U.S. Securities and Exchange Commission v. Wilson et al

Filing 79

ORDER granting 75 Motion for Default Judgment; Final Judgment of Permanent Injunction and Other Relief by Default Against Defendant Joel I. Wilson. Signed by District Judge Thomas L. Ludington. (SGam)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

CIVIL ACTION No. 12 cv 15062
HON. Thomas L. Ludington

JOEL I. WILSON, DIVERSIFIED
GROUP PARTNERSHIP
MANAGEMENT, LLC, and AMERICAN
REALTY FUNDS CORPORATION,
Defendants.
___________________________________/
FINAL JUDGMENT OF PERMANENT INJUNCTION AND OTHER
RELIEF BY DEFAULT AGAINST DEFENDANT JOEL I. WILSON
This cause coming to be heard on Plaintiff Securities and Exchange Commission’s
(“Commission”) Motion for Final Judgment of Permanent Injunction and Other Relief by
Default Against Defendant Joel I. Wilson (“Wilson”); the Court having considered Plaintiff’s
Complaint, Plaintiff’s Motion, Plaintiff’s Memorandum in Support of its Motion, and the
evidence submitted in support thereof; the Court, being fully advised in the premises, finds:
1.

That this Court has jurisdiction over the subject matter of this case and Defendant

Wilson.
2.

That Defendant Wilson, through his agents, servants, employees, attorneys, and

those persons in active concert or participation with him, has engaged in transactions, acts,
practices and courses of business which constitute violations of the federal securities laws.
Specifically, Defendant Wilson has engaged in transactions, acts, practices and courses of
business which constitute violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of

1933 (“Securities Act”) [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], Section 10(b) of the Securities
Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17
C.F.R. § 240.10b-5], and Section 206(4) of the Investment Advisers Act of 1940 (“Advisers
Act”) [15 U.S.C. § 80b-6(4)], and Rule 206(4)-8 promulgated thereunder [17 C.F.R. §
275.206(4)-8] and aided and abetted in the violations of Section 13(a) of the Exchange Act, [15
U.S.C. § 78m(a)], and Rules 12b-20, 13a-1, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20,
240.13a-1, and 240.13a-13].
3.

That without an order permanently enjoining Defendant Wilson from violating the

securities laws set forth herein, there is a substantial likelihood that Defendant Wilson will
continue to violate the federal securities laws.
4.

That it is necessary for Defendant Wilson to pay disgorgement, prejudgment

interest, and a civil penalty in order to make his violations of the federal securities laws
unprofitable and to deter future violations.
I.
IT IS HEREBY ORDERED that the Motion by Plaintiff Securities and Exchange
Commission (ECF No. 75) is GRANTED against Defendant Joel I. Wilson.
II.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and those persons in active concert or
participation with him who receive actual notice of this Final Judgment by personal service or
otherwise are permanently restrained and enjoined from violating, directly or indirectly, Sections
5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)] by, directly or indirectly, in
the absence of any applicable exemption:

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(a)

unless a registration statement is in effect as to a security, making use of any
means or instruments of transportation or communication in the interstate
commerce or of the mails to sell such security through the use or medium of any
prospectus or otherwise;

(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].
III.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and those persons in active concert or
participation with him who receive actual notice of this Final Judgment by personal service or
otherwise are permanently restrained and enjoined from violating, directly or indirectly, Section
17(a) of the Securities Act [15 U.S.C. § 77q(a)] 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:

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(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.
IV.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and those persons in active concert or
participation with him who receive actual notice of this Final Judgment by personal service or
otherwise are permanently restrained and enjoined from violating, directly or indirectly, Section
10(b) of 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 circumstances
under which they were made, not misleading; or

(c)

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

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V.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and those persons in active concert or
participation with him who receive actual notice of this Final Judgment by personal service or
otherwise are permanently restrained and enjoined from violating, directly or indirectly, Section
206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 promulgated thereunder
[17 C.F.R. 275.206(4)-8], while acting as investment advisers within the meaning of Section
202(11) of the Advisers Act [15 U.S.C. § 80b-2(11)], by use of the mails or any means or
instrumentality of interstate commerce, directly or indirectly, to make any untrue statement of a
material fact or to omit to state a material fact necessary to make the statements made, in light of
the circumstances under which they are made, not misleading, to any investor or prospective
investor in a pooled investment vehicle or otherwise engage in any act, practice, or course of
business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective
investor in the pooled investment vehicle.
VI.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and those persons in active concert or
participation with him who receive actual notice of this Final Judgment by personal service or
otherwise are permanently restrained and enjoined from aiding and abetting any violation of
Section 13(a) of the Exchange Act [15 U.S.C. §§ 78m(a)] and Rules 12b-20, 13a-1, and 13a-13
thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13] by knowingly providing
substantial assistance to an issuer that:

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(a)

fails to file with the Commission such information, documents, or annual,
quarterly or periodic reports that the Commission may require or prescribe
pursuant to Section 13(a) of the Exchange Act or any of the rules, regulations or
forms promulgated thereunder; or

(b)

files with the Commission any information, document, or report, that contains any
untrue statement of a material fact, omits any material information, or otherwise
fails to comply with the provisions of Section 13(a) of the Exchange Act or any of
the rules, regulations or forms thereunder; or

(c)

fails to add or include, in addition to the information expressly required to be
included in a statement or report, such further material information as may be
necessary to make the required statements, in the light of the circumstances under
which they were made, not misleading.
VII.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and all persons in active concert or participation
with him who receive actual notice of this Final Judgment by personal service or otherwise are
permanently restrained and enjoined from violating Section 13(a) of the Exchange Act [15
U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20,
240.13a-1, and 240.13a-13] through any other person, for whom they are control persons for
purposes of Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)], who, directly or indirectly:
(a)

fails to file with the Commission such information, documents, or annual,
quarterly or periodic reports that the Commission may require or prescribe

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pursuant to Section 13(a) of the Exchange Act or any of the rules, regulations or
forms promulgated thereunder; or
(b)

files with the Commission any information, document, or report, that contains any
untrue statement of a material fact, omits any material information, or otherwise
fails to comply with the provisions of Section 13(a) of the Exchange Act or any of
the rules, regulations or forms thereunder; or

(c)

fails to add or include, in addition to the information expressly required to be
included in a statement or report, such further material information as may be
necessary to make the required statements, in the light of the circumstances under
which they were made, not misleading

unless Defendant Wilson acts in good faith and does not directly or indirectly induce the act or
acts constituting the violation.
VIII.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
and his agents, servants, employees, attorneys, and those persons in active concert or
participation with him who receive actual notice of this Final Judgment by personal service or
otherwise are permanently restrained and enjoined from violating, directly or indirectly,
Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14] by signing personal certifications falsely
stating that he has reviewed periodic reports containing financial statements which an issuer filed
with the Commission pursuant to Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and
that, based on his knowledge,
(a)

these reports do not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances

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under which such statements were made, not misleading with respect to the period
covered by the report; and
(b)

that information contained in these reports fairly present, in all material respects,
the financial condition and results of the issuer’s operations.
IX.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant Wilson
is liable for disgorgement of $6,403,580, representing the ill-gotten gains as a result of the
conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of
$290,319, and a civil penalty in the amount of $7,500 pursuant to Section 20(d) of the Securities
Act [15 U.S.C. § 77t(d)] , Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] and
Section 209(e) of the Investment Advisers Act [15 U.S.C. § 80b-9(e)]. Defendant Wilson shall
satisfy this obligation by paying $7,500 by certified check, bank cashier’s check, or United
States postal money order within thirty (30) days of the entry of this Judgment to the CourtAppointed Receiver (“Receiver”), Randall L. Frank, together with a cover letter identifying
himself as a defendant in this action; setting forth the title and civil action number of this action
and the name of this Court; and specifying that payment is made pursuant to this Final Judgment.
Defendant shall simultaneously transmit photocopies of such payment and letter to the SEC’s
counsel in this action. By making this payment, Defendant Wilson relinquishes all legal and
equitable right, title, and interest in such funds, and no part of the funds shall be returned to
Defendant Wilson. The Receiver shall deposit the funds into an interest bearing account. These
funds, together with any interest and income earned thereon (collectively, the “Fund”), shall be
held by the Receiver until further order of the Court. The Commission and/or Receiver may
propose a plan to distribute the Fund subject to the Court’s approval.

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The Commission may enforce the Court’s judgment for disgorgement and prejudgment
interest by moving for civil contempt (and/or through other collection procedures authorized by
law) at any time after 30 days following entry of this Final Judgment. Defendant shall pay post
judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961.
X.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall
retain jurisdiction of this matter for all purposes, including, but not limited to implementing and
enforcing the terms of this Final Judgment; and all other orders and decrees which may have
been or may be entered in this case, and to granting such relief as this Court may deem necessary
and just.
Should Defendant Wilson file a motion to offset the funds recovered by the Receiver
through the liquidation of Defendants’ properties against the amount of this judgment, the Court
will entertain the motion.

s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: May 28, 2013

PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on May 28, 2013
s/Tracy A. Jacobs
TRACY A. JACOBS

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