SEC Secures $51M Final Judgment Against Tri Energy and Co-Defendants for Their Gold-Related Ponzi Scheme

Holding:

The Securities and Exchange Commission (“SEC”) has announced that the U.S. District Court for the Central District of California entered a final judgment on April 13, 2009, against defendants Tri Energy, Inc., H & J Energy Company, Inc., Robert Jennings, Arthur Simburg, and La Vie D'Argent (collectively the "Tri Energy Defendants"). In this settled action, the district court ordered the Tri Energy Defendants to pay $35 million in disgorgement and $2,048,466 in prejudgment interest, and ordered Simburg and Jennings to each pay a civil penalty of $7 million. $28,058,310 of the disgorgement is deemed satisfied by the criminal restitution ordered in a parallel criminal proceeding. In a related criminal proceeding, Simburg entered into a plea agreement, and on November 17, 2008 got a sentence of nine years imprisonment. After jury trial, the jury returned a guilty verdict against Jennings on July 11, 2008, for which Jennings was sentenced on November 17, 2008 to twelve years imprisonment. Defendant Henry Jones was extradited from Hong Kong and convicted after a jury trial on July 11, 2008, and was sentenced to twenty years imprisonment on April 3, 2009.

Detailed Summary:

The SEC’s amended complaint, filed on August 10, 2006, stated that Tri Energy, Inc. and H & J Energy, Inc. represented themselves as companies engaged in the mining business. Defendant Jennings is the president and chairman of Tri Energy, as well as the president and treasurer of H & J Energy.  The complaint stated that defendant Simburg of is the senior vice president of Tri Energy. Simburg allegedly led nightly investor conference calls in which he solicited investors and lulled them with fraudulent statements. He received investor money from funds sent to the Tri Energy bank account. Relief defendant La Vie D’Argent (“La Vie D’Argent”), a Nevada corporation, has a registered agent at Corporate Services Company, 2nd Floor, 723 So. Casino Center Blvd., Las Vegas, NV 89101. Defendant Simburg is president, secretary and treasurer of La Vie D’Argent.

The amended complaint alleged that the aforementioned defendants, and others, perpetrated a massive fraud and Ponzi scheme involving a purported coal mine venture and a so-called international “gold deal.” The complaint claimed that defendants had been telling investors that these extraordinary profits were to be generated in part by helping an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates.

In reality, according to the complaint, although some money had been paid out to investors, those funds appeared to have come from new investor money, and substantial amounts of investor funds had been transferred to bank accounts controlled by some of the defendants and relief defendants. Defendants recruited potential victims through claims that their investments were aimed, at least in part, at raising money for humanitarian and religious efforts. Defendants promised their victims outlandish returns on their investments of 100-1000% in as little as 60 days. Over 500 investors lost more than $50 million in the scheme.

The district court previously on August 13, 2007, enjoined the Tri Energy Defendants from violations of the reporting and anti-fraud provisions of the securities laws (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 and Rule 10-b-5 thereunder), and specifically enjoined them from soliciting investments of the type at issue in the SEC’s lawsuit. The SEC obtained a default judgment against Jones and his companies Marina Investors Group, Inc. and Global Village Records on March 20, 2008, enjoining them from future violations of the same provisions identified above, as well ordering $22,291,725 in disgorgement, $2,073,922 in prejudgment interest, and a $7 million civil penalty.

The SEC also obtained final judgments against relief defendant Thomas Avery and his company T.M.A. Investment Enterprises and relief defendant R.P.J. Investment Group, Inc. on April 9, 2008, ordering $70,000 in disgorgement plus $4,342.42 in prejudgment interest jointly and severally between Avery and his company, and ordering $7,364 in disgorgement against R.P.J.