Securities & Exchange Commission v. BIH Corporation et al

Filing 248

OPINION and ORDER granting 240 Plaintiff's Renewed Motion Recommending Particularized Permanent Injunction Language, and Joint Motion to Set Evidentiary Hearing. See Opinion and Order for details. The Clerk shall enter judgment in favor of Pl aintiff and against Defendant BIH Corporation as set forth in this Opinion and Order and as set forth in 121 the Court's September 26, 2012 Opinion and Order. A separate notice will issue setting a date for an evidentiary hearing regarding the amount of disgorgement, interest, and civil money penalties to be paid by Defendants Bimini Reef Real Estate, Inc., Riverview Capital Inc., Christopher L. Astrom, and Damian B. Guthrie. Signed by Judge John E. Steele on 12/12/2014. (MAW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
SECURITIES
COMMISSION,

&

EXCHANGE

Plaintiff,
v.

Case No: 2:10-cv-577-FtM-29DNF

BIH CORPORATION, WAYNE A.
BURMASTER, EDWARD W. HAYTER,
NORTH BAY SOUTH CORPORATION,
THE CADDO CORPORATION, and
BEAVER
CREEK
FINANCIAL
CORPORATION,
Defendants.
OPINION AND ORDER
This matter comes before the Court on Plaintiff the Securities
and Exchange Commission’s Renewed Motion Recommending Permanent
Injunction Language (Doc. #240) filed on September 9, 2014.1
response has been filed and the time to respond has expired.

No
For

the reasons set forth below, Plaintiff’s motion is granted.
I.
This case is a civil enforcement action brought by the
Securities

1

and

Exchange

Commission

(the

Commission

or

SEC)

The motion also contains Plaintiff’s request, jointly with
Defendants Bimini Reef Real Estate, Inc., Riverview Capital Inc.,
Christopher L. Astrom, and Damian B. Guthrie, to set an evidentiary
hearing concerning the amount of disgorgement, interest, and civil
money penalties to be paid by those Defendants. The Court grants
the parties’ request and a separate notice will issue setting an
evidentiary hearing for a date in January.

concerning a scheme to “pump and dump” shares of BIH Corporation’s
(BIH) stock on the investing public.

The basic underlying facts

are as follows:
BIH, which traded as a penny stock, claimed to be a holding
company specializing in the restaurant and hospitality industry.
BIH’s website stated that an individual named Cris Galo (Galo), an
accomplished entrepreneur, was the president and CEO of BIH.

In

reality, Defendants Hayter and Wayne A. Burmaster (Burmaster)
controlled every aspect of BIH.

During 2008 and 2009, in order

to effectuate the pump and dump scheme, Hayter and Burmaster issued
numerous fraudulent press releases on behalf of BIH.

The press

releases dramatically increased the price and trading volume of
BIH shares.
During the same time period, Hayter and Burmaster sold tens
of

millions

of

unregistered

shares

of

companies for little or no consideration.
North

Bay

Burmaster.

South

Corporation

(North

BIH

stock

to

various

One of those companies,

Bay),

was

controlled

by

In turn, those companies sold the newly-received stock

to unwitting investors at prices inflated by BIH’s fraudulent press
releases.

All told, those companies sold 89.8 million BIH shares

for a total of $1,121,051.

The companies retained a portion of

the sales proceeds and sent the remaining funds to entities
controlled by Burmaster and Hayter.

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II.
The Commission brought a five-count Complaint against Hayter,
Burmaster, BIH, North Bay, and others alleging violations of the
Securities

Act

of

1933

(the

Securities

Act),

the

Securities

Exchange Act of 1934 (the Exchange Act), and Exchange Act Rule
10b-5.

Following their defaults, the Court entered Judgments

against BIH, North Bay, and Burmaster which, inter alia, enjoined
them from further violations of Sections 5(a) and 5(c) of the
Securities Act.

(Docs. ##121, 206.)

At that time, the Court

found that BIH had also violated Section 17(a) of the Securities
and Section 10(b) and Rule 10b-5 of the Exchange Act and that BIH
should be enjoined from further violations of those provisions as
well.

(Doc. #121.)

However, at that time, the Commission did not

yet have authority to propose particularized language concerning
those violations.

Accordingly, the Court deferred issuing an

injunction pending the Commission’s proposal.
On March 7, 2013, the Commission filed its proposed injunction
language.

(Doc. #140-1.)

Hayter objected to the proposal,

arguing that, because the Commission sought to enjoin BIH and its
“agents, servants, employees, attorneys, and all persons in active
concert or participation with them,” he would be enjoined despite
the fact that the Commission’s claims against him remained pending.
(Doc. #147.)

As a result of Hayter’s objection, the Court deferred

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ruling on the proposal pending disposition of the Commission’s
claims against Hayter.
On August 8, 2014, a jury found Hayter liable for all of the
Commission’s claims against him.

In particular, the jury found

that Hayter violated (i) Sections 5(a) and 5(c) of the Securities
Act; (ii) Section 17(a)(1) of the Securities Act; (iii) Sections
17(a)(2) and 17(a)(3) of the Securities Act; and (iv) Section 10(b)
and Rule 10b-5 of the Exchange Act.

The jury also found that

Hayter aided and abetted BIH's violations of Section 10(b) and
Rule 10b-5 of the Exchange Act.

As set forth in a separate Order

(Doc. #247), the Court has permanently enjoined Hayter form future
Securities Act and Exchange Act violations.

Accordingly, it is

no longer a concern that the Commission’s requested injunction
against BIH might also enjoin Hayter.
III.
As set forth in its September 26, 2012 Opinion and Order, the
Court has already found that the Commission was entitled to a
default judgment against BIH for violations of Section 17(a) of
the Securities and Section 10(b) and Rule 10b-5 of the Exchange
Act.

(Doc. #121.)

The Court also concluded that the Commission

was entitled to an injunction enjoining BIH from future violations.
(Id.)

Accordingly, the sole issue now before the Court is whether

the specific injunction language proposed by the Commission is
appropriate.

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To comport with the Federal Rules of Civil Procedure, an
injunction must “state its terms specifically,” and “describe in
reasonable detail—and not by referring to the complaint or other
document—the act or acts restrained or required.”

Fed. R. Civ.

P.

on

65(d).

However,

recognizing

that

reliance

official

statutory and regulatory language may be helpful in crafting an
appropriately-specific injunction, the Eleventh Circuit has held
that in the context of a SEC civil enforcement action “a broad,
but properly drafted injunction, which largely uses the statutory
or regulatory language may satisfy the specificity requirement
of Rule 65(d) so long as it clearly lets the defendant know what
he is ordered to do or not do.”
(11th Cir. 2012).

SEC v. Goble, 682 F.3d 934, 952

Having reviewed the Commission’s proposed

injunction, the Court finds that it clearly sets forth the acts
which BIH is ordered not to do.

Accordingly, it comports with

Fed. R. Civ. P. 65(d) and, therefore, the Court will grant the
injunctive relief requested by the Commission.
Accordingly, it is hereby
ORDERED AND ADJUDGED:
Plaintiff the Securities and Exchange Commission’s Renewed
Motion Recommending Permanent Injunction Language (Doc. #240) is
GRANTED.

Judgment is entered in favor of Plaintiff and against

Defendant BIH Corporation as set forth in the Court’s September
26, 2012 Opinion and Order (Doc. #121) and as follows:

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1.

BIH Corporation (BIH) and his agents, servants, employees,
attorneys, and all persons in active concert or participation
with them who receive actual notice of this Judgment by
personal service or otherwise are permanently restrained and
enjoined from violating Sections 17(a)(1)-(3) of the
Securities Act, 15 U.S.C. §§ 77q(a)(1)-(3), in the offer or
sale of any security by the use of any means or instruments
of transportation or communication in interstate commerce or
by use of the mails, directly or indirectly:
a)

to employ any device, scheme, or artifice to defraud;

b)

to obtain money or property by means of any untrue
statement of a material fact
or any omission of a
material fact necessary in order to make the
statements made, in light of the circumstances under
which they were made, not misleading; or

c)

to engage in any transaction, practice, or course of
business which operates or would operate as a fraud
or deceit upon the purchaser

by, directly or indirectly, (i) creating a false appearance
or otherwise deceiving any person about the price or trading
market for any security, or (ii) making any false or
misleading statement, or disseminating any false or
misleading documents, materials, or information, concerning
matters relating to a decision by an investor or prospective
investor to buy or sell securities of any company.
2.

BIH and his agents, servants, employees, attorneys, and all
persons in active concert or participation with them who
receive actual notice of this Judgment by personal service or
otherwise are permanently restrained and enjoined from
violating, directly or indirectly, Section 10(b) of the
Securities Exchange Act of 1934 (the “Exchange Act”), 15
U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder,
17 C.F.R. § 240.10b-5, by using any means or instrumentality
of interstate commerce, or of the mails, or of any facility
of any national securities exchange, in connection with the
purchase or sale of any security:
a)

to employ any device, scheme, or artifice to defraud;

b)

to make any untrue statement of a material fact or to
omit to state a material fact necessary in order to
make the statements made, in the light of the

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circumstances under
misleading; or
c)

which

they

were

made,

not

to engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon any person

by, directly or indirectly, (i) creating a false appearance
or otherwise deceiving any person about the price or trading
market for any security, or (ii) making any false or
misleading
statement,
or
disseminating
any
false
or
misleading documents, materials, or information, concerning
matters relating to a decision by an investor or prospective
investor to buy or sell securities of any company.
3.

The Court will retain jurisdiction over the enforcement of
the judgment upon entry.
The Clerk shall enter judgment in favor of the Commission and

against Defendant BIH Corporation as set forth herein and in the
Court’s September 26, 2012 Opinion and Order (Doc. #121).
A separate notice will issue setting a date for an evidentiary
hearing regarding the amount of disgorgement, interest, and civil
money penalties to be paid by Defendants Bimini Reef Real Estate,
Inc., Riverview Capital Inc., Christopher L. Astrom, and Damian B.
Guthrie.
DONE and ORDERED at Fort Myers, Florida, this
of December, 2014.

Copies:
Counsel of Record

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12th

day