Securities and Exchange Commission v. Craig Rumbaugh et al
Filing
33
FINAL JUDGMENT AS TO DEFENDANT CRAIG RUMBAUGH by Judge Philip S. Gutierrez 30 . IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant liable, jointly and severally with Defendants Rumbaugh Financial, Inc. and Desert Strategic Equity, LLC, for disgorgement of $676,000, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $137,808.31, for a total of $813,808.31. Defendant shall satisfy this obligation by paying $813,808.31 to the Securities and Exchange Commission within 14 days after entry of final judgment. (See document for further details) (yl)
1
2
3
4
5
6
7
DONALD W. SEARLES (Cal. Bar No. 135705)
Email: searlesd@sec.gov
M. LANCE JASPER (Cal. Bar No. 244516)
Email: jasperml@sec.gov
Attorneys for Plaintiff
Securities and Exchange Commission
Michele Wein Layne, Regional Director
Alka N. Patel, Associate Regional Director
Amy J. Longo, Regional Trial Counsel
444 S. Flower Street, Suite 900
Los Angeles, California 90071
Telephone: (323) 965-3998
Facsimile: (213) 443-1904
11/19/2020
link #30
8
UNITED STATES DISTRICT COURT
9
CENTRAL DISTRICT OF CALIFORNIA
10
11
12
13
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
vs.
CRAIG RUMBAUGH,
RUMBAUGH FINANCIAL, INC,
AND DESERT STRATEGIC
EQUITY, LLC,
Defendants.
Case No. CV 5:19-CV-01517 - PSG
[PROPOSED] FINAL JUDGMENT AS
TO DEFENDANT CRAIG
RUMBAUGH
1
The Securities and Exchange Commission having filed a Complaint and
2
Defendant Craig Rumbaugh having entered a general appearance; consented to the
3
Court’s jurisdiction over Defendant and the subject matter of this action; consented to
4
entry of this Final Judgment without admitting or denying the allegations of the
5
Complaint (except as to jurisdiction and except as otherwise provided herein in
6
paragraph IX); waived findings of fact and conclusions of law; and waived any right
7
to appeal from this Final Judgment:
8
9
I.
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Defendant is
10
permanently restrained and enjoined from violating Sections 206(1) and (2) of the
11
Advisers Act [15 U.S.C. §§ 80b-6(1) & 80b-6(2)], by directly or indirectly:
12
13
14
1.
employing any device, scheme or artifice to defraud any client or
prospective client; and
2.
engaging in any transaction, practice, or course of business which
15
operates or would operate as a fraud or deceit upon any client or prospective client;
16
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as
17
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also
18
binds the following who receive actual notice of this l Judgment by personal service
19
or otherwise: (a) Defendant’s officers, agents, servants, employees, and attorneys;
20
and (b) other persons in active concert or participation with Defendant or with anyone
21
described in (a).
22
II.
23
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
24
Defendant is permanently restrained and enjoined from violating Section 17(a) of the
25
Securities Act of 1933 (the “Securities Act”) [15 U.S.C. § 77q(a)] in the offer or sale
26
of any security by the use of any means or instruments of transportation or
27
communication in interstate commerce or by use of the mails, directly or indirectly:
28
(a)
to employ any device, scheme, or artifice to defraud;
1
1
(b)
to obtain money or property by means of any untrue statement of a
2
material fact or any omission of a material fact necessary in order to
3
make the statements made, in light of the circumstances under which
4
they were made, not misleading; or
5
(c)
6
to engage in any transaction, practice, or course of business which
operates or would operate as a fraud or deceit upon the purchaser.
7
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as
8
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also
9
binds the following who receive actual notice of this Final Judgment by personal
10
service or otherwise: (a) Defendant’s officers, agents, servants, employees, and
11
attorneys; and (b) other persons in active concert or participation with Defendant or
12
with anyone described in (a).
13
14
III.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is
15
permanently restrained and enjoined from violating, directly or indirectly, Section
16
10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. §
17
78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using
18
any means or instrumentality of interstate commerce, or of the mails, or of any
19
facility of any national securities exchange, in connection with the purchase or sale of
20
any security:
21
(a)
to employ any device, scheme, or artifice to defraud;
22
(b)
to make any untrue statement of a material fact or to omit to state a
23
material fact necessary in order to make the statements made, in the light
24
of the circumstances under which they were made, not misleading; or
25
26
(c)
to engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any person.
27
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as
28
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also
2
1
binds the following who receive actual notice of this Final Judgment by personal
2
service or otherwise: (a) Defendant’s officers, agents, servants, employees, and
3
attorneys; and (b) other persons in active concert or participation with Defendant or
4
with anyone described in (a).
5
IV.
6
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
7
Defendant is permanently restrained and enjoined from violating Section 5(a) and (c)
8
of the Securities Act [15 U.S.C. § 77e(a) & (c)] by, directly or indirectly, in the
9
absence of any applicable exemption:
10
(a)
Unless a registration statement is in effect as to a security, making use of
11
any means or instruments of transportation or communication in
12
interstate commerce or of the mails to sell such security through the use
13
or medium of any prospectus or otherwise; or
14
(c)
Making use of any means or instruments of transportation or
15
communication in interstate commerce or of the mails to offer to sell or
16
offer to buy through the use or medium of any prospectus or otherwise
17
any security, unless a registration statement has been filed with the
18
Commission as to such security, or while the registration statement is the
19
subject of a refusal order or stop order or (prior to the effective date of
20
the registration statement) any public proceeding or examination under
21
Section 8 of the Securities Act [15 U.S.C. § 77h].
22
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as
23
provided in Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also
24
binds the following who receive actual notice of this Final Judgment by personal
25
service or otherwise: (a) Defendant’s officers, agents, servants, employees, and
26
attorneys; and (b) other persons in active concert or participation with Defendant or
27
with anyone described in (a).
28
3
V.
1
2
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant
3
and his agents, servants, employees, attorneys, and all persons in active concert or
4
participation with them who receive actual notice of this Judgment by personal
5
service or otherwise are permanently restrained and enjoined from violating, directly
6
or indirectly, Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a), which makes it
7
unlawful for any broker or dealer which is either a person other than a natural person
8
or a natural person, to make use of the mails or any means or instrumentality of
9
interstate commerce to effect any transactions in, or to induce or attempt to induce the
10
purchase or sale of, any security (other than an exempted security or commercial
11
paper, bankers' acceptances, or commercial bills) unless such broker or dealer is
12
registered in accordance with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b).
13
VI.
14
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
15
Defendant liable, jointly and severally with Defendants Rumbaugh Financial, Inc.
16
and Desert Strategic Equity, LLC, for disgorgement of $676,000, representing profits
17
gained as a result of the conduct alleged in the Complaint, together with prejudgment
18
interest thereon in the amount of $137,808.31, for a total of $813,808.31.
19
Defendant shall satisfy this obligation by paying $813,808.31 to the Securities and
20
Exchange Commission within 14 days after entry of final judgment.
21
Defendant may transmit payment electronically to the Commission, which will
22
provide detailed ACH transfer/Fedwire instructions upon request. Payment may also
23
be made directly from a bank account via Pay.gov through the SEC website at
24
http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified
25
check, bank cashier’s check, or United States postal money order payable to the
26
Securities and Exchange Commission, which shall be delivered or mailed to
27
28
Enterprise Services Center
Accounts Receivable Branch
6500 South MacArthur Boulevard
4
1
Oklahoma City, OK 73169
2
and shall be accompanied by a letter identifying the case title, civil action number,
3
and name of this Court; [Defendant’s name] as a defendant in this action; and
4
specifying that payment is made pursuant to this Final Judgment.
5
Defendant shall simultaneously transmit photocopies of evidence of payment
6
and case identifying information to the Commission’s counsel in this action. By
7
making this payment, Defendant relinquishes all legal and equitable right, title, and
8
interest in such funds and no part of the funds shall be returned to Defendant.
9
The Commission shall hold the funds (collectively, the “Fund”) and may
10
propose a plan to distribute the Fund subject to the Court’s approval. The Court shall
11
retain jurisdiction over the administration of any distribution of the Fund. If the
12
Commission staff determines that the Fund will not be distributed, the Commission
13
shall send the funds paid pursuant to this Final Judgment to the United States
14
Treasury.
15
The Commission may enforce the Court’s judgment for disgorgement and
16
prejudgment interest by moving for civil contempt (and/or through other collection
17
procedures authorized by law) at any time after 14 days following entry of this Final
18
Judgment]. Defendant shall pay post judgment interest on any delinquent amounts
19
pursuant to 28 U.S.C. § 1961.
20
VII.
21
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that
22
Defendant is liable for a civil penalty in the amount of $192,768 pursuant to Section
23
20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange
24
Act [15 U.S.C. § 78u(d)(3)]. Defendant shall satisfy this obligation by paying
25
$192,768 to the Securities and Exchange Commission within 30 days after entry of
26
this Final Judgment.
27
Defendant may transmit payment electronically to the Commission, which will
28
provide detailed ACH transfer/Fedwire instructions upon request. Payment may also
5
1
be made directly from a bank account via Pay.gov through the SEC website at
2
http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified
3
check, bank cashier’s check, or United States postal money order payable to the
4
Securities and Exchange Commission, which shall be delivered or mailed to:
5
Enterprise Services Center
Accounts Receivable Branch
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
6
7
8
and shall be accompanied by a letter identifying the case title, civil action number,
9
and name of this Court; Michael R. Gregory as a defendant in this action; and
10
specifying that payment is made pursuant to this Final Judgment.
11
Defendant shall simultaneously transmit photocopies of evidence of payment
12
and case identifying information to the Commission’s counsel in this action. By
13
making this payment, Defendant relinquishes all legal and equitable right, title, and
14
interest in such funds and no part of the funds shall be returned to Defendant.
15
Defendant shall pay post judgment interest on any delinquent amounts pursuant
16
to 28 U.S.C. § 1961. The Commission shall hold the funds, together with any interest
17
and income earned thereon (collectively, the “Fund”), pending further order of the
18
Court.
19
The Commission may propose a plan to distribute the Fund subject to the
20
Court’s approval. Such a plan may provide that the Fund shall be distributed
21
pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of
22
2002. The Court shall retain jurisdiction over the administration of any distribution
23
of the Fund. If the Commission staff determines that the Fund will not be distributed,
24
the Commission shall send the funds paid pursuant to this Final Judgment to the
25
United States Treasury.
26
Regardless of whether any such Fair Fund distribution is made, amounts
27
ordered to be paid as civil penalties pursuant to this Judgment shall be treated as
28
penalties paid to the government for all purposes, including all tax purposes. To
6
1
preserve the deterrent effect of the civil penalty, Defendant shall not, after offset or
2
reduction of any award of compensatory damages in any Related Investor Action
3
based on Defendant’s payment of disgorgement in this action, argue that he is entitled
4
to, nor shall he further benefit by, offset or reduction of such compensatory damages
5
award by the amount of any part of Defendant’s payment of a civil penalty in this
6
action (“Penalty Offset”). If the court in any Related Investor Action grants such a
7
Penalty Offset, Defendant shall, within 30 days after entry of a final order granting
8
the Penalty Offset, notify the Commission’s counsel in this action and pay the amount
9
of the Penalty Offset to the United States Treasury or to a Fair Fund, as the
10
Commission directs. Such a payment shall not be deemed an additional civil penalty
11
and shall not be deemed to change the amount of the civil penalty imposed in this
12
Judgment. For purposes of this paragraph, a “Related Investor Action” means a
13
private damages action brought against Defendant by or on behalf of one or more
14
investors based on substantially the same facts as alleged in the Complaint in this
15
action.
16
VIII.
17
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the
18
Consent is incorporated herein with the same force and effect as if fully set forth
19
herein, and that Defendant shall comply with all of the undertakings and agreements
20
set forth therein.
21
22
IX.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for
23
purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code,
24
11 U.S.C. §523, the allegations in the complaint are true and admitted by Defendant,
25
and further, any debt for disgorgement, prejudgment interest, civil penalty or other
26
amounts due by Defendant under this Final Judgment or any other judgment, order,
27
consent order, decree or settlement agreement entered in connection with this
28
proceeding, is a debt for the violation by Defendant of the federal securities laws or
7
1
any regulation or order issued under such laws, as set forth in Section 523(a)(19) of
2
the Bankruptcy Code, 11 U.S.C. §523(a)(19).
X.
3
4
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court
5
shall retain jurisdiction of this matter for the purposes of enforcing the terms of this
6
Final Judgment.
7
8
9
10
XI.
There being no just reason for delay, pursuant to Rule 54(b) of the Federal
Rules of Civil Procedure, the Clerk is ordered to enter this Final Judgment forthwith
and without further notice.
11
12
11/19/2020
Dated: ________________
13
________________________________
14
UNITED STATES DISTRICT JUDGE
15
16
17
18
19
20
21
22
23
24
25
26
27
28
8
PROOF OF SERVICE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
I am over the age of 18 years and not a party to this action. My business address is:
U.S. SECURITIES AND EXCHANGE COMMISSION,
444 S. Flower Street, Suite 900, Los Angeles, California 90071
Telephone No. (323) 965-3998; Facsimile No. (213) 443-1904.
On November 18, 2020, I caused to be served the document entitled [PROPOSED]
FINAL JUDGMENT AS TO DEFENDANT CRAIG RUMBAUGH on all the
parties to this action addressed as stated on the attached service list:
OFFICE MAIL: By placing in sealed envelope(s), which I placed for
collection and mailing today following ordinary business practices. I am readily
familiar with this agency’s practice for collection and processing of correspondence
for mailing; such correspondence would be deposited with the U.S. Postal Service on
the same day in the ordinary course of business.
PERSONAL DEPOSIT IN MAIL: By placing in sealed envelope(s),
which I personally deposited with the U.S. Postal Service. Each such envelope was
deposited with the U.S. Postal Service at Los Angeles, California, with first class
postage thereon fully prepaid.
EXPRESS U.S. MAIL: Each such envelope was deposited in a facility
regularly maintained at the U.S. Postal Service for receipt of Express Mail at Los
Angeles, California, with Express Mail postage paid.
HAND DELIVERY: I caused to be hand delivered each such envelope to the
office of the addressee as stated on the attached service list.
UNITED PARCEL SERVICE: By placing in sealed envelope(s) designated
by United Parcel Service (“UPS”) with delivery fees paid or provided for, which I
deposited in a facility regularly maintained by UPS or delivered to a UPS courier, at
Los Angeles, California.
ELECTRONIC MAIL: By transmitting the document by electronic mail to
the electronic mail address as stated on the attached service list.
E-FILING: By causing the document to be electronically filed via the Court’s
CM/ECF system, which effects electronic service on counsel who are registered with
the CM/ECF system.
FAX: By transmitting the document by facsimile transmission. The
transmission was reported as complete and without error.
I declare under penalty of perjury that the foregoing is true and correct.
Date: November 18, 2020
/s/ Sarah Mitchell
Sarah Mitchell
27
28
1
2
SEC v. Rumbaugh, et al.
United States District Court—Central District of California
Case No. 5:19-cv-01517-PSG-SP
3
SERVICE LIST
1
4
5
6
7
Julie E. Kamps, Esq. (via ECF)
1600 Dove Street, Suite 250
Newport Beach, CA 92660
kamps@wpcfs.com
Counsel for Defendants Craig Rumbaugh, Rumbaugh Financial, Inc.,
and Desert Strategic Equity, LLC
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
2
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?