United States Securities and Exchange Commission v. Prevost et al

Filing 18

JUDGMENT OF PERMANENT INJUNCTION AND OTHER RELIEF as set forth in this order. There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, the Clerk is directed to enter this Judgment. Signed by Judge Paul A. Magnuson on April 20, 2011. (smr)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
_______________________________________
:
UNITED STATES SECURITIES
:
AND EXCHANGE COMMISSION,
:
:
Plaintiff,
:
: CIVIL ACTION
v.
: FILE NO. 10-cv-4235-PAM-SER
:
:
BRUCE F. PRÉVOST,
:
DAVID W. HARROLD,
:
PALM BEACH CAPITAL
:
MANAGEMENT LP, and
:
PALM BEACH CAPITAL
:
MANAGEMENT LLC,
:
:
Defendants.
:
:
:
JUDGMENT OF PERMANENT
INJUNCTION AND OTHER RELIEF
Plaintiff, U.S. Securities and Exchange Commission (“SEC”) filed a complaint in this
matter, and Defendants Bruce F. Prévost (“Prévost”), David W. Harrold (“Harrold”), Palm
Beach Capital Management LP (“PBCM LP”) and Palm Beach Capital Management LLC
(“PBCM LLC”), have, in their Consents hereto and incorporated herein (Docket Entries #12,
#13, #14 and #15), acknowledged receipt of the complaint and admitted the personal jurisdiction
of the Court over them and over the subject matter thereof, and without admitting or denying the
allegations of the complaint, except as to jurisdiction, and without trial, argument or adjudication
of any facts or law herein, consented to the entry of this Judgment of Permanent Injunction and
Other Relief (“Judgment”). The SEC and the Defendants have waived the entry of findings of
fact and conclusions of law, as provided by Rule 52 of the Federal Rules of Civil Procedure and

the Defendants have waived any right to appeal from this Judgment. The Court having
jurisdiction over the parties and the subject matter hereof, and being fully advised in the
premises, hereby states:
I.
IT IS ORDERED, ADJUDGED AND DECREED that Defendants and all agents,
servants, employees, attorneys, assigns, and all persons in active concert or participation with
any of them who receive actual notice of this Judgment by personal service or otherwise, and
each of them are permanently restrained and enjoined from, in the offer or sale of any securities,
by the use of any means or instruments of transportation or communication in interstate
commerce or by the use of the mails, directly or indirectly, employing any device, scheme or
artifice to defraud, in violation of Section 17(a)(1) of the Securities Act of 1933 (“Securities
Act”) [15 U.S.C. §77q(a)(1)].
II.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendants and all
agents, servants, employees, attorneys, assigns, and all persons in active concert or participation
with each of them who receive actual notice of this Judgment by personal service or otherwise,
and each of them are permanently restrained and enjoined from, in the offer or sale of any
securities by the use of any means or instruments of transportation or communication in
interstate commerce or by use of the mails, directly or indirectly, obtaining money or property by
means of any untrue statement of a material fact or any omission to state a material fact
necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading, or engaging in any transaction, practice, or course of business which

2

operates or would operate as a fraud or deceit upon the purchaser, in violation of Sections
17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. §§77q(a)(2) and 77q(a)(3)].
III.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Defendants and
all agents, servants, employees, attorneys, assigns, and all persons in active concert or
participation with any of them who receive actual notice of this Judgment by personal service or
otherwise, and each of them are permanently restrained and enjoined from, directly or indirectly,
in connection with the purchase or sale of any security, by the use of any means or
instrumentality of interstate commerce, or of the mails, or any facility of any national securities
exchange:
(a)

employing any device, scheme or artifice to defraud; or

(b)

making any untrue statement of material fact or omitting 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)

engaging in any act, practice or course of business which operates or would

operate as a fraud or deceit upon any person, in violation of 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].
IV.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Defendants and
all agents, servants, employees, attorneys, assigns, and persons in active concert or participation
with any of them who receive actual notice of this Judgment by personal service or otherwise,
and each of them are permanently restrained and enjoined, while acting as an investment adviser,

3

by use of the mails, and the means and instrumentalities of interstate commerce, directly or
indirectly, from knowingly, willfully, or recklessly:
(a)

employing devices, schemes or artifices to defraud clients or prospective clients;

(b)

engaging in any transaction, practice or course of business which operates as a

fraud or deceit upon any client or prospective client; or
(c)

engaging in any act, practice or course of business which is fraudulent, deceptive,

or manipulative including, but not limited to, making untrue statements of a material fact and/or
omitting to state a material fact necessary to make statements made, in the light of the
circumstances under which they were made, not misleading, to any investor or prospective
investor in a pooled investment vehicle;
in violation of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940
(“Advisers Act”) [15 U.S.C. §§ 80b-6(1), 80b-6(2), and 80b(6)-4 and Rule 206-4(8)] [17 C.F.R.
§ 275.206.4(8)] thereunder.
V.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendants
Prévost and Harrold and all agents, servants, employees, attorneys, assigns, and persons in active
concert or participation with any of them who receive actual notice of this Judgment by personal
service or otherwise, and each of them are permanently restrained and enjoined, from aiding and
abetting violations of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of
1940 [15 U.S.C. §§ 80b-6(1), 80b-6(2), and 80b(6)-4 and Rule 206-4(8) [17 C.F.R. §
275.206.4(8)] thereunder, by knowingly, willingly, or recklessly providing substantial assistance
to any person who, while acting as an investment adviser, by the use of the mails, and the means
and instrumentalities of interstate commerce, knowingly, willfully, or recklessly:

4

(a)

employs devices, schemes or artifices to defraud clients or prospective clients;

(b)

engages in any transaction, practice or course of business which operates as a

fraud or deceit upon any client or prospective client; or
(c)

engages in any act, practice or course of business which is fraudulent, deceptive,

or manipulative including, but not limited to, making untrue statements of a material fact and/or
omitting to state a material fact necessary to make statements made, in the light of the
circumstances under which they were made, not misleading, to any investor or prospective
investor in a pooled investment vehicle.
VI.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Defendants
shall pay disgorgement of all ill-gotten gains and prejudgment interest on those amounts. The
amounts of the disgorgement and civil penalty shall be determined by the Court upon motion of
the SEC. Prejudgment interest shall be calculated from the date of Defendants’ receipt of any
such ill-gotten gains, based on the rate of interest used by the Internal Revenue Service for the
underpayment of federal income tax as set forth in 26 U.S.C. § 6621(a)(2). Upon motion of the
SEC, the Court shall determine whether a civil penalty 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 Advisers Act [15 U.S.C. § 80b-9(e)] is appropriate and, if so, the
amount of the penalty. In connection with the SEC’s motion for disgorgement and/or civil
penalties, and at any hearing held on such a motion: (a) Defendants will be precluded from
arguing that they did not violate the securities laws as alleged in the SEC’s complaint; (b)
Defendants may not challenge the validity of the Consents or this Final Judgment; (c) solely for
the purposes of such motion, the allegations of the Complaint shall be accepted and deemed true

5

by the Court; and (d) the Court may determine the issues raised in the motion on the basis of
affidavits, declarations, excerpts of sworn deposition or investigative testimony, and
documentary evidence, without regard to the standards for summary judgment contained in Rule
56(c) of the Federal Rules of Civil Procedure. In connection with the SEC’s motion for
disgorgement and/or civil penalties, the parties may take discovery, including discovery from
appropriate non-parties.
VII.
IT IS FURTHER ORDERED that the Consents of the Defendants are incorporated
herein with the same force and effect as if fully set forth herein, and that Defendants shall each
comply with all of the undertakings and agreements set forth therein.
VIII.
RECORDS PRESERVATION
IT IS FURTHER ORDERED that the Defendants and all agents, servants, employees,
attorneys, and persons in active concert or participation with any of them, be and they hereby are
temporarily restrained and enjoined from, directly or indirectly, destroying, mutilating,
concealing, altering, disposing of, or otherwise rendering illegible or indecipherable in any
manner, any of the books, records, documents, correspondence, ledgers, accounts, statements,
files and other property of or pertaining to the Defendants or any entities owned, managed, or
controlled by the Defendants or any matters described in the Complaint filed by the United
States Securities and Exchange Commission in this action, however maintained and wherever
located, until further order of this Court.

6

IX.
NOTICE OF THIS ORDER
IT IS FURTHER ORDERED that notice of this Order may be accomplished by
delivery of a copy of the Order by first class mail, overnight delivery, facsimile, electronic mail,
or personally by agents or employees of the SEC, to the Defendants, and to any bank, savings
and loan institution, credit union, financial institution, transfer agent, broker-dealer, investment
company, title company, commodity trading company, storage company, or any other person,
partnership, corporation, or legal entity that may be subject to any provision of this Order.

X.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the SEC is
expressly authorized to engage in continued discovery regarding any unresolved issue in this
case with respect to the Defendants, including, but not limited to, discovery for the purposes of
determining the amount of ill-gotten gains and civil penalties, if any.

XI.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Court shall
retain jurisdiction of this matter for all purposes, including, but not limited to, enforcement of the
Judgment.

7

XII.
There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil
Procedure, the Clerk is hereby directed to enter this Judgment.

SO ORDERED:
s/Paul A. Magnuson
PAUL A. MAGNUSON
UNITED STATES DISTRICT JUDGE
Dated: April 20

, 2011

8