Securities & Exchange Commission v. BIH Corporation et al
Filing
131
OPINION AND ORDER granting 126 Motion for Default Judgment against relief defendant Baron International, Inc. and Judgment will be entered in favor of plaintiff and against defendant Baron International as to Count I as stated in the Opinion and Order. The Clerk shall enter judgment accordingly, send a copy of this Opinion and Order to Mr. Ingala, and terminate Baron International as a pending defendant. Signed by Judge John E. Steele on 12/17/2012. (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., CHRISTPHER 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 plaintiff’s Motion for
Default
Final
Judgment
Against
Relief
Defendant
Baron
International, Inc. (Doc. #126) filed on November 1, 2012.
No
response has 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 October 19, 2012, the Court issued an Opinion and Order
(Doc.
#124)
adopting
the
Magistrate
Judge’s
Report
and
Recommendation (Doc. #122) recommending that the Securities and
Exchange Commission’s (SEC) motion for entry of Clerk’s default for
failure to comply with the Court’s Orders and retain counsel be
granted and that the Answer and Affirmative Defenses (Doc. #61) of
Baron International, Inc. (Baron International) be stricken.
A
Clerk’s Entry of Default (Doc. #127) was issued on November 27,
2012
against
Baron
International.
Therefore,
plaintiff
has
complied with the necessary prerequisite under Fed. R. Civ. P.
55(a) for a default judgment.1
“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.
BIH’s
website
1
claimed
that
Galo,
an
On September 26, 2012, the Court issued an Opinion and Order
(Doc. #121) granting a default final judgment against defendants
BIH Corporation and North Bay South Corporation and Relief
Defendants The Caddo Corporation and Beaver Creek Financial
Corporation.
-2-
“accomplished entrepreneur”, was the president and CEO of BIH but
Glao is an alter ego and never existed.
As part of the scheme, $1 million of the stock was dumped on
“unwitting” investors and the illegally obtained sales proceeds
split
amongst
International.
companies,
including
relief
defendant
Baron
Baron International builds restaurants and sells
beverage systems and equipment.
In 2008, Baron International
became a subsidiary of BIH and received more than $90,000 in
proceeds without any legitimate basis from defendants’ securities
fraud.
On June 25, 2008, and the day after, a press release was
issued by BIH and individuals announcing that Baron International
would sell for between 19 and 23 cents a share and if the sale was
completed, BIH would pay a one time cash dividend of between 7 and
9 cents a share.
On August 19, 2008, another press release was
issued regarding the “pending sale” and claimed additional revenues
Baron International generated would create a higher sales price.
On November 11, 2008, a press release was issued quoting the
fictitious Galo and claiming another purchase price increase.
On
November 13, 2008, a press release quoted the fictitious Galo and
falsely reported that Baron International has signed a multimillion dollar renovation deal.
misleading.
The press releases were false and
North Bay sold more than 21 million BIH shares for
more than $110,000, and in turn wired more than $90,000 in sales
-3-
proceeds to Baron International.
No registration statement was
filed or in effect with regard to the securities offered for sale
by BIH and sold to North Bay.
Only Count I pertains to Baron International.
Plaintiff
alleges all 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) 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.
plaintiff
sought
declaratory
relief
that
In the Complaint,
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 Baron International.
Accordingly, it is now
ORDERED:
1.
Plaintiff’s Motion for Default Final Judgment Against
Relief Defendant Baron International, Inc. (Doc. #126) is GRANTED
and Judgment will be entered in favor of plaintiff and against
Defendant Baron International as to Count I as follows:
-4-
A. The Commission is entitled to disgorgement of all
ill-gotten
gains
as
to
Relief
Defendant
Baron
International,
Inc.,
jointly
and
severally
with
Defendants
BIH
Corporation
and
North
Bay
South
Corporation, in the amount of $13,000, plus $1,917 of
prejudgment interest (with any payments made by Baron
proportionally reducing the Defendants total disgorgement
and prejudgment amount);
B. All amounts ordered shall be due and payable within
thirty (30) days of the Court entering this Final
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 letter that identifies the name and number of this
action, with a copy of said cover letter and money order
or check to Christopher E. Martin, Esq., Securities and
Exchange Commission, Senior Trial Counsel, 801 Brickell
Avenue, Suite 1800, Miami, Florida, 33131;
C. 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; and
-5-
D.
The Court will retain jurisdiction
enforcement of the judgment upon entry.
over
the
2. The Clerk shall enter judgment accordingly, send a copy of
this
Opinion
and
Order
to
Mr.
Ingala,
and
terminate
Baron
International as a pending defendant in this case.
DONE AND ORDERED at Fort Myers, Florida, this
December, 2012.
Copies:
Counsel of record
-6-
17th
day of
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