Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, September 16, 2008

SEC Charges Attorney in Bogus PIPES Scheme

The SEC charged an attorney and two other promoters for conducting a $52.7 million Ponzi scheme in which they sold investors bogus PIPE (private investment in public equity) investments, promised unrealistic profits, and misappropriated more than $20 million of investors' funds to function as their own personal piggy bank.  The SEC's complaint alleges that attorney Jeanne M. Rowzee, James R. Halstead, and Robert T. Harvey told investors that Rowzee was an experienced securities attorney who personally screened and selected each PIPE investment after thorough due diligence. However, they did not place investor funds in PIPE investments, but instead used new investor funds to pay principal and returns to earlier investors, and to finance their own personal endeavors.

The SEC's complaint, filed in federal court in Santa Ana, Calif., alleges that from at least March 2004 through December 2006, the defendants sold the purported PIPE investments to investors, promising returns of 19 to 54 percent within 12 to 16 weeks. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains, and civil penalties against each defendant.

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