Securities and Exchange Commission v. Craig Rumbaugh et al

Filing 35

FINAL JUDGMENT AS TO DEFENDANT DESERT STRATEGIC EQUITY, LLC. by Judge Philip S. Gutierrez. IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable, jointly and severally with Defendants Craig Rumbaugh and Rumbaugh Fin ancial, Inc., 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)

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 1 of 8 Page ID #:246

1
2
3
4
5
6
7

DONALD W. SEARLES (Cal. Bar No. 135705)
Email: [e-mail]
M. LANCE JASPER (Cal. Bar No. 244516)
Email: [e-mail]

11/19/2020

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: [phone]
Facsimile: [phone]

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 DESERT
STRATEGIC EQUITY, LLC

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 2 of 8 Page ID #:247

1

The Securities and Exchange Commission having filed a Complaint and

2

Defendant Desert Strategic Equity, LLC having entered a general appearance;

3

consented to the Court’s jurisdiction over Defendant and the subject matter of this

4

action; consented to entry of this Final Judgment without admitting or denying the

5

allegations of the Complaint (except as to jurisdiction and except as otherwise

6

provided herein in paragraph VII); waived findings of fact and conclusions of law;

7

and waived any right 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

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 3 of 8 Page ID #:248

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

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 4 of 8 Page ID #:249

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
6

IV.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant

7

and his agents, servants, employees, attorneys, and all persons in active concert or

8

participation with them who receive actual notice of this Judgment by personal

9

service or otherwise are permanently restrained and enjoined from violating, directly

10

or indirectly, Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a), which makes it

11

unlawful for any broker or dealer which is either a person other than a natural person

12

or a natural person, to make use of the mails or any means or instrumentality of

13

interstate commerce to effect any transactions in, or to induce or attempt to induce the

14

purchase or sale of, any security (other than an exempted security or commercial

15

paper, bankers' acceptances, or commercial bills) unless such broker or dealer is

16

registered in accordance with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b).

17

V.

18

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that

19

Defendant is liable, jointly and severally with Defendants Craig Rumbaugh and

20

Rumbaugh Financial, Inc., for disgorgement of $676,000, representing profits gained

21

as a result of the conduct alleged in the Complaint, together with prejudgment interest

22

thereon in the amount of $137,808.31, for a total of $813,808.31. Defendant shall

23

satisfy this obligation by paying $813,808.31 to the Securities and Exchange

24

Commission within 14 days after entry of final judgment.

25

Defendant may transmit payment electronically to the Commission, which will

26

provide detailed ACH transfer/Fedwire instructions upon request. Payment may also

27

be made directly from a bank account via Pay.gov through the SEC website at

28

http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified
3

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 5 of 8 Page ID #:250

1

check, bank cashier’s check, or United States postal money order payable to the

2

Securities and Exchange Commission, which shall be delivered or mailed to

3
4
5

Enterprise Services Center
Accounts Receivable Branch
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

6

and shall be accompanied by a letter identifying the case title, civil action number,

7

and name of this Court; [Defendant’s name] as a defendant in this action; and

8

specifying that payment is made pursuant to this Final Judgment.

9

Defendant shall simultaneously transmit photocopies of evidence of payment

10

and case identifying information to the Commission’s counsel in this action. By

11

making this payment, Defendant relinquishes all legal and equitable right, title, and

12

interest in such funds and no part of the funds shall be returned to Defendant.

13

The Commission shall hold the funds (collectively, the “Fund”) and may

14

propose a plan to distribute the Fund subject to the Court’s approval. The Court shall

15

retain jurisdiction over the administration of any distribution of the Fund. If the

16

Commission staff determines that the Fund will not be distributed, the Commission

17

shall send the funds paid pursuant to this Final Judgment to the United States

18

Treasury.

19

The Commission may enforce the Court’s judgment for disgorgement and

20

prejudgment interest by moving for civil contempt (and/or through other collection

21

procedures authorized by law) at any time after 14 days following entry of this Final

22

Judgment]. Defendant shall pay post judgment interest on any delinquent amounts

23

pursuant to 28 U.S.C. § 1961.

24
25

VI.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the

26

Consent is incorporated herein with the same force and effect as if fully set forth

27

herein, and that Defendant shall comply with all of the undertakings and agreements

28

set forth therein.
4

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 6 of 8 Page ID #:251

1

VII.

2

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for

3

purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code,

4

11 U.S.C. §523, the allegations in the complaint are true and admitted by Defendant,

5

and further, any debt for disgorgement, prejudgment interest, civil penalty or other

6

amounts due by Defendant under this Final Judgment or any other judgment, order,

7

consent order, decree or settlement agreement entered in connection with this

8

proceeding, is a debt for the violation by Defendant of the federal securities laws or

9

any regulation or order issued under such laws, as set forth in Section 523(a)(19) of

10

the Bankruptcy Code, 11 U.S.C. §523(a)(19).

11

VIII.

12

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court

13

shall retain jurisdiction of this matter for the purposes of enforcing the terms of this

14

Final Judgment.

15
16

IX.
There being no just reason for delay, pursuant to Rule 54(b) of the Federal

17

Rules of Civil Procedure, the Clerk is ordered to enter this Final Judgment forthwith

18

and without further notice.

19
20

11/19/2020
Dated: ________________

21

________________________________

22

UNITED STATES DISTRICT JUDGE

23
24
25
26
27
28
5

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 7 of 8 Page ID #:252

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. [phone]; Facsimile No. [phone].
On November 18, 2020, I caused to be served the document entitled [PROPOSED]
FINAL JUDGMENT AS TO DEFENDANT DESERT STRATEGIC EQUITY,
LLC 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

Case 5:19-cv-01517-PSG-SP Document 32-1 Filed 11/18/20 Page 8 of 8 Page ID #:253

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
[e-mail]
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