Securities and Exchange Commission
Litigation Release No. 17909 / December 23, 2002
SEC Files "Prime Bank" Securities Fraud Case Against
Unregistered Utah Broker and His Company
Securities and Exchange Commission v. Russell W. Jones and R&D Marketing, Inc., No. 5:02CV118 (Wilson, C.J.) (U.S.D.C., W.D. Va.)
On December 23, 2002, the Commission filed a securities fraud case in the United States District Court for the Western District of Virginia charging an unregistered Utah broker and his company with promoting a fraudulent "prime bank" type investment scheme. The defendants are Russell W. Jones of Logan, Utah and R&D Marketing, Inc., a Utah corporation.
The Commission's complaint alleges that the defendants acted as the primary broker and wholesaler of a fraudulent bank-instrument trading program through which they defrauded investors throughout the United States of at least $1.9 million, including at least $240,000 from Virginia investor-victims. According to the complaint, Jones, acting through R&D Marketing, dispatched a network of local agents around the country, including Lytle E. Foglesong in Virginia, to solicit investors for the program. Jones supplied these agents, according to the complaint, with fraudulent representations that were echoed to investors: (1) that investors' funds would be used to trade in European bank instruments; (2) that this activity would yield returns in excess of 200% within forty-five days; and (3) that the International Monetary Fund ("IMF") sponsored the program. The complaint further alleges that, rather than investing the investors' funds in such a bank-instrument trading program, Jones unilaterally decided to wire the funds to an altogether different fraudulent program, supposedly involving the purchase and re-sale-at rapid and exorbitant profits-of assets from estate auctions in Europe. The complaint further alleges that Jones failed to inform the investors or obtain their consent, and that the funds disappeared shortly after Jones wired them in June 1997. Finally, the complaint alleges that thereafter, and continuing into 2002, Jones lulled investors by (among other things) assuring them that they would still realize the promised returns by sharing in the proceeds of yet another fraudulent program.
The Commission's complaint charges each of the defendants with securities fraud, sale of unregistered securities, and acting as an unregistered broker-dealer, in violation of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Exchange Act Rule 10b-5. The Commission is seeking injunctions, disgorgement of ill-gotten gains (with interest), and civil penalties against both defendants.
In a related matter, the United States Attorney's Office for the Western District of Virginia announced the indictment of Jones and others on September 12, 2002, charging securities fraud, mail fraud, wire fraud, money laundering and witness tampering stemming from the same fraudulent scheme that is the subject of the Commission's complaint. See United States v. Russell W. Jones, John Daniel Deeter and Robert N. Perry, No. 5:02Cr10093 (Michael, J.) (W.D. Va., filed Sept. 12, 2002, superseding an earlier indictment that had been filed under seal on June 12, 2002). In another related criminal prosecution arising from the same fraudulent scheme, Jones' Virginia promoter Lytle Foglesong entered a guilty plea on October 24, 2002. See United States v. Lytle E. Foglesong, No. 5:02Cr10056 (Michael, J.) (W.D. Va.). The Commission's related case against Foglesong and three other Virginia brokers, announced previously, is pending. (See Lit. Rel. No. 17281/December 19, 2001).
The Commission wishes to thank the United States Attorney's Office for the Western District of Virginia, the Federal Bureau of Investigation, the United States Postal Inspection Service, the Internal Revenue Service and the Virginia State Corporation Commission for their assistance in connection with this matter.
This case is part of the SEC's continuing effort to combat prime bank fraud and to alert the public to the risks posed by these phony instruments. The risks of this type of fraud and warnings about how to avoid it are spelled out in the Interagency Advisory: Warning Concerning "Prime Bank" Notes, Guarantees, and Letters of Credit and Similar Financial Instruments (October 21, 1993), and other information which is available through the SEC's Homepage at http://www.sec.gov/divisions/enforce/primebank.shtml.
http://www.sec.gov/litigation/litreleases/lr17909.htm
