Securities & Exchange Commission v. BIH Corporation et al
Filing
121
OPINION AND ORDER granting 111 Motion for Default Judgment in favor of plaintiff and against Defendants BIH Corporation and North Bay South Corporation and Relief Defendants The Caddo Corporation and Beaver Creek Financial Corporation as more fully set forth in the Opinion and Order. The Clerk shall withhold the entry of judgment pending submission by the SEC of a motion within 120 days regarding a permanent injunction and the amount of civil penalties. The Court will retain jurisdiction over the enforcement of the judgment upon entry. Signed by Judge John E. Steele on 9/26/2012. (RKR)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
vs.
Case No.
2:10-cv-577-FtM-29DNF
BIH CORPORATION, WAYNE A. BURMASTER,
EDWARD A. HAYTER, NORTH BAY SOUTH
CORPORATION,
BIMINI
REEF
REAL
ESTATE, INC., RIVERVIEW CAPITAL
INC., CHRISTOPHER L. ASTROM, DAMIAN
B. GUTHRIE, BARON INTERNATIONAL
INC., THE CADDO CORPORATION, BEAVER
CREEK FINANCIAL CORPORATION,
Defendants.
___________________________________
OPINION AND ORDER
This matter comes before the Court on the Securities and
Exchange Commission’s Motion for Default Final Judgment Against
Defendants BIH Corporation and North Bay South Corporation and
Relief Defendants The Caddo Corporation and Beaver Creek Financial
Corporation (Doc. #111) filed on August 28, 2012.
No responses
have been filed and the time to respond has expired.
The Court
finds that an evidentiary hearing on the motion is not required in
this case and will render a decision based on the documents
submitted.
On June 27, 2012, a Clerk’s Entry of Default (Doc. #104) was
entered as to defendants BIH Corporation, Beaver Creek Financial
Corporation,
North
Bay
South
Corporation,
and
The
Caddo
Corporation.
Therefore, plaintiff has complied with the necessary
prerequisite under Fed. R. Civ. P. 55(a) for a default judgment.
“A
defendant,
by
his
default,
admits
the
plaintiff’s
well-pleaded allegations of fact, is concluded on those facts by
the judgment, and is barred from contesting on appeal the facts
thus established. [ ]
merits,
but
only
so
A default judgment is unassailable on the
far
as
it
is
supported
by
well-pleaded
allegations. [ ] A default defendant may, on appeal, challenge the
sufficiency of the complaint, even if he may not challenge the
sufficiency of the proof.”
Eagle Hosp. Physicians, LLC v. SRG
Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009)(internal
quotations and citations omitted).
Deeming all the allegations in the Complaint (Doc. #1) as
admitted, certain individuals implemented a “pump-and-dump” scheme
involving the sale of unregistered shares of BIH Corporation’s
(BIH) stock to the investing public.
BIH was a penny stock and
claimed to be a holding company specializing in the restaurant and
hospitality industry.
As part of the scheme, stock was illegally
distributed to North Bay South Corporation (North Bay) and other
companies, with $1 million of the stock being dumped on investors
and the illegally obtained sales proceeds being split amongst the
individuals, including relief defendants Beaver Creek Financial
Corporation (Beaver Creek) and The Caddo Corporation (Caddo).
North Bay acted as an underwriter by selling the unregistered
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shares of BIH and as a conduit of the individuals to distribute BIH
shares to the public.
North Bay generated more than $110,000 from
selling shares of BIH. Beaver Creek received more than $230,000 in
proceeds
from
consulting
the
securities
services.
fraud
Caddo,
an
for
purportedly
investment
banking
providing
business,
received more than $240,000 in proceeds from the securities fraud.
Plaintiff alleges defendants violated the Securities Act of
1933, the Securities Exchange Act of 1934, and/or Exchange Act Rule
10b-5.
Count I (Sections 5(a) and 5(c) of the Securities Act)
pertains to both defendants BIH and North Bay.
In Count I,
plaintiff states that no registration statement was filed or in
effect with the Commission and defendants sold securities, carried
securities, or offered to sell or offered to buy securities through
interstate commerce without a registration statement.
Counts II through IV (Section 17 of the Securities Act and
Section 10(b) of the Exchange Act) pertain to BIH only.
In Count
II, plaintiff states that BIH used interstate commerce to offer or
sell securities
knowingly,
willfully,
or
recklessly
employing
devices, schemes, or artifices to defraud. In Count III, plaintiff
states that BIH obtained money or property by means of untrue
statements
of
material
facts
and
omissions
or
engaged
in
transactions, practices and courses of business to operate as a
fraud or deceit upon purchasers and prospective purchasers through
interstate commerce.
In Count IV, plaintiff states that BIH,
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through interstate commerce, knowingly, willfully, or recklessly
employed devices, schemes, or artifices to defraud, made untrue
statements of material facts, or engaged in acts, practices, and
courses of business to defraud purchasers of securities.
In the Complaint, plaintiff sought declaratory relief that
defendants violated federal securities laws, a permanent injunction
against defendants from further violations, a disgorgement of all
ill-gotten gains, including prejudgment interest, civil monetary
penalties, and the retention of jurisdiction.
Upon review, the
Court finds that plaintiff has established that it is entitled to
a default judgment against defendants and the relief defendants.
Accordingly, it is now
ORDERED:
1.
Securities and Exchange Commission’s Motion for Default
Final Judgment Against Defendants BIH Corporation and North Bay
South Corporation and Relief Defendants The Caddo Corporation and
Beaver Creek Financial Corporation (Doc. #111) is GRANTED and
Judgment
will
be
entered
in
favor
of
plaintiff
and
against
Defendants BIH Corporation and North Bay South Corporation and
Relief Defendants The Caddo Corporation and Beaver Creek Financial
Corporation as more fully set forth below:
A.
Judgment as to Count I of the Complaint shall be in favor
of the SEC and against BIH and North Bay as follows:
Defendants
BIH
Corporation
and
North
Bay
South
Corporation, any of their officers, agents, servants,
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representatives, employees, attorneys, and all persons in
active concert or participation with any of them, who
receive actual notice of this Final Judgment by personal
service or otherwise, are permanently restrained and
enjoined from violating Section 5 of the Securities Act
[15 U.S.C. § 77e] by, directly or indirectly, in the
absence of any applicable exemption:
(a) Unless a registration statement is in effect as
a security, making use of any means or instruments
transportation or communication in interstate commerce
of the mails to sell such security through the use
medium of any prospectus or otherwise;
to
of
or
or
(b) Unless a registration statement is in effect as to
a security, carrying or causing to be carried through the
mails or in interstate commerce, by any means or
instruments of transportation, any such security for the
purpose of sale or for delivery after sale; or
(c) Making use of any means or instruments of
transportation or communication in interstate commerce or
of the mails to offer to sell or offer to buy through the
use or medium of any prospectus or otherwise any
security, unless a registration statement has been filed
with the Commission as to such security, or while the
registration statement is the subject of a refusal order
or stop order or (prior to the effective date of the
registration statement) any public proceeding or
examination under Section 8 of the Securities Act [15
U.S.C. § 77h].
B.
Judgment as to Counts II through IV shall be in favor of
the SEC and against BIH with particularized permanent injunctive
relief to be determined upon motion by plaintiff to be filed within
ONE HUNDRED AND TWENTY (120) DAYS of this Order.
C.
The Securities and Exchange Commission is entitled to
disgorgement of all ill-gotten gains as to BIH and North Bay,
jointly and severally, in the amount of $1,137,106, plus $143,421
in prejudgment interest;
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D.
The Securities and Exchange Commission is entitled to
disgorgement of all ill-gotten gains as to Caddo, jointly and
severally with BIH and North Bay, in the amount of $245,356.00,
plus $41,872.00 of prejudgment interest (with any payments made by
Caddo
Corp.
proportionally
reducing
the
Defendants
total
disgorgement and prejudgment amount);
E.
The Securities and Exchange Commission is entitled to
disgorgement of all ill-gotten gains as to Beaver Creek, jointly
and severally with BIH and North Bay, in the amount of $238,676.00,
plus $37,036.00 of prejudgment interest (with any payments made by
Beaver
Creek
proportionally
reducing
the
Defendants
total
disgorgement and prejudgment amount);
F.
The Securities and Exchange Commission is entitled to
civil penalties against BIH and North Bay in an amount to be set
and determined under separate notice upon motion by plaintiff to be
filed within ONE HUNDRED AND TWENTY (120) DAYS of this Order.
G. All amounts ordered shall be due and payable within THIRTY
(30) DAYS of the entry of judgment.
Post-judgment interest shall
accrue pursuant to 28 U.S.C. § 1961.
All payments shall be made by
sending a United States postal money order, certified check, bank
cashier's check or bank money order payable to the Registry of the
Court of the United States District Court for the Middle District
of Florida under cover of a letter that identifies the name and
number of this action, with a copy of said cover letter and money
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order or check to Christopher E. Martin, Esq., Securities and
Exchange Commission, Senior Trial Counsel, 801 Brickell Avenue,
Suite 1800, Miami, Florida, 33131.
For any payments made, the party shall relinquish all legal
and equitable right, title, and interest in such funds, and no part
of the funds shall be returned to any of them.
The Clerk shall
deposit the funds into an interest bearing account with the Court
Registry Investment System ("CRIS") or any other type of interest
bearing account that is utilized by the Court.
These funds,
together with any interest and income earned thereon (collectively,
the "Fund"), shall be held in the interest bearing account until
further order of the Court.
In accordance with 28 U.S.C. § 1914
and the guidelines set by the Director of the Administrative Office
of the United States Courts, the Clerk is directed, without further
order of this Court, to deduct from the income earned on the money
in the Fund a fee equal to ten percent of the income earned on the
Fund.
Such fee shall not exceed that authorized by the Judicial
Conference of the United States.
The Commission may by motion
propose a plan to distribute the Fund subject to the Court's
approval.
Such
a
plan
may
provide
that
the
Fund
shall
be
distributed pursuant to the Fair Fund provisions of Section 308(a)
of the Sarbanes-Oxley Act of 2002.
2.
The Clerk shall withhold the entry of judgment in favor of
the SEC and against defendants BIH Corporation and North Bay South
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Corporation and Relief Defendants The Caddo Corporation and Beaver
Creek Financial Corporation pending submission of a motion by the
SEC with the permanent injunction language and the amount of civil
penalties.
3. The Court will retain jurisdiction over the enforcement of
the judgment upon entry.
DONE AND ORDERED at Fort Myers, Florida, this
September, 2012.
Copies:
Counsel of record
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26th
day of
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