CFTC v. Berus (Full text of Order)

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

_____________________________
                             :
COMMODITY FUTURES            :CIVIL ACTION NO.
TRADING COMMISSION,          :
               Plaintiff,    :
           v.                :  COMPLAINT FOR INJUNCTIVE
                             :AND OTHER EQUITABLE
GARY BERUS, individually and :RELIEF AND FOR CIVIL
d/b/a PROFIT MASTERS GROUP,  :PENALTIES UNDER THE
MECA INTERNATIONAL, INC. a   :COMMODITY EXCHANGE ACT
Michigan Corporation, and    :
PATRICIA GALE,               :
               Defendants.   :
_____________________________:

I. INTRODUCTION

Plaintiff, Commodity Futures Trading Commission ("Commission"), hereby alleges that defendants Gary Berus, individually and d/b/a Profit Masters Group ("Berus"), Meca International, Inc. ("Meca") and Patricia Gale ("Gale"), individually and jointly, have engaged and are engaging in acts and practices which constitute violations of Sections 4b(a)(i), 4b(a)(ii), 4k(2), 4m, 4n(4), 4o(1)(B) and 9(a)(1) of the Commodity Exchange Act, as amended ("Act"), 7 U.S.C.6b(a)(i), 6b(a)(ii), 6k(2), 6m, 6n(4), 6o(1)(B) and 13(a)(1) (1994), and Commission Regulations 4.20(c), 4.21(a), 4.21(b) and 4.22 promulgated thereunder, 17 C.F.R.4.20(c), 4.21(a), 4.21(b) and 4.22 (1996).

Accordingly, pursuant to Section 6c of the Act, 7 U.S.C.13a-1 (1994), the Commission brings this action to enjoin such acts and practices, to compel compliance with the Act and Commission Regulations thereunder and to obtain Orders of Preliminary and Permanent Injunction, a freezing of assets, an accounting, disgorgement, rescission, restitution, civil monetary penalties and such other relief as this Court may deem necessary or appropriate under the circumstances.

II.

JURISDICTION AND VENUE

This Court has jurisdiction over this action pursuant to Section 6c of the Act, 7 U.S.C.13a-1, which authorizes the Commission to seek injunctive relief against any person whenever it appears that such person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of the Act or any rule, regulation, or order promulgated thereunder.

Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C.13a-1(e), in that defendants are found in, inhabit, or transact business in this district, and the acts and practices in violation of the Act have occurred, are occurring, or are about to occur within this district, among other places.

Unless restrained and enjoined by this Court, the defendants Berus, Meca and Gale are likely to and will continue to engage in the acts and practices alleged in this Complaint or in similar acts and practices, as described more fully below.

III.

THE PARTIES

Plaintiff Commission is the independent federal regulatory agency charged with the administration and enforcement of the Act, 7 U.S.C.1 et seq. (1994), and the Regulations promulgated thereunder, 17 C.F.R.1.1 et seq. (1996).

Defendant Berus resides at 4455 Sudbury Drive, Warren, Michigan 48092. Berus is a shareholder, a principal and the President of Meca. From time to time during the period of October 1992 through the present, Berus also did business, including the soliciting of funds for investment in, and the trading of, commodity futures, as Profit Masters Group, a purported partnership. Berus has never been registered in any capacity with the Commission.

Defendant Meca is a Michigan corporation which maintains its principal place of business at Berus' residence, 4455 Sudbury Drive, Warren, Michigan, 48092. Meca has never been registered in any capacity with the Commission.

Defendant Gale resides at 3251 Nina Road, Gaylord, Michigan 49735. Gale operates a tax return preparation business and holds herself out to the public as a financial planner. Gale has never been registered with the Commission in any capacity.

IV.

CONCEPTUAL OVERVIEW

A commodity pool is any investment trust, syndicate or similar form of enterprise operated for the purpose of trading commodity interests. Section 4.10(d)(1) of the Regulations, 17 C.F.R.4.10(d)(1).

A commodity pool operator ("CPO") is any firm or individual engaged in a business which is of the nature of an investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities or otherwise, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market. Section 1a(4) of the Act, 7 U.S.C.1a(4). With certain specified exceptions and exemptions, not applicable here, all CPOs are required to be registered with the Commission, pursuant to Section 4m(1) of the Act, 7 U.S.C.6m(1).

A CPO must deliver a Disclosure Document for a commodity pool to prospective pool participants on or before the date that it solicits or accepts funds from participants in the pool. The Disclosure Document must include, among other things, information regarding the business background of the CPO, its actual futures trading performance records, disclosure of the risks of futures trading and of the potential liabilities of pool participants, and other material facts. A CPO may not accept funds from participants in the pool unless the CPO first receives an acknowledgment signed and dated by the prospective participant stating that the prospective participant received a Disclosure Document for the pool. Sections 4.21(a) and 4.21(b) of the Regulations, 17 C.F.R.4.21(a) and 4.21(b). See also Section 4.24 of the Regulations, 17 C.F.R.4.24.

A CPO who is registered or required to be registered under the Act must issue monthly account statements to pool participants separately itemizing, among other things, the realized net gain or loss on liquidated futures positions, the change in unrealized net gain or loss in open futures positions, and the net gain or loss from all other transactions, including interest earned on pool funds and management fees paid, during the preceding month. Section 4n(4) of the Act, 7 U.S.C.6n(4), and Section 4.22 of the Regulations, 17 C.F.R.4.22.

An associated person ("AP") of a CPO is any natural person who is associated with a CPO as a partner, officer, employee, consultant or agent, in any capacity which involves the solicitation of funds, securities, or property for a participation in a commodity pool, or the supervision of any person or persons so engaged. With certain specified exceptions and exemptions, not applicable here, all APs are required to be registered with the Commission, pursuant to Section 4k(2) of the Act, 7 U.S.C.6k(2).

A commodity trading advisor ("CTA") is any firm or individual, who for compensation or profit, engages in the business of advising others, either directly or through publications, writings or electronic media, as to the value of or the advisability of trading in any contract of sale of a commodity for future delivery made or to be made on or subject to the rules of contract market. Section 1(a)(5) of the Act, 7 U.S.C.1(a)(5). With certain specified exceptions and exclusions, not applicable here, all CTAs are required to be registered with the Commission, pursuant to Section 4m(1) of the Act, 7 U.S.C.6m(1).

FACTUAL BACKGROUND

From at least October 1992 through the present, defendants Berus and Meca have engaged in the business of operating a syndicate, investment trust or similar enterprise for the purpose of pooling participants' funds to invest in, among other things, commodity futures (the "Pools"). In connection therewith, they have solicited and accepted funds from the public for the purchase and sale of commodity futures contracts made or to be made on or subject to the rules of a contract market. Berus and Meca have been acting as CPOs without the benefit of registration with the Commission. While acting as CPOs, they have received compensation or payment, directly or indirectly, for operating the Pools.

A total of approximately $1 million dollars was invested in the Pools by participants ("investors"), mostly elderly and retired Michigan residents.

Berus and Meca actually used only a portion of the money received for investments in the Pools for commodity futures trading. The investors' funds were used, among other things, to pay personal expenses of Berus and make returns of principal and purported profits to some other investors in the Pools, and to investors in other investment schemes operated by Berus and others, in a manner akin to a Ponzi scheme.

Berus and Meca defrauded investors in the Pools by misappropriating investor funds and by converting investors' funds to their own use or the use of others.

Berus, Meca and Gale defrauded investors in the Pools by making false, deceptive or misleading oral and written statements and material omissions about the risks associated with investing in the Pools, the commodity futures transactions completed for the Pools and the profitability of the Pools.

PROFIT MASTERS COMMODITY POOL

During the period from at least October 1992 through November 1994, Berus and Gale solicited members of the public to make investments in an alleged investment club entitled Profit Masters Group for the purpose of, among other things, investing in commodity futures contracts ("Profit Masters Pool"). These solicitations were made in person, by holding demonstrations and meetings, and through telephone calls.

Berus and Gale falsely represented to potential investors in the Profit Masters Pool that the investment carried little risk and would earn an annual return of between 12% and 24%.

Berus and Gale, in soliciting investors for the Profit Masters Pool, presented a "track record" that purported to represent previous trading done by Berus. The track record was false in that it omitted losing trades and deceptively portrayed Berus as a profitable trader.

Berus and Gale solicited funds for the Profit Masters Pool without providing prospective investors a required Disclosure Document describing, among other things, the risks associated with futures trading and without receiving a signed acknowledgment from investors that they had received such a Disclosure Document.

Investors in Profit Masters invested amounts ranging from as little as $5,000 to more than $100,000. These investments included the retirement funds of some investors. Investments in the Profit Masters Pool solicited by Berus and Gale totaled approximately $700,000 from at least 37 individual investors.

Defendant Gale solicited funds totaling approximately $400,000 from at least 25 investors for the Profit Masters Pool, in exchange for commissions or finders fees. In connection with these solicitations, Gale knowingly failed to disclose to some investors the material fact that she would receive commissions or finders fees for soliciting their investments.

Gale falsely told several investors in the Profit Masters Pool that the returns on their investments would be tax exempt.

Defendant Berus deposited the investors' funds into bank accounts he controlled. Contrary to representations made by Berus and Gale to investors in soliciting them for the Profit Masters Pool, Berus took approximately $500,000 of the invested funds to pay his personal and business expenses and to pay returns of principal and purported profits to some other investors in the Profit Masters Pool and to others who had invested in other schemes operated by Berus and others.

Berus commingled funds of investors in the Profit Masters Pool with his own funds and the funds of others.

Only approximately $200,000 of investors funds was actually invested in commodity futures by Berus, of which approximately $100,000 was lost in commodity futures trading. Berus made all of the trading decisions for the trading done on behalf of the Profit Masters Pool. Rather than reporting the losses to the Profit Masters Pool's investors as they occurred, Berus and Gale made false, deceptive or misleading representations or omissions of material facts relating to the Profit Masters Pool to investors, orally and in writing, including, but not limited to, the following:

a)that at various times the accounts traded on behalf of the Profit Masters Pool were profitable when, in fact, the accounts had incurred trading losses; and

b)that at various times the Profit Masters Pool was operating at a profit when, in fact, it had never been profitable.

Berus provided false written records showing profitable trading results for the Profit Masters Pool to Gale, intending that Gale would use the reports to solicit prospective investors for the Profit Masters Pool and to provide information to the then current Profit Masters Pool investors.

Gale knew that the above-described representations or omissions regarding the Profit Masters Pool that she made in the solicitation of investors, and to the investors thereafter, were false or that she had no reasonable basis to make such representations or omissions, in reckless disregard of the truth.

Berus and Gale used the mails and other means of interstate commerce to disseminate the above-described false, deceptive or misleading representations or omissions of material facts to investors.

Berus acted as the CPO for the Profit Masters Pool, without the benefit of required registration as such with the Commission.

Berus failed to provide account statements to the investors in the Profit Masters Pool in the form prescribed by Commission Regulation 4.22.

Although many investors in the Profit Masters Pool have requested, and continue to request, repayment of their funds from Berus and Gale, few have been fully repaid to date.

MECA-COMMODITY POOL

During the period from at least May 1993 through October 1995, Berus and Gale, while acting as agents for Meca, solicited members of the public to make investments in Meca for the purpose of investing in, among other things, commodity futures contracts ("Meca Pool"). These solicitations were made in person and through telephone calls.

Berus and Gale falsely represented to potential investors in the Meca Pool that, although it was a riskier investment than an investment in the Profit Masters Pool, it still had little risk and would return an annual profit of 24%.

Investments in the Meca Pool totaled approximately $300,000 from at least 20 individual investors.

Berus, Gale and Meca solicited funds for the Meca Pool without providing prospective investors a required Disclosure Document describing, among other things, the risks associated with futures trading, and without receiving a signed acknowledgment from investors that they had received such a Disclosure Document.

Defendant Gale solicited funds totaling approximately $140,000 from at least five investors in the Meca Pool, in exchange for commissions or finders fees. In connection with these solicitations, Gale knowingly failed to disclose to some investors the material fact that she would receive commissions or finders fees for soliciting their investments.

Defendant Berus deposited the investors' funds into bank accounts controlled by him and Meca. Contrary to representations made by Berus and Gale to investors in soliciting them for the Meca Pool, Berus and Meca took approximately $100,000 of the invested funds to pay their personal and business expenses and to pay returns of principal and purported profits to some other investors in the Meca Pool, to some other investors in the Profit Masters Pool, and to others who had invested in other schemes operated by Berus and others.

Berus and Meca commingled funds of investors in the Meca Pool with their own funds and the funds of others.

Berus and Meca engaged in commodity futures trading activity for the Meca Pool which resulted in losses of approximately $77,000. Rather than reporting the losses to the Meca Pool investors as they occurred, Berus, Meca and Gale made false, deceptive or misleading representations or omissions of material facts relating to the Meca Pool to investors, orally and in writing, including, but not limited to, the following:

a)that at various times the accounts traded on behalf of the Meca Pool were profitable when, in fact, the accounts had incurred trading losses; and

b)that at various times the Meca Pool was operating at a profit when, in fact, it had never been profitable.

Berus provided false written records showing profitable trading results for the Meca Pool to Gale, intending that Gale would use the reports to solicit prospective investors for the Meca Pool and to provide information to the then current Meca Pool investors.

Gale knew that the above-described representations or omissions regarding the Meca Pool that she made in the solicitation of investors, and to the investors thereafter, were false or that she had no reasonable basis to make such representations or omissions, in reckless disregard of the truth.

Berus, Meca and Gale used the mails and other means of interstate commerce to disseminate such false, deceptive or misleading representations or omissions of material facts to investors.

Berus and Meca acted as CPOs for the Meca Pool, without the benefit of required registration as such with the Commission.

Neither Berus nor Meca ever provided pool participants with statements of account in the form prescribed by Commission Regulation 4.22.

Many investors in the Meca Pool have requested, and continue to request, repayment of their funds from Meca and Berus. Some of the investors in the Meca Pool have recently received small money orders from Berus, Meca and Gale. Few of the investors in the Meca Pool have been fully repaid to date.

MECA--AS COMMODITY TRADING ADVISOR

In addition to the above, during the time period of May 1993 through July 1995, Berus, as an agent of Meca, accepted compensation from ten customers ("managed account clients") for advising individual commodity interest trading accounts owned by the managed account clients ("managed accounts"). These managed accounts held initial deposits solicited by Berus and Meca from managed account clients totaling approximately $376,000, of which approximately $136,560 was lost by Berus trading commodity futures.

Berus represented to at least one of these managed account clients that he had a record of 35% to 75% profitability in trading such accounts.

Berus personally directed the trading in these ten managed accounts through powers of attorney.

Berus and Meca acted as CTAs to the managed account clients who owned these managed accounts, without the benefit of required registration as such with the Commission.

In several instances, Berus and Meca entered into written agreements with these managed account clients falsely stating that any losses could and would be limited to a specific amount. In all of these instances, actual losses exceeded the amount guaranteed.

In at least one instance, Berus fraudulently represented to a managed account client that losses in commodity futures trading were temporary and would be made back.

In at least one instance, Berus fraudulently represented to a managed account client that the account was backed by U.S. Treasury Bonds.

Berus and Meca used the mails and other means of interstate commerce to solicit such individual managed accounts from public investors and to direct the trading in them.

Berus, through Meca, is currently selling to the public, for compensation or profit, a computer software program which gives specific recommendations for futures trading, including buy and sell signals. Berus and Meca, by selling such a program to the public, are acting as CTAs, without the benefit of required registration as such with the Commission.

VI.

VIOLATIONS OF THE COMMODITY EXCHANGE ACT

COUNT I

VIOLATIONS OF SECTIONS 4b(a)(i) AND 4b(a)(ii) OF THE ACT, 7 U.S.C.6b(a)(i) AND 6b(a)(ii): FRAUD BY MISAPPROPRIATION AND MISREPRESENTATIONS

Paragraphs 1 through 59 are realleged and incorporated herein by reference.

During the period of October 1992 through the present, Berus, Meca and Gale, 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 any other persons, where such contracts for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodities 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, cheated and defrauded or attempted to cheat or defraud investors in the Profit Masters Pool, the Meca Pool, and the managed account clients, and willfully made or caused to be made to investors in the Profit Masters Pool and the Meca Pool false reports or statements thereof, or willfully entered or caused to be entered for investors in the Profit Masters Pool and the Meca Pool false records thereof, all in violation of Sections 4b(a)(i) and 4b(a)(ii) of the Act, 7 U.S.C.6b(a)(i) and 6b(a)(ii) (1994); in that, among other things:

(a) Berus and Gale gave written and oral statements to investors in the Profit Masters Pool; and Berus, Meca and Gale gave written and oral statements to investors in the Meca Pool that reflected that:

(i) at various times the accounts traded on behalf of the Pools were profitable when, in fact, the accounts had incurred trading losses; and

(ii) at various times the Pools were operating at a profit when, in fact, they had never been profitable;

(b) Berus and Gale, in connection with the Meca Pool and the Profit Masters Pool; and Berus, Meca and Gale, in connection with the Meca Pool, exaggerated or overstated the likelihood of profits, and minimized the risks, or omitted to discuss the risks, associated with investing in commodity futures to investors in the Profit Masters Pool and Meca Pool, when in fact they knew such representations and material omissions were untrue, or had no reasonable basis to make such representations or material omissions, in reckless disregard of the truth;

(c) Berus and Gale, in connection with the Profit Masters Pool, in soliciting investors, presented a track record that purported to represent previous trading done by Berus. This track record was false and Berus and Gale knew it was false, or had no reasonable basis to present the track record as true, in reckless disregard of the truth;

(d) Gale knowingly failed to disclose to numerous investors in the Meca Pool and the Profit Masters Pool the material fact that she would receive commissions or finders fees for soliciting their investments;

(e) Gale falsely told several investors in the Profit Masters Pool that the returns on their investments would be tax exempt;

(f) Berus, in connection with the Profit Masters Pool, and Berus and Meca, in connection with the Meca Pool, misappropriated funds belonging to investors in the Pools and, contrary to what was falsely represented to the investors by Berus, Meca, and Gale, used the funds to pay personal and business expenses and to pay returns of principal and purported profits to some other investors in the Pools and to others who had invested in other schemes operated by Berus and others; and

(g) Berus and Meca falsely represented to one managed account client that Berus had a record of 35% to 75% profitability in trading such accounts; falsely represented to at least one managed account client that the investments in these accounts were backed by U.S. Treasury Bonds and that losses were temporary and would be made back; and also falsely represented to several managed account clients that any losses could and would be limited to a specific amount.

Meca is liable for the foregoing acts and omissions of Berus and Gale, its officials, agents or employees in connection with the Meca Pool and the managed accounts, by operation of Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C.4, and Section 1.2 of the Regulations, 17 C.F.R.1.2 (1996).

COUNT II

VIOLATIONS OF SECTION 4m OF THE ACT, 7 U.S.C.

6m: ACTING AS COMMODITY POOL OPERATORS AND

COMMODITY TRADING ADVISORS WITHOUT BENEFIT

OF REGISTRATION

Paragraphs 1 through 59 are realleged and incorporated herein by reference.

From at least October 1992 through the present, Berus and Meca, without the benefit of registration with the Commission as CPOs and while not exempt from such registration, made and continue to make use of the mails or other means or instrumentalities of interstate commerce to solicit, accept or receive from the public, funds, securities or property to participate in commodity pools formed and operated for the purpose of trading commodity futures contracts on contract markets, in violation of Section 4m of the Act, 7 U.S.C. 6m (1994).

From at least October 1992 through the present, Berus and Meca, without benefit of registration with the Commission as CTAs, and while not exempt from such registration, made and continue to make use of the mails or other means or instrumentalities of interstate commerce to, for compensation or profit, engage in the business of advising others, either directly or indirectly through publications, writings or electronic media, as to the value of or the advisability of trading in any contract of sale of a commodity for future delivery made or to be made on or subject to the rules of a contract market, in violation of Section 4m of the Act, 7 U.S.C.6m (1994).

COUNT III

VIOLATIONS OF SECTION 4k(2) OF THE ACT,

7 U.S.C.6k(2): ACTING AS AN ASSOCIATED

PERSON TO A COMMODITY POOL OPERATOR

WITHOUT BENEFIT OF REGISTRATION

Paragraphs 1 through 50 are realleged and incorporated by reference.

From at least October 1992 through at least October 1995, Gale was associated with Meca and Berus, CPOs of the Pools, as a partner, officer, employee, consultant or agent, and solicited funds, securities, or property for a participation in the Profit Masters Pool and the Meca Pool without benefit of registration, and while not exempt from such registration, in violation of Section 4k(2) of the Act, 7 U.S.C.6k(2) (1994).

From at least October 1992 through at least October 1995, Berus and Meca, acting as CPOs, also violated Section 4k(2) of the Act, 7 U.S.C. 6k(2) (1994), by allowing Gale to become and remain associated with them, knowing that Gale was not registered as an associated person.

COUNT IV

VIOLATIONS OF SECTION 4o(1)(B) OF THE ACT,

7 U.S.C.6o(1)(B): FRAUD BY COMMODITY

POOL OPERATORS, ASSOCIATED PERSON AND

COMMODITY TRADING ADVISORS

Paragraphs 1 through 59 are realleged and incorporated herein by reference.

At various times during the period from October 1992 through the present, Berus and Meca as CPOs and CTAs, and Gale, as an associated person of CPOs, by use of the mails or other instrumentalities of interstate commerce, have engaged or are engaging in transactions, practices, or courses of business which operate as a fraud or deceit upon commodity pool participants or prospective participants and commodity trading advisor clients or prospective clients, in violation of Section 4o(1)(B) of the Act, 7 U.S.C.6o(1)(B) (1994), in that, among other things:

(i) at various times the accounts traded on behalf of the Pools were profitable when, in fact, the accounts had incurred trading losses; and

(ii) at various times the Pools were operating at a profit when, in fact, they had never been profitable;

(d) Gale failed to disclose to numerous investors in the Meca Pool and the Profit Masters Pool the material fact that she would receive commissions or finders fees for soliciting their investments;

(e) Gale falsely told several investors in the Profit Masters Pool that the returns on their investments would be tax exempt;

COUNT V

VIOLATIONS OF SECTION 9(a)(1)

OF THE ACT, 7 U.S.C.13(a)(1):

CONVERSION

Paragraphs 1 through 50 are realleged and incorporated herein by reference.

During the time period of October 1992 through the present, Berus, by using $500,000 of investor funds in the Profit Masters Pool and $100,000 of investor funds in the Meca Pool for his personal and business use or for the use of others, embezzled, stole, purloined, or with criminal intent converted to his own use or the use of others money, securities or property having a value in excess of $100 which he had received to margin, guarantee, or secure the trades of commodity interest contracts for investors in the Pools or which was otherwise received from customers, clients, or pool participants in connection with his running of the Pools.

By virtue of this conduct, Berus violated Section 9(a)(1) of the Act, 7 U.S.C.13(a)(1) (1994).

Meca is liable for the foregoing acts and omissions of its agent, Berus, in connection with the Meca Pool, by operation of Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C.4(1994), and Section 1.2 of the Regulations, 17 C.F.R.1.2 (1996).

COUNT VI

VIOLATIONS SECTION 4n(4) OF THE ACT,

7 U.S.C.6n(4), AND SECTIONS

4.21(a), 4.21(b) AND 4.22 OF THE

REGULATIONS, 17 C.F.R.4.21(a), 4.21(b)

AND 4.22: FAILURE TO FURNISH

REQUIRED STATEMENTS TO POOL PARTICIPANTS

Paragraphs 1 through 50 are realleged and incorporated herein by reference.

From at least October 1992 through at least October 1995, Berus, in connection with the Profit Masters and the Meca Pool, and Meca, in connection with the Meca Pool, solicited, accepted or received funds, securities, or other property from prospective investors in the Pools that they operated, without delivering or causing to be delivered to the prospective investors in the Pools, a Disclosure Document in the form prescribed and containing the information required by the Commission; and Berus and Meca accepted funds from investors in the Pools that they operated without first receiving an acknowledgment signed and dated by the prospective investor stating that the prospective investor had received such a Disclosure Document for the Pool, all in violation of Sections 4.21(a) and 4.21(b) of the Regulations, 17 C.F.R.4.21(a) and 4.21(b) (1996).

From at least October 1992 through at least October 1995, Berus, in connection with the Profit Masters and the Meca Pool, and Meca, in connection with the Meca Pool, failed to regularly furnish appropriate statements of account to each investor in the Pools, in violation of Section 4n(4) of the Act, 7 U.S.C.6n(4) (1994), and Regulation 4.22, 17 C.F.R.4.22 (1996).

Meca is liable for the foregoing acts and omissions of its agent, Berus, in connection with the Meca Pool, by operation of Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C.4, and Section 1.2 of the Regulations, 17 C.F.R.1.2 (1996).

COUNT VII

VIOLATIONS OF SECTION 4.20(c)

OF THE REGULATIONS, 17 C.F.R.

4.20(c): COMMINGLING OF POOL

PARTICIPANTS' FUNDS

Paragraphs 1 through 50 are realleged and incorporated by reference.

From at least October 1992 through at least October 1995, Berus commingled the property of investors in the Pools with his own property or the property of other individuals and entities, in violation of Section 4.20(c) of the Regulations, 17 C.F.R.4.20(c) (1996).

VII.

RELIEF

WHEREFORE, Plaintiff Commission respectfully requests that this Court enter orders of preliminary and permanent injunction:

A. restraining and enjoining defendants and any of their affiliates, agents, servants, employees, successors, assigns, attorneys, and persons in active concert or participation with them who receive actual notice of such order by personal service or otherwise, from directly or indirectly:

1.violating Sections 4b(a)(i) and 4b(a)(ii) of the Act, 7 U.S.C.6b(a)(i) and 6b(a)(ii), by, in or in connection with any order to make, or the making of any contract of sale of any commodity for future delivery (including but not limited to foreign currencies), 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--

i.cheating or defrauding or attempting to cheat or defraud such other person; and

ii.willfully making or causing to be made to such other person any false report or statement thereof, or willfully entering or causing to be entered for such person any false record thereof;

2.violating Section 4m of the Act, 7 U.S.C.6m, by Acting as a commodity pool operator or as a commodity trading advisor without benefit of registration;

3. violating Section 4k(2) of the Act, 7 U.S.C.6k(2), by soliciting funds, securities or property for a participation in any commodity pool without benefit of registration as an associated person of the commodity pool;

4.violating Section 4o(1)(B) of the Act, 7 U.S.C.6o(1)(B) by employing devices, schemes or artifices to defraud commodity pool participants or prospective participants, and engaging in transactions, practices or courses of business that operate as a fraud or deceit upon commodity pool participants or prospective participants;

5. violating Section 9(a)(1) of the Act, 7 U.S.C.13(a)(1), by embezzling, stealing, purloining, or with criminal intent converting customer money, securities or property to his own use, the money, securities or property having a value in excess of $100; which was received to margin, guarantee, or secure the trades of pool participants;

6.violating Section 4n(4) of the Act, 7 U.S.C.6n(4), and Sections 4.21(a), 4.21(b) and 4.22 of the Regulations, 17 C.F.R.4.21(a), 4.21(b) and 4.22, by directly or indirectly, soliciting, accepting or receiving funds, securities, or other property from prospective pool participants in a pool that any defendant operates or intends to operate; by failing to deliver to prospective participants in a pool a Disclosure Document, in the form prescribed by, and containing the information required by, the Commission and failing to receive an acknowledgment signed and dated by the prospective pool participants that they had received such a Disclosure Document, on or before the date any defendant engages in that activity; and failing to regularly furnish appropriate statements of account to each participant in a pool;

7.violating Section 4.20(c) of the Regulations, 17 C.F.R.4.20(c), by commingling the property of any pool that any of them operates or intends to operate with the property of any other person;

8.soliciting or accepting any new customers or participants or any new deposits of funds from existing or new customers or participants;

9.acting in any capacity for which registration with the Commission is required under the Act;

10.transferring, withdrawing, removing, or disposing of any funds, securities, assets or other property, which order shall also restrain, enjoin and be binding upon each firm, corporation, partnership, association, or other person or entity which holds or which is a depository of funds, securities, assets or other property owned or controlled (legally, equitably or otherwise) by defendants Berus, Meca and Gale, whether individually or jointly, provided, however, that this paragraph shall not prevent any person or entity from taking such steps as are necessary to enable defendants Berus, Meca and Gale to comply with such order, and further provided, that any futures or options trading account owned or controlled by the defendants in which there are open futures or options positions, shall be liquidated by the defendants, or any other person who owns or controls the account, in a prudent manner and with the purpose of preserving the value of the account;

B. directing defendants:

1.to cooperate fully with the Commission to locate all assets, books, and records of Berus, Profit Masters Group, Meca and Gale wherever such assets, books, and records may be situated;

2.to make an accounting of all assets and liabilities of Berus, Profit Masters Group, Meca and Gale together with all funds received and paid out by Berus, Profit Masters Group, Meca and Gale in or connection with all commodity pool operations or commodity futures and options transactions, from the date of their receipt until the date of such accounting; together with an accounting of all salaries, commissions, fees, loans, and other disbursements of money and property of any kind from Berus, Profit Masters Group, Meca and Gale in or in connection with any commodity pool operations or commodity futures and options transactions from the date of the beginning of those operations and transactions to and including the date of such accounting, and that such accounting be accomplished under the supervision of such person as the Court may appoint or designate, or upon such terms and conditions as the Court may deem appropriate. Such accounting shall enumerate:

a.all funds, securities, assets and other property currently owned or controlled (legally, equitably or otherwise) directly or indirectly by Berus, Profit Masters Group, Meca and Gale, whether individually or jointly;

b.all fund, securities, assets and other property received directly or indirectly by Berus, Profit Masters Group, Meca and Gale, whether individually or jointly, describing the source, amount, disposition, and current location of each listed item;

c.the name and last known address of each bailee, debtor or other person or entity currently holding any funds, securities, assets or other property owned or controlled (legally, equitably or otherwise) by Berus, Profit Masters Group, Meca and Gale, whether individually or jointly; and

d.the name and financial condition (including assets, liabilities, revenues and expenses) of each entity directly or indirectly owned or controlled by Berus, Profit Masters Group, Meca and Gale, whether individually or jointly.

3.to disgorge to any officer appointed and directed by the Court all benefits received including, but not limited to salaries, commissions, loans, fees, revenues and profits derived, directly or indirectly, from acts or practices which constitute violations of the Act, as described herein;

4.to make restitution by making whole each and every customer or participant whose funds were received or utilized by the defendants in violation of the provisions of the Act, as described herein;

5.to pay civil penalties, to be assessed by the Court separately against each of them, in amounts not to exceed the higher of $100,000 or triple the monetary gain to them for each violation of the Act, as described herein; and

6.to pay prejudgment and post-judgment interest; and

C. providing for such other and further relief as this Court may deem necessary and appropriate under the circumstances.

Dated: September 30, 1996

Respectfully submitted,

Mark H. Bretscher

Ill. Bar No. 06194945

Joseph A. McHatton

Ill. Bar No. 01846965

Robert J. Greenwald

Ill. Bar No. 01053159

Dennis M. Robb

Ill. Bar No. 02348888

Attorneys for Plaintiff

Commodity Futures Trading Commission

300 South Riverside Plaza

Suite 1600 North

Chicago, Illinois 60606

(312)353-9526

Local Counsel Mary Rigdon

Assistant United States Attorney

Civil Division

211 West Fort

Suite 2300

Detroit, MI 48226-3211

(313) 226-9790