C. Leng |
� |
�
PLAINTIFF _______________________________
Susan B. Padove
Rosemary Hollinger
Scott R. Williamson
Commodity Futures Trading
Commission |