SEC v. Benjamin Cook & Dennel Financial Limited
CIV 02-0581-PHX-EHC
On March 16, 1999, the SEC obtained temporary restraining orders
against Benjamin Franklin Cook and his company, Dennel Finance Ltd. and others
in connection with a Ponzi scheme involving the fraudulent offer and sale of
nonexistent
"prime bank" securities. The Court froze the assets of the defendants
and relief defendants. For more information about the SEC's action, you can
read several litigation releases: 16089 is below, and the rest can be found on
the SEC website: 16341
(October 25, 1999),
16538 (May 4, 2000), and
16849 (January 2, 2001).
The Court also appointed Lawrence J. Warfield as receiver to collect
the assets of the defendants and relief defendants for the benefit of
investors. The receiver has so far paid out approximately $13 million to
investors. He anticipates making an interim distribution in the amount of
$1.8 million by year end and a smaller final distribution in the final
quarter of 2005
SEC Litigation Release NO. 16089 \ March 17, 1999
SECURITIES AND EXCHANGE COMMISSION v. BENJAMIN FRANKLIN COOK, individually and
dba DENNEL FINANCE LIMITED, GERALD LEE PATE, ELLSWORTH WAYNE McLAWS and ALAN
CLAGG, et al., 3:99CV0571-X, USDC, ND/TX (Dallas Division)
On March 16, 1999, Judge Jerry Buchmeyer, United States District Judge for the
Northern District of Texas, granted the Commission's request for a temporary
restraining order to halt a fraudulent scheme to offer and sell unregistered
"prime bank" securities throughout the United States. In connection with the
scheme, approximately $30 million has been raised from more than 100 investors
nationwide. The fraudulent trading program was developed by Benjamin Franklin
Cook ("Cook") and his company, Dennel Finance Ltd ("Dennel"), and marketed to
investors chiefly by Gerald Lee Pate ("Pate"), Ellsworth Wayne McLaws,
("McLaws") and Alan Clagg ("Clagg"), all named as defendants in this matter.
According to the Commission's complaint, the defendants targeted religious and
charitable groups and persons investing retirement funds. To induce investment
in the scheme, the defendants misrepresented the use and safety of investor
funds. Defendants represent, for example, that investor funds will be
transferred to a London bank, secured by a bank guarantee and used as
collateral to trade financial instruments with top 50 European banks. This
trading activity, investors are told, will provide them with annual returns of
24 to 60 percent. In reality, the prime bank program marketed to investors does
not exist. Dennel has not sent any funds to Europe for use in a trading program
and funds have not been secured by any type of guarantee. Rather, defendants
have misappropriated investment funds for personal and unauthorized uses,
including making Ponzi payments to existing investors with funds provided by
new investors.
The Court also entered an order freezing the assets of the defendants as well
as FPC-1 Limited Partnership, Samuel Limited Partnership, Alliance Investments
Corp., Cornerstone Management LLC, International Business Consultants Limited,
Highlander Limited Partnership, and C. Kelly Olsen (collectively "relief
defendants"), named as defendants solely for relief purposes, and ordered the
defendants and relief defendants to account for investor monies and to
repatriate any funds not subject to the jurisdiction of the Court.
Additionally, the Court ordered the appointment of a receiver to take control
of the assets of the defendants and relief defendants for the benefit of
investors.
The Commission is seeking preliminary and permanent injunctions enjoining Cook,
Dennel, Pate, McLaws and Clagg from future violations of Sections 5(a), 5(c)
and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Pate,
McLaws, and Clagg from future violations of Section 15(a)(1) of the Exchange
Act. The Commission also seeks disgorgement of funds and benefits the
defendants obtained illegally as a result of the violations alleged, and civil
penalties, as well as disgorgement from the relief defendants of illegally
obtained investors funds they received from the defendants.
This matter was jointly investigated by the Commission, the Securities Division
of the Arizona Corporation Commission, and the Arizona Attorney General's
office. The Commission appreciates their valuable assistance in bringing this
case to litigation.
http://www.sec.gov/litigation/litreleases/lr16089.txt