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MARSHALL GANDY
IN THE UNITED STATES DISTRICT COURT
COMPLAINT The United States Securities and Exchange Commission ("Commission"), files this Complaint against Defendants U.S. Reservation Bank & Trust ("USRBT"), Higher Investments Technologies, Inc. ("HIT"), Global-Link Capital Markets, Ltd. ("Global-Link"), Edward J. Driving Hawk, Sr. ("Ed Driving Hawk"), Leo R. Driving Hawk, Sr. ("Leo Driving Hawk"), John M. Adams ("Adams"), Edmund J. Smedley ("Smedley"), Kenneth S. Harrison ("Harrison"), William J. Herisko ("Herisko"), and Thomas T. Emerton, III ("Emerton") (collectively "Defendants") and Relief Defendants Oyate Development, Inc. ("Oyate Development"), Oyate Enterprises, L.L.P. ("Oyate Enterprises"), Oyate Trust ("Oyate Trust"), River Walk Development, L.L.C. ("River Walk Development"), Ringthunder Racing Stables, Inc. ("Ringthunder Racing"), HPHC, Inc. ("HPHC"), James R. Driving Hawk ("James Driving Hawk"), and Orpha Jane Johnston ("Johnston") ("collectively Relief Defendants") and would respectfully show the Court as follows: SUMMARY 1. This matter involves a nationwide network of conspirators who have raised as much as $88 million since March 2000, by means of two similar fraudulent schemes. 1) In the first scheme, USRBT, through its marketing relationship with Global-Link, has raised as much as $78 million from at least 20 investors or investor groups in several states since about March 2000, through the offer and sale of an investment program combining the sale of a "Leveraged Profit Sharing Agreement" ("LPSA") with a certificate of deposit ("CD"). 2) The USRBT investment scheme promised investors that their funds would be held in "safekeeping" and would not be removed from the institution in which they were deposited. Investors were told that the "leverage" created by their deposited funds would be used by USRBT to invest in "trading programs" involving United States Treasury notes and "bank debentures." Investors were further told that they would receive the greater of either 20% of the profits from USRBT's trading activity or the interest on USRBT's CD. 3) In reality, USRBT never leveraged any of the investor funds to invest in any trading programs. USRBT's bank and brokerage records do not show any profits or funds returning from any "investments" in trading programs made by USRBT. Rather, a majority of the investor funds were used to make "Ponzi" payments of interest and principal to other investors. In addition, the Defendants spent over $4 million for salaries, commissions and personal and business expenses, including for a horse racing stable and a purported casino development company. 4) Based on the USRBT offering documents, banking warnings, and information received from other law enforcement sources, the United States Attorney for the District of Arizona ("USAO") obtained a seizure warrant on February 2, 2002, for over $20 million recently deposited in a USRBT account. 5) The second scheme involves HIT, a spin-off created by Adams, USRBT's former executive vice president, in September 2001. In its scheme, HIT raised over $10.6 million from at least six investors or investment groups. 6) HIT offered investors the opportunity to participate in its "Fund Management Agreements" ("FMAs"), which represented to investors that HIT would use investors funds to trade in Treasury bond futures and share the profits with the investors. 7) In reality, Adams only sent about 10% of the funds it raised to a brokerage account for such trading. Company records indicate that, contrary to specific representations in the FMAs, a substantial portion of investors' funds were used to pay for HIT office expenses, including office rent, office supplies, computers, office repairs, payroll, and travel. 8) On February 25, 2002, the USAO for the Southern District of Ohio obtained a seizure warrant for over $10 million deposited in a HIT account controlled by John Adams. 9) By reason of these activities, Defendants have violated Section 17(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder. In addition, Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton have violated Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)]. The Commission, in the interest of protecting the public from any further fraudulent activity, brings this action against Defendants seeking preliminary and permanent injunctive relief, disgorgement of illicit profits, plus accrued prejudgment interest and a civil monetary penalty. The Commission also seeks an asset freeze against Defendants USRBT, HIT, Ed Driving Hawk, Leo Driving Hawk, Adams and Smedley and each Relief Defendant, an accounting and other incidental relief, as well as the appointment of a receiver to take possession and control of certain Defendants' assets and possession and control of each Relief Defendants' assets, that were derived, directly or indirectly, from the Defendants' fraudulent scheme, so that investor assets will not be further dissipated. JURISDICTION 10) The Commission brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] to enjoin the Defendants from future violations of the federal securities laws. The Commission also seeks disgorgement of ill-gotten gains from the Defendants, plus prejudgment interest, and civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)]. The Commission is also seeking disgorgement, plus prejudgment interest, from the Relief Defendants, regarding all funds derived, directly or indirectly, from the Defendants' fraudulent conduct. 11) This Court has jurisdiction over this action pursuant to § 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and § 27 of the Securities Exchange Act [15 U.S.C. § 78(aa)] and Title 28 U.S.C. § 1331. Defendants, directly and indirectly, made use of the mails and of the means and instrumentalities of interstate commerce in connection with the acts, practices and courses of business described in this Complaint. 12) Venue is proper because many of the transactions, acts, practices and courses of business described below occurred within the jurisdiction of the District of Arizona. DEFENDANTS 13) U.S. Reservation Bank & Trust is a non-incorporated entity with its principal offices in Scottsdale, Arizona. USRBT is controlled by Ed Driving Hawk and his son Leo Driving Hawk. USRBT was purportedly granted two business licenses: the first, on May 12, 1992, by the Rosebud Sioux Tribe in South Dakota, and the second, on November 9, 2001, by the Salt River Pima-Maricopa Indian Community in Arizona. USRBT's office is located on the Salt River Reservation. 14) Higher Investments Technologies, Inc., incorporated pursuant to Nevada law on August 21, 2001, maintains its principal place of business in Mundelein, Illinois. Defendant Adams is its president and sole shareholder. 15) Global-Link Capital Markets, Ltd. is a limited liability company registered in both Nevada and Texas since 1994, with its principal office in Houston, Texas. Harrison, Herisko, and Emerton control and operate Global-Link. Global-Link is the subject of a 1995 Commission cease-and-desist Order prohibiting it from committing or causing securities fraud. Since at least March 2000, Global-Link has offered and sold the USRBT securities and is responsible for making the initial solicitations and distribution of offering documents and agreements to almost all of the known USRBT investors. Global-Link is not registered as a broker-dealer with the Commission or with any state. 16) Edward J. Driving Hawk, Sr., age 67 and a Mesa, Arizona resident, is the president of and has controlled USRBT since at least May 1992. He is the father of Leo and James Driving Hawk. 17) Leo R. Driving Hawk, Sr., age 37 and a Higley, Arizona resident, is currently listed as vice president of USRBT and has been associated with the bank since at least November 2001. He is also a deputy sheriff with the Salt Pima Indian Sheriff's Department, but he is currently on a leave of absence, purportedly to help his father operate USRBT. 18) John M. Adams, age 54 and a Mundelein, Illinois resident, was the vice president of USRBT from at least 1996 to December 2001, when he was fired by Ed Driving Hawk. While still at USRBT, Adams began raising money for HIT. 19) Edmund J. Smedley, age 65 and a Harrison, Ohio resident, has been associated with USRBT since at least January 1996. Smedley is currently a vice president of USRBT. 20) Kenneth S. Harrison, age 46 and a Houston, Texas resident, is the registered agent for Global-Link. Through Global-Link, Harrison solicited new investors for USRBT. Harrison is not licensed to offer and sell securities. 21) William J. Herisko, age 68, is a Palm Springs, California resident. He solicited new USRBT investors through Global-Link. Herisko is subject to the Global-Link cease-and-desist Order from the Commission. He is not licensed to offer and sell securities. 22) Thomas T. Emerton, III is a Palm Springs, California resident. He is a principal of Global-Link and frequently communicated with USRBT investors on behalf of Global-Link. He is not licensed to offer and sell securities. RELIEF DEFENDANTS 23) Oyate Development, Inc. is a Nevada corporation incorporated on June 22, 2001 with its principal office, which it shares with USRBT, in Mesa, Arizona. Ed Driving Hawk and Leo Driving Hawk are the company's sole directors and Leo Driving Hawk is the registered agent. Oyate Development received over $1.65 million from USRBT accounts for no apparent consideration. 24) Oyate Enterprises, L.L.P. is an Arizona limited liability partnership created on April 19, 2001, with its principal office located in Ed Driving Hawk's residence in Mesa, Arizona. Leo Driving Hawk is the registered agent and Oyate Management, L.L.C. is the general partner. Oyate Enterprises received at least $500,000 from USRBT accounts and transferred $170,000 to Ringthunder Racing Stables, Inc. 25) Oyate Trust is a trust of unknown jurisdiction controlled by Ed, James, and Leo Driving Hawk. Oyate Trust received over $400,000, for no apparent consideration, from bank accounts controlled by USRBT. 26) River Walk Development, L.L.C. is an Arizona limited liability company created on April 12, 2000, with its principal office in Mesa, Arizona. Ed Driving Hawk is listed as a manager of River Walk. River Walk received $255,000, for no apparent consideration, from USRBT controlled bank accounts. 27) Ringthunder Racing Stables, Inc. is an Arizona corporation incorporated on November 15, 2001, with its principal place of business in Wilmington, Delaware. It is owned by Ed Driving Hawk, Sr. and Ed Driving Hawk, Jr. It is purportedly in the business of operating stables and training thoroughbred racehorses. It received at least $110,000 of USRBT funds directed through Oyate bank accounts. 28) HPHC, Inc. is an Illinois corporation incorporated on May 20, 1991, with its principal place of business in Buffalo Grove, Illinois. HPHC received over $100,000 from USRBT for no apparent consideration. 29) James R. Driving Hawk is a Chandler, Arizona resident and the son of Ed Driving Hawk. He was the former vice president of USRBT until Leo Driving Hawk became vice president in November 2001. James Driving Hawk received a total of $185,000, including in a 20-day period in September 2000 over $176,000, from an USRBT bank account for no apparent consideration. 30) Orpha Jane Johnston is the wife of Edmund Smedley. Smedley had his earnings from USRBT paid to Johnston because he did not want to have them affect his social security benefits. She received over $130,000, for no apparent consideration, from USRBT STATEMENT OF FACTS A. Factual Background 31) In late December 2001, federal and state investigative agencies advised the Commission regarding the USRBT offering and the Commission obtained a copy of an advertisement from an Austin, Texas paper. The ad was placed by an Austin securities broker, and offered high returns with guaranteed principal. The broker was contacted and produced USRBT offering documents and agreements. 32) The Commission learned that USRBT was the subject of several banking regulators' warnings stating that it was operating as an unauthorized bank and that several criminal law enforcement agencies were also investigating USRBT, most prominently the USAO in Phoenix. 33) Based on the offering documents, banking warnings, and information received from other law enforcement sources, the USAO obtained a seizure warrant on February 2, 2002 for over $20 million recently deposited in a USRBT controlled bank account. The application for the warrant alleged that there was probable cause to find that USRBT was illegally raising funds as part of a prime bank high-yield investment fraud. 34) The Commission issued subpoenas to USRBT, its principals and financial institutions (there are over 14 accounts controlled by USRBT and its principals) obtaining preliminary account records that revealed sweeping misuse of investor funds by USRBT and its principals. 35) Approximately two weeks after the initial seizure, on February 25, 2002, the USAO in Cincinnati obtained a seizure warrant for over $10 million deposited in a HIT account controlled by Adams, the former vice president of USRBT. The application for the warrant alleged probable cause that HIT was involved in a prime bank scam. B. The USRBT Investment Scheme 36) Since at least March 2000, USRBT, while under the control of Ed Driving Hawk and Leo Driving Hawk, has raised approximately $78 million from at least 20 individual investors and investor groups. 37) USRBT literature indicates that the entity was created in 1992 for the purpose of operating as a Native-American financial institution to offer traditional banking services to Native-Americans located on tribal reservations. Apparently, it was not successful in this initial endeavor. 38) In 1996, USRBT began looking into the possibility of accepting deposits from Native-American tribal trust funds and investing those funds in order to obtain a higher return for the tribes than they were able to obtain in their current investments. USRBT attempted to obtain surety bond coverage in order to be able to accept these trust deposits. While an insurance company did initially provide surety coverage for two USRBT depositors, it refused to cover additional deposits. After USRBT learned that it could not receive these trust funds without surety coverage, it decided to solicit investors from the general public. 39) Adams became involved with USRBT at about this time and brought in Smedley to assist him in marketing to the public and finding investors for USRBT's investment program. USRBT relied upon a vast, unorganized nation-wide network of individuals who claim to have access to persons and entities involved in prime bank and high-yield trading programs. Many of the individuals in this network believe that these trading programs really exist, but that the government and the wealthy hide them from the common investor. 40) In the case of USRBT's investment program, all of the known investors were directed by these "true believers" to contact Global-Link. Global-Link is a marketer or "finder" for purported high-yield investments, such as those offered by USRBT. Upon initial contact with Global-Link by telephone, potential investors were told about the USRBT investment either by Harrison, Herisko or Emerton. 41) Afterwards, potential investors were sent background questionnaires, seeking detailed information about funds available for deposit, bank information, and the origin of the funds. 42) Global-Link principals told potential investors that USRBT was gathering funds for its trading activity and that investor funds would be "leveraged" to create more funds for the trading program. 43) After the potential investor supplied the requested information, Global-Link sent the investor a "services agreement" indicating that Global-Link will provide the investor with a "manifest capital growth opportunity," invite the client into a "direct trading opportunity," and will receive and distribute the investor's profits. Upon signing this agreement, investors were placed into contact with USRBT. Global-Link received a commission and was promised 1% of the profit generated by the funds of each investor it brought to USRBT. 44) After the initial contact with Global-Link, investors were introduced to USRBT and obtained oral and written representations from USRBT principals, including Ed Driving Hawk, Leo Driving Hawk, Adams, and Smedley. 45) The USRBT offering documents consisted of a brochure, information page, and a history of USRBT. These documents stated that "USRBT is an Indian bank where every account, no matter how large, is insured by an individual policy issued from one of several "A" or better insurance companies and that this coverage is vastly superior to FDIC and SIPC coverage." In addition, the offering documents stated that USRBT accepted deposits from trusts, charitable institutions, local governments, individuals, and religious organizations. 46) The USRBT investment program consisted of a LPSA and a CD issued by USRBT. 47) The LPSA stated that USRBT is interested in sharing profits with a depositor on a pro-rata basis that are obtained as a result of the depositor purchasing a CD issued by USRBT and the leverage of those deposited funds to a multitude of 10. According to the LPSA, the investor would receive an amount equal to 20% of the gross profits generated by USRBT's leveraged use of the investor funds. The LPSA further stated that the investor will receive either the 20% profits generated or the stated return on the CD, whichever is greater. 48) The LPSA specifically stated that investor funds themselves would not be used for trading, but would only be used only to create leverage. The LPSA indicated that USRBT would use the deposited funds to leverage additional funds, meaning that for each million dollars invested, USRBT would be able to use $10 million for the benefit of the depositor in the actual trading of the bank instruments. It is not clear how exactly USRBT was going to leverage the funds deposited. This is irrelevant, since USRBT never leveraged any of the funds nor sent investor funds to potential trading programs. 49) After entering into the LPSA, investors were instructed to wire their funds to an USRBT account maintained at Philadelphia Bank & Trust or Bank One in Ohio. Upon receipt of the funds, USRBT issued a CD and safekeeping receipt. The CD contained the certificate number, issue date, maturity date, principal amount, and the term (all CDs were for 12 months). 50) The safekeeping receipt stated, "USRBT confirms with all bank responsibility" that it is holding the funds in favor of the investor. Ed Driving Hawk and Adams signed the CDs and safekeeping receipts. The CDs were not insured by the FDIC, or any other governmental authority, or any private entity. C. USRBT's Written and Oral Misrepresentations and Omissions 51) Most investors were given the details regarding the investment program through conversations with USRBT principals, Ed Driving Hawk, Leo Driving Hawk, Adams, and Smedley, as well as Harrison, Herisko and Emerton of Global-Link. 52) Investors were told that USRBT has the ability to place investor funds in a trust account and then, because it is a bank, "leverage" those funds to raise additional funds and then use those "leveraged funds" to make a profit. The investor and USRBT purportedly would share this profit in a 20% investor-80% USRBT split. 53) USRBT and Global-Link claimed that USRBT could use the leveraged funds to enter into trading programs described as "high-yield" investments and "federal bank programs." 54) USRBT and Global-Link told investors this investment was risk-free and that their funds were totally secure since their funds would not be used to do the actual trading, but that the mere placement of their funds with USRBT would allow the bank to create these profits. Some investors were promised that their funds would not be removed from the trust account at Philadelphia Bank & Trust. 55) While investors were not told exactly what percentage return they would receive from the profit sharing, they were told that the returns on these types of investments were very high, paying up to 60% annually. 56) On at least two occasions, investors received "Ponzi" payments, purported by Global-Link and USRBT to be profits from these "trading activities." USRBT and Global-Link made additional representations that several trades were imminent and were likely to produce significant profits. 57) The written and oral representations made by USRBT and Global-Link were false and misleading. 58) First, none of the investors' deposits was ever insured and USRBT never leveraged any investor funds. 59) Second, at least $5 million of investor funds, not funds created by leverage as represented, were sent to a foreign currency operation in the West Indies. 60) Third, USRBT never made any "profits" from trading activity, and it did not inform new investors that it had made "Ponzi" payments of profits, interest, and principal to previous investors. 61) Fourth, USRBT moved almost all of the investor funds to other bank and brokerage accounts controlled by it or its principals, misappropriating millions of dollars for their personal use. 62) Fifth, USRBT paid commissions and expenses with investor funds, in complete contrast with its written agreement. 63) Finally, the investment was anything but secure and risk-free. USRBT and Global-Link knew or should have known that these high-yield investments and federal bank trading programs do not exist. Moreover, USRBT and its principals knew that they had misappropriated investor principal, rather than profits, for their own purposes when they solicited many investors. D. USRBT's Misuse of Investor Proceeds 64) The written LPSA contains several representations regarding how investor funds will be used, including that the actual funds will not be used for trading and that no commissions or expenses will be paid with investor funds. 65) In fact, the only thing USRBT did with investors' funds was fraudulently dissipate them by transferring at least $5 million to an off-shore foreign currency program; by transferring almost all of the investor funds from Philadelphia Bank & Trust and Bank One to other accounts controlled by USRBT and its principals; and finally, by paying millions of dollars in commissions and salaries from investor funds. 66) USRBT raised over $78 million dollars from investors. Because USRBT had no other source of income, it used approximately $50 million of those investors' funds for "Ponzi" payments of principal, profits and interest to other investors. 67) In addition, $1 million of investors' funds were transferred directly to USRBT principals: Adams received $480,000 and also purchased a $50,000 Suburban, James Driving Hawk received $185,000, and Smedley received $130,000. 68) USRBT transferred an additional $3 million to entities controlled by the Driving Hawks, including over $2.5 million to the Relief Defendants Oyate Development, Oyate Enterprises and Oyate Trust, which then transferred $255,000 to River Walk, a purported casino development company, and $170,000 to Ringthunder Racing Stables. Bank records indicate that the $255,000 transferred to River Walk was used for personal expenses and a substantial amount was withdrawn through "casino cash," furnished by casino ATM machines. Additional funds were used by USRBT to purchase at least one other vehicle, pay for trips to Las Vegas, and to pay for fine dining. E. The HIT Investment Scheme 69) Since at least September 2001, Adams, through his company HIT, has raised $10.6 million from 6 individual investors and investor groups. 70) Adams began his fraudulent scheme while still a vice president at USRBT. HIT issued securities in the form of FMAs that represented to investors that HIT would use the funds to trade in financial futures and share the profits or losses with the investors. 71) The FMAs stated that HIT would manage investors' funds, that investors' funds would be invested by HIT as a "conglomerate" of client accounts and that any increase or loss would be allocated by the following formula: accounts over $100,000 investors would receive 50% of gross dollars earned and accounts under $99,000 investors would receive 45%. 72) Offering documents stated that HIT would be compensated only from its allocation of increase in the account, and commissions or fees would not be deducted from the investors' accounts. In addition, the FMA stated that investors' funds would be placed into trading within five days after receipt. 73) The written and oral representations made by HIT and Adams were false and misleading. 74) HIT did not place all, or even a majority of the investors' funds into trades within the promised five days; rather, HIT warehoused the money in a bank account controlled by HIT. Adams sent only $50,000 of the initial $450,000 raised to its brokerage account for trading. HIT's check ledger reflects that approximately $150,000 of investors' funds was used to pay for HIT office expenses, including rent, office supplies, computers, office repairs and payroll. Adams used an additional $20,000 for personal travel expenses. CLAIMS FIRST CLAIM Violations of Section 10(b) of the Exchange Act and Rule 10b-5 75) Plaintiff Commission repeats and incorporates paragraphs 1 through 75 of this Complaint by reference as if set forth verbatim. 76) The Defendants directly or indirectly, singly or in concert with others, in connection with the purchase and sale of securities, by use of the means and instrumentalities of interstate commerce and by use of the mails (a) have employed devices, schemes and artifices to defraud, (b) have made untrue statements of material facts and have omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading and (c) have engaged in acts, practices and courses of business which operate as a fraud and deceit upon purchasers, prospective purchasers and other persons. 77) As a part of and in furtherance of their scheme to defraud, the Defendants, directly and indirectly, prepared, disseminated or used contracts, written offering documents, promotional materials, investor and other correspondence and oral presentations which contained untrue statements of material facts and misrepresentations of material facts and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth above. 78) The Defendants made these misrepresentations and omissions knowingly or with reckless disregard for the truth. 79) By reason of the foregoing, the Defendants violated and, unless enjoined, will continue to violate the provisions of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder. SECOND CLAIM Violations of Section 17(a) of the Securities Act 80) Plaintiff Commission repeats and incorporates paragraphs 1 through 75 of this Complaint by reference as if set forth verbatim. 81) The Defendants directly or indirectly, singly or in concert with others, in the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, have (a) employed devices, schemes or artifices to defraud; (b) obtained money or property by means of untrue statements of material fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, practices or courses of business which operate or would operate as a fraud or deceit. 82) As part of and in furtherance of this scheme, the Defendants, directly and indirectly, prepared, disseminated or used contracts, written offering documents, promotional materials, investor and other correspondence and oral presentations which contained untrue statements of material fact and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those statements and omissions set forth above. 83) The Defendants made the above-referenced misrepresentations and omissions knowingly or with reckless disregard for the truth. Defendants, in addition, were negligent in connection with their offer and sale of the securities alleged in this Complaint. 84) By reason of the foregoing, the Defendants violated, and unless enjoined, will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. THIRD CLAIM Violations of Section 15(a) of the Exchange Act 85) The Commission realleges and restates Paragraphs 1 through 75 of this Complaint and incorporates the same by reference as if set forth herein verbatim. 86) Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton are in the business of effecting transactions in securities for the accounts of others. 87) Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton made use of the mails and of the means and instrumentalities of interstate commerce to effect transactions in and to induce or attempt to induce the purchase of those securities. 88) Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton were not and are not registered with the Commission as brokers or dealers, as required by section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)]. 89) By reason of the foregoing, Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton have violated and, unless enjoined, will continue to violate section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)]. FOURTH CLAIM Claims Against the Relief Defendants as Custodians of Investor Funds 90) Plaintiff Commission repeats and incorporates paragraphs 1 through 75 of this Complaint by reference as if set forth verbatim. 91) The Relief Defendants received, directly or indirectly, funds and/or other benefits from the Defendants, which either are the proceeds of, or are traceable to the proceeds of, the unlawful activities alleged herein and to which they have no legitimate claim to these funds and property. 92) The Relief Defendants obtained the funds and property as part of and in furtherance of the securities violations alleged and under circumstances in which it is not just, equitable or conscionable for them to retain the funds and property, and accordingly, each it has been unjustly enriched. 93) The Commission is entitled to an order requiring that the Relief Defendant disgorge these funds and property plus prejudgment interest thereon. FIFTH CLAIM Claim for an Order under Section 21(e) of the Exchange Act 94) Plaintiff Commission repeats and incorporates paragraphs 1 through 75 of this Complaint by reference as if set forth verbatim. 95) Defendants Global-Link, Harrison, and Herisko have failed to comply with the terms of the Commission's July 6, 1995, Order Instituting Proceeding Pursuant to Section 8A of the Securities Act of 1933, Making Findings and Imposing Cease and Desist Order entered in In the Matter of Global-Link Capital Markets, Kenneth S. Harrison, and W. J. Herisko, Administrative Proceeding, File No. 3-8745. 96) Based upon the Offer of Settlement of Defendants Global-Link, Harrison, and Herisko, the Commission made findings of fact that:
97) Based on the foregoing findings, the Commission ordered pursuant to Section 8A of the Securities Act that Defendants Global-Link, Harrison, and Herisko cease and desist from committing or causing any violations, and any future violation, of Section 17(a) of the Securities Act. 98) By virtue of the conduct alleged herein, much of which occurred after July 6, 1995, Global-Link, Harrison and Herisko have violated the Commission's cease-and-desist order, and unless restrained and enjoined will continue to engage in conduct violating the order. RELIEF REQUESTED The Commission seeks the following relief: 99) A Preliminary Injunction against Defendants USRBT and HIT enjoining them from further violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder. 100) A Preliminary Injunction against Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton enjoining them from further violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Sections 10(b) and 15(a) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78o(a)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder. 101) A Permanent Injunction against Defendants USRBT and HIT and their agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder. 102) A Permanent Injunction against Defendants Global-Link, Ed Driving Hawk, Leo Driving Hawk, Adams, Smedley, Harrison, Herisko and Emerton, and their agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and Sections 10(b) and 15(a) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78o(a)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder. 103) An order requiring a full and accurate accounting and an interim asset freeze of all assets of Defendants USRBT, HIT, Ed Driving Hawk, Leo Driving Hawk, Adams and Smedley until a full and accurate accounting can be made of all investor monies raised in fraudulent schemes alleged this Complaint and a determination made as to the disposition of those assets. 104) An order requiring a full and accurate accounting of all assets of Defendants Global-Link, Harrison, Herisko and Emerton until a full and accurate accounting can be made of all investor monies raised in fraudulent schemes alleged this Complaint and a determination made as to the disposition of those assets. 105) A full and accurate accounting and an interim asset freeze of all accounts of Relief Defendants and all assets held by Relief Defendants. 106) On an interim basis, the Commission requests that a Receiver be appointed to take possession and control of the assets of Defendants USRBT, HIT, Ed Driving Hawk, Leo Driving Hawk, Adams and Smedley and each Relief Defendant to marshal and preserve their assets for the benefit of the defrauded investors. 107) An order that each Defendant and each Relief Defendant be restrained and enjoined from destroying, removing, mutilating, altering, concealing or disposing of, in any manner, any of their books and records or documents relating to the matters set forth in the Complaint, or the books and records and such documents of any entities under their control, until further order of the Court; 108) An order allowing that the parties may commence discovery immediately, and that notice periods be shortened to permit the parties to require production of documents or to take oral depositions on seventy-two (72) hours notice by facsimile or personal service. 109) An order requiring the Defendants USRBT, HIT, Ed Driving Hawk, Leo Driving Hawk, Adams and Smedley and each Relief Defendant to repatriate and to return to identified accounts in the United States of America all monies and liquid assets held outside this Court's jurisdiction. 110) Disgorgement of all illicit profits and benefits, plus prejudgment interest, realized by each Defendant and all investor monies obtained by each Relief Defendant, plus prejudgment interest, as a result of participation in or attributable to the fraudulent schemes alleged in this Complaint. 111) A civil monetary penalty against each Defendant as provided by statute and determined by the Court to be just and proper. 112) Such other and further relief as the Commission may show itself entitled. Dated: April 3, 2002 Respectfully submitted, _________________________
Of Counsel: Spencer C. Barasch
http://www.sec.gov/litigation/complaints/complr17459.htm
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