Securities and Investment Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
Securities and Exchange Commission v. David Ronald Allen, et al. Civil Action No. 3:11-CV-882-O (N.D. Tex.)
COURT ENTERS FINAL JUDGMENTS AGAINST CHINA VOICE HOLDING CORP. AND ITS FORMER CFO, DAVID RONALD ALLEN
Recently, the Securities and Exchange Commission announced that the Honorable Reed O’Connor, United States District Judge for the Northern District of Texas, entered a final judgment against David Ronald Allen, the co-founder and former Chief Financial Officer and President of China Voice Holding Corp., to settle charges that he made false and misleading statements and material omissions regarding China Voice, selectively disclosed material, non-public information regarding the company, aided and abetted an unregistered broker, and operated a Ponzi scheme. The court also entered final judgments against China Voice and a number of Allen’s related companies.
Allen agreed to entry of a final judgment permanently enjoining him from violating Sections 5 and 17(a) of the Securities Act of 1933, 10(b) and 15(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder and from aiding and abetting violations of Section 13(a) of the Exchange Act and Regulation FD thereunder. The final judgment, entered on December 2, also orders Allen and his company, Winterstone Financial Ltd., to pay $225,468 in disgorgement and prejudgment interest and orders Allen to pay a civil penalty of $212,821. In addition, Allen is barred permanently from serving as an officer or director of a public company and from participating in an offering of a penny stock. Allen’s wife agreed to pay disgorgement and prejudgment interest of $146,162. The Allens and Winterstone Financial Ltd. agreed to the entry of these judgments without admitting or denying the allegations in the Commission’s complaint.
The Commission had filed an emergency action on April 28, 2011, alleging that Allen, with the assistance of Alex Dowlatshahi and Christopher Mills, and numerous related entities, launched what became a Ponzi scheme that sought to raise at least $8.6 million from investors across the country. The Commission alleged that, contrary to what investors were told, proceeds were used to pay back earlier investors; to make payments to Allen, Dowlatshahi, and Mills; and to make payments to Allen-affiliated businesses, including China Voice. The Commission’s complaint further charged Allen, China Voice, and China Voice’s former CEO and President, William Burbank, for a series of fraudulent statements about China Voice’s financial condition and business prospects and with selectively disclosing material, non-public information regarding the company to certain shareholders. In addition, the SEC charged China Voice shareholders Ilya Drapkin and Gerald Patera with financing stock promotion campaigns regarding China Voice, including a blast fax campaign conducted by Robert Wilson, and charged Patera with acting as an unregistered broker.
Five companies associated with Allen, Associates Funding Group, Inc., Associates Capital Leasing Joint Venture, D-Cap Associates Joint Venture, Development Capital Associates Joint Venture, and Townhome Communities Corp., also agreed to entry of a final judgment to settle the charges against them. Without admitting or denying the allegations in the Commission’s complaint, the five companies agreed to entry of a final judgment that permanently enjoins all of them from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and further enjoins D-Cap Associates Joint Venture, Development Capital Associates Joint Venture, and Townhome Communities Corp. from violating Sections 5 and 17(a) of the Securities Act. In addition, the Final Judgment orders the five companies to pay a civil penalty of $500,000.
Finally, China Voice agreed to entry of a final judgment permanently enjoining it from violations of Section 17(a) of the Securities Act and Sections 10(b) and 13(a) of the Exchange Act and Rule 10b-5 and Regulation FD thereunder. The judgment, which China Voice consented to without admitting or denying the allegations in the Commission’s complaint, also requires China Voice to hire an independent consultant to evaluate the company’s internal controls.