In re Raejean S. Bonham dba World Plus
Bankruptcy No. F95-00897
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The United States Securities & Exchange Commission ("the SEC") in 1996 filed a civil action against the debtor, World Plus, Inc. and Atlantic Pacific Funding Corporation, seeking an injunction, damages and other relief. In 1997, the SEC moved for summary judgment on its claims. The court entered an Order and the SEC's proposed Findings of Fact and Conclusions of Law on November 24, 1997. While not strictly speaking a part of the bankruptcy case, these results may be very helpful to the trustee and many of the creditors. The two decisions are set out in full below:
Order re Motion for Summary Judgment
Findings of Fact and Conclusions of Law
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SECURITIES & EXCHANGE COMMISSION, |
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Plaintiff, |
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RAEJEAN BONHAM, aka JEAN BONHAM; WORLD PLUS, INC. and ATLANTIC PACIFIC FUNDING CORPORATION, |
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Defendant. |
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_____________________________________ |
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Plaintiff United States Securities and Exchange Commission (SEC) moves for: (1) entry of a default judgment against defendants World Plus, Inc., and Atlantic Pacific Funding Corporation pursuant to a default entered on July 1, 1996; and (2) summary judgment as to all claims against defendant Raejean S. Bonham. Defendants World Plus, Inc., and Atlantic Pacific Funding Corporation do not oppose the motion for default judgment. Defendant Bonham opposes the motion for summary judgment. Oral argument is not requested.
Plaintiff SEC brings the following causes of action against defendants: (1) violation of Sections 5(a) and 5(c) of the Securities Act (sale or delivery of unregistered securities); (2) violation of Section 17(a) of the Securities Act (fraud); (3) violation of Section 10-b of the Exchange Act and Rule lOb-5 thereunder (use of manipulative or deceptive device in connection with the purchase or sale of a security). In addition, the SEC sues defendant Bonham for violation of Section 15(a) of the Exchange Act (acting as an unregistered broker-dealer). The SEC seeks the following remedies: (1) permanently enjoin defendants from violating the above statutes and regulations under which the causes of action are brought; (2) an order that requires all defendants to jointly and severally pay disgorgement of all ill-gotten gains in the amount of $2,492,000.00, plus pre-judgment interest, provided that any order of disgorgement be implemented and carried out under the provisions of the Bankruptcy Code in the proceedings In re Raejean Bonham, a/k/a Jean Bonham. a/k/a Jeannie Bonham, d/b/a World Plus, Case No. F95-00897-HAR, in the United States Bankruptcy Court for the District of Alaska; and (3) an order that this court retain jurisdiction over this action to implement and carry out the terms of all orders and decrees entered in this case.
Defendants World Plus, Inc., and Atlantic Pacific Funding Corporation failed to answer plaintiff's complaint and entry of default was made against them on July 1, 1996. The SEC now moves for an entry of default judgment against them on all counts raised against them and for the above described remedies. This motion is not opposed. It is, therefore, granted.
The SEC moves also for summary judgment in its favor on all claims made against defendant Bonham. Bonham files an opposition, but does not dispute her liability under the above mentioned statutes and regulations. Absent an opposition, there is no question of material fact presented to dispute liability. Plaintiff's motion for summary judgment shall be granted against defendant Bonham as to all counts.
What defendant Bonham does dispute is the remedy plaintiff requests of disgorgement of ill-gotten gains. Bonham argues that the amount of ill-gotten gains is less than the approximately $2.5 million figure cited by the SEC. The SEC arrived at the figure by determining that defendants illegally raised approximately $42,334,000.00. Of this amount, defendants paid investors approximately $39,842,000.00, leaving $2,492,000.00 of investor funds unaccounted for except for material goods purchased by Bonham. Bonham states that this figure makes no provisions for airline-related activities, which total at least $7.7 million of the $42 million alleged to be part of investor receipts. Plaintiff SEC responds that this is incorrect in that both its expert and the Bankruptcy Trustee distinguished investor funds from ticket sales revenue and excluded ticket sales revenue from the $42 million figure attributed to investor funds. The SEC states that according to governing law the amount to be disgorged "need only be a reasonable approximation of profits causally connected to the violation" and the "risk of uncertainty" in computing disgorgement "should fall on the wrongdoer whose illegal conduct created that uncertainty." SEC v. First City Financial Corp., 890 F.2d 1215, 1231, 1232 (D.C. Cir. 1989). The SEC states the $7.7 million figure alleged to be wrongly included in investor funds were listed in the information it reviewed as "payer unknown," a designation which it alleges is a deceptive and elusive accounting practice. The SEC states that Bonham exemplifies the wrongdoer who attempt to create an alleged uncertainty through deceptive practices. The SEC concludes that it satisfies its burden of providing a disgorgement figure that is a reasonable approximation of ill-gotten gains. The court concludes that the SEC is correct and that the SEC is entitled to judgment as a matter of law for $2,492,000.00 plus pre-judgment interest.
For the foregoing reasons, the court now enters the SEC's proposed order and judgment as prayed for.
DATED at Anchorage, Alaska, this 24th day of November, 1997.
/s/ H. Russel Holland, Judge
District of Alaska
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SECURITIES & EXCHANGE COMMISSION, |
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Plaintiff, |
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RAEJEAN BONHAM, aka JEAN BONHAM; WORLD PLUS, INC. and ATLANTIC PACIFIC FUNDING CORPORATION, |
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Defendant. |
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_____________________________________ |
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Plaintiff Securities and Exchange Commission ("Commission") commenced this action on April 26, 1996 by filing its Complaint for Permanent Injunction and Other Legal and Equitable Relief ("Complaint"). Defendant Raejean S. Bonham ("Bonham") answered the Commission's Complaint on July 8, 1996. An entry of default was entered against defendants World Plus, Inc. ("World Plus") and Atlantic Pacific Funding Corporation ("Atlantic") on July 1, 1996.
The Commission has filed with this Court an Application for Entry of Default Judgment Against World Plus, Inc. and Atlantic Pacific Funding Corporation and Motion for Summary Judgment Against Defendant Raejean S. Bonham ("Motion"). The Commission and Bonham having had an opportunity to submit memoranda and declarations in support of and in opposition to the Motion, the Court having jurisdiction over the parties and the subject matter of this action, the Court being fully advised in the premises, and there being no just reason for delay, THE COURT HEREBY FINDS AS FOLLOWS:
1. There is no genuine issue of material fact in this action. Among the undisputed material facts are the following:
A. The Defaulted Defendants World Plus and Atlantic
2. On April 29, 1996, pursuant to Fed. R. Civ. P. 4(h)(1), Deputy United States Marshall Donald Bennett served defendants World Plus and Atlantic, through their President, Bonham, with copies of the Summons and Complaint.
3. On July 1, 1996, an entry of default was entered against World Plus and Atlantic.
4. World Plus and Atlantic have not appeared in this action.
5. World Plus and Atlantic are not infants, incompetents or in the United States Military Service.
6. The Commission's Motion was served upon World Plus and Atlantic, through Bonham.
B. Defendants Fraudulently Offered and Sold Unregistered World Plus and Atlantic "Contracts."
7. Beginning in or around 1984 and continuing through December 1995, Bonham purchased and resold frequent flyer airline tickets in Fairbanks, Alaska. In 1991, Bonham incorporated her business as World Plus.
8. Beginning no later than 1988 and continuing through December 1995, defendants offered and sold short-term, high interest World Plus and Atlantic "contracts" to the general public.
9. In soliciting investors, defendants misrepresented to the public that investor funds would be pooled and used to purportedly purchase large blocks of frequent flyer miles from multinational corporations, and that the miles would then be converted to tickets for defendants' frequent flyer ticket business.
10. In the course of offering and selling the "contracts," defendants also knowingly made other misrepresentations and omissions of material fact to investors, including, but not limited to, misrepresenting the risks associated with the investment and the legality of defendants' ticket business.
11. Defendants' representations were false, and defendants knew them to be false. In fact, defendants' "investment program" was a Ponzi scheme: defendants used investor funds primarily to repay other investors when their World Plus and Atlantic "contracts" became due.
12. At least 1,192 investors, from more than forty states, purchased approximately 6,500 "investment contracts" from defendants in an aggregate amount of over $42 million.
13. Throughout the course of defendants' conduct, they made use of the telephones, mails and wires to solicit investors, to transmit and receive investor funds and to deliver World Plus and Atlantic "contracts" to investors.
14. At all relevant times, defendants were not, and are not currently, registered with the Commission in any capacity. No registration statements were, or are, on file with the Commission relating to the "contracts" offered and sold by defendants.
15. By reason of the foregoing, defendants Bonham, World Plus and Atlantic violated Section 17(a) of the Securities Act of 1933 ("Securities Act") in that they, directly or indirectly, in the offer or sale of securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, employed devices, schemes or artifices to defraud; obtained money or property by means of untrue statements of any material fact or omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in transactions, practices, or courses of business which operated as a fraud or deceit upon the purchaser.
16. By reason of the foregoing, defendants Bonham, World Plus and Atlantic violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder in that they, directly or indirectly, in connection with the purchase or sale of securities, namely the World Plus and Atlantic "contracts," by use of the means or instrumentalities of interstate commerce, employed devices, schemes and artifices to defraud, made untrue statements of material facts, 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 engaged in acts, practices and courses of business which operated as a fraud or deceit.
17. By reason of the foregoing, defendants Bonham, World Plus and Atlantic violated Sections 5(a) and 5(c) of the Securities Act in that they, directly or indirectly, made use of the means or instruments of transportation or communication in interstate commerce or of the mails to sell securities for which no registration statement was in effect as to such securities and for which no exemption from registration was available; and offered to sell securities, for which no registration statement had been filed as to such securities and for which no exemption from registration was available.
18. By reason of the foregoing, defendant Bonham violated Section 15(a) of the Exchange Act in that she, directly or indirectly, while acting as a broker or dealer, made use of the mails and means or instrumentality of interstate commerce to effect transactions in, and to induce and attempt to induce the purchase or sale of securities without being registered in accordance with Section 15(b) of the Exchange Act.
The Court, having found that defendants Bonham, World Plus and Atlantic have violated the aforementioned federal securities laws, and there being no just reason for delay:
IT IS HEREBY ORDERED that the Commission's Motion is GRANTED.
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that defendants Bonham, World Plus and Atlantic, and their agents, servants, employees and attorneys, and all persons acting in concert or participation with them, who receive actual notice of this Final Judgment by personal service or otherwise, and each of them, are permanently restrained and enjoined from, directly or indirectly, in the offer or sale of the securities of any issuer, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails:
1. employing any device, scheme or artifice to defraud;
2. obtaining money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
3. engaging in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser;
in violation of Section 17(a) of the Securities Act of 1933 [15 U.S.C. § 77q(a)].
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that defendants Bonham, World Plus and Atlantic and their agents, servants, employees and attorneys, and all persons acting in concert or participation with them, who receive actual notice of this Final Judgment by personal service or otherwise, and each of them, are permanently restrained and enjoined from, directly or indirectly, in connection with the purchase or sale of the securities of any issuer, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange:
1. employing any device, scheme or artifice to defraud;
2. making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
3. engaging in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;
in violation of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that defendants Bonham, World Plus and Atlantic and their agents, servants, employees and attorneys, and all persons acting in concert or participation with them, who receive actual notice of this Final Judgment by personal service or otherwise, and each of them, are permanently restrained and enjoined from, directly or indirectly, violating Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)] by:
1. making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell the securities of any issuer, through the use or medium of any prospectus or otherwise, unless and until a registration statement is in effect as to such securities;
2. carrying or causing to be carried through the mails or in interstate commerce, by any means or instruments of transportation, for the purpose of sale or for delivery after sale, the securities of any issuer, unless and until a registration statement is in effect as to such securities; and
3. making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy, through the use or medium of any prospectus or otherwise, the securities of any issuer, unless and until a registration statement has been filed with the Commission as to such securities, or while a registration statement as to such securities is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under Section 8 of the Securities Act of 1933, as amended, [15 U.S.C. § 77h], provided, however, that nothing in Part III of this Order shall apply to any security or transaction which is exempt from the provisions of Section 5 of the Securities Act [15 U.S.C. § 77e].
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that defendant Bonham and her agents, servants, employees and attorneys, and all persons acting in concert or participation with them, who receive actual notice of this Final Judgment by personal service or otherwise, and each of them, are permanently restrained and enjoined from, directly or indirectly, by use of means or instrumentalities of interstate commerce, or of the mails, effecting transactions in, and inducing or attempting to induce the purchase or sale of, securities (other than an exempted security or commercial paper, banker's acceptances, or commercial bills) without being registered as a broker-dealer pursuant to Section 15(b) of the Exchange Act [15 U.S.C. §78o (b)].
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that defendants Bonham, World Plus and Atlantic shall jointly and severally pay disgorgement in the amount of $2,492,000, plus pre-judgment interest thereon in an amount to be calculated pursuant to 28 U.S.C. § 1961, provided that this order of disgorgement be implemented and carried out in accordance with the provisions of the United States Bankruptcy Code and the proceedings In re Raejean S. Bonham, aka Jean Bonham, aka Jeannie Bonham, dba World Plus, Case No. F95-00897-HAR, filed in the United States Bankruptcy Court for the District of Alaska.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall retain jurisdiction over this action for the purposes of implementing and carrying out the terms of all orders and decrees which may be entered herein and to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
There being no just reason for delay, the Clerk of the Court is hereby directed, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, to enter this Final Judgment forthwith.
IT IS SO ORDERED.
DATED: 11/29/97
/s/ H. Russel Holland, Judge
District of Alaska
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