Article

Prime Bank Instrument Scams.

Type of Lawsuit:

Action by SEC against alleged scamsters for violation of anti-fraud provisions of U.S. securities laws, for disgorgement of illicit profits, and permanent injunction against future violations.

Parties:

Plaintiff- SEC

Defendant/Alleged Scamsters: Ellis Deyon; Bradley Gullet; Sherwood Craig; William Hanke; Dove Investment Group, Inc. Connection to PB Instruments: William McKnight

False Instruments:

Prime Bank Programs, Bill of Exchange Program, Prime Bank Debentures, Mexican Bank Account (Bancomer).

Activities:

1) In 1993, promoted Prime Bank Programs for trading of instruments in market regulated by Grand Master located in Hong Kong.

2) In June 1993, promotion of Bill of Exchange Program funded by $5 million "self liquidating" loan for trading of Prime Bank Debentures.

3) "Hong Kong Program" expected to generate $750 million profit.

4) Trading bank debentures for 25% per month profit.

5) Promoted "special bank account" at Bancomer with "guaranteed" 25% per month and average of 85% per month.

Decision:

The U.S. District Court for Maine, Brody, J., entered consent judgment against Deyon enjoining future violations and ordering disgorgement of $512,000; default judgments were entered against Hanke and Dove Investment Group, Inc.; and, after a trial, a permanent injunction was entered against Gullet and Craig and disgorgement of $41,646 ordered. Civil penalties were also assessed.

Notes:

1. The court's conclusion: "These programs in reality were fraudulent schemes that purported to generate substantial profits through the trading of fictional instruments in a fictional market said to be regulated by a Grand Master."

2. In one of the more interesting revelations of the trial, Gullet testified that "President Clinton was an investor in the program; and later told Gullet that the program failed because President Clinton was refused his billion dollar share and subsequently sent the Secret Service to execute the Grand Master." [Apparently James Bond was busy on location filming his next movie and was unavailable for the job.]

3. This scam is an example of how religion can be used to deceive victims. Many of the victims were fundamentalist Christians whose investment was encouraged by Craig, an ordained minister. Much of the rhetoric was couched in religious terminology and the purpose of the program was said to generate funds to be used for religious work.

©1998 INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.