Fraudulent Prime Bank, Bank Guarantee and Letter of Credit Litigation and FINRA Arbitration Lawyer, Russell L. Forkey, Esq.
Securities and Exchange Commission v. The Milan Group, Inc., a/k/a The Milan Trading Group, Inc., Frank L. Pavlico III, a/k/a Frank Lorenzo, Brynee K. Baylor, Baylor & Jackson, P.L.L.C., Mia C. Baldassari, Elmo Baldassari, Brett A. Cooper, Global Funding Systems, LLC, GPH Holdings, LLC, Dawn R. Jackson, Patrick T. Lewis, Susan C. Kevra-Shiner, a/k/a Susan C. Kevra, The Law Office of Susan C. Kevra Civil Action No. 11-cv-02132 (RMC) (D.D.C. Nov. 30, 2011)
SEC HALTS PRIME BANK SCHEME OPERATED BY D.C. LAW FIRM AND PENNSYLVANIA COMPANY
Recently,the Securities and Exchange Commission filed an enforcement action under seal in federal court in Washington D.C. and obtained an emergency court order to halt a prime bank scheme that defrauded at least 13 investors out of more than $2 million since August 2010. The Court unsealed the action on December 5, 2011, at the SEC’s request.
The SEC’s complaint alleges that Pennsylvania resident Frank L. Pavlico III and Washington D.C. attorney Brynee K. Baylor operated a prime bank scheme, offering investors risk-free returns of up to 20 times the original investment within as few as 45 days through the purported “lease” and “trading” of foreign bank instruments, including “standby letters of credit” and “bank guarantees,” in highly complex transactions with unidentified parties and secretive “trading platforms.” However, the bank instruments and trading programs were entirely fictitious. Pavlico and Baylor provided investors with phony contracts and legal documents, digitally-created computer screen shots, and copies of fictitious foreign bank instruments as purported proof of the ongoing success of the transactions. Baylor and her law firm Baylor & Jackson P.L.L.C. acted as “counsel” for Pavlico’s company The Milan Group, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.
According to the SEC complaint, Pavlico and Baylor lured investors into believing they were being given an exclusive chance to participate in an international investing program involving complex financial instruments that generated astronomical profits. They used vague and complex terms in their communications to confuse investors, and claimed that confidentiality concerns prevented them from providing more complete details regarding the status of the investment. Pavlico and Baylor also provided investors with bogus excuses attempting to explain the delay in providing the promised returns, such as feigned illnesses and false representations that the European bankers supposedly involved in the transaction were on extended vacation.
In furtherance of the scheme, the complaint alleges that Baylor provided investors with “attorney attestation” letters that assured them the investments were legitimate, and investor contracts that promised investment profits would be shared among investors, Milan, and Baylor & Jackson. Meanwhile, Pavlico was using a fake name of “Frank Lorenzo” to conceal his 2008 money laundering conviction from investors. He failed to disclose that he served 10 months in prison and was on supervised release at the time he was soliciting their investments.
According to the SEC’s complaint, Pavlico and Baylor used investor funds to pay Baylor & Jackson business expenses as well as personal expenditures. Pavlico purchased a Range Rover and a Jaguar, and Baylor made purchases at expensive restaurants and retailers including Jimmy Choo, and financed a trip to the Bahamas in September 2010. Investor funds also were used to make payments to nine individuals and entities – including Baylor’s law partner Dawn R. Jackson – named as relief defendants in the SEC’s complaint for the purpose of recovering funds unrightfully in their possession.
None of the defendants charged in the SEC’s enforcement action has ever registered with the SEC to sell securities.
On November 30, 2011, the Honorable Rosemary M. Collyer granted the SEC’s request for a temporary restraining order to prevent Pavlico, Milan, Baylor, and Baylor & Jackson from further engaging in the alleged investment program. The Court also granted the SEC’s request for an order freezing the assets of all the defendants and relief defendants, requiring accountings, prohibiting the destruction or alteration of documents, and allowing for expedited discovery.
The SEC’s complaint alleges that Pavlico, Baylor, Milan, and Baylor & Jackson violated various antifraud, broker-dealer, and securities registration provisions of the federal securities laws. Specifically, the complaint alleges that they each violated 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 10b-5 thereunder; that Pavlico, Baylor, and Baylor & Jackson aided and abetted violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5; that Baylor and Baylor & Jackson aided and abetted violations of Securities Act Sections 5(a) and 5(c); and that Pavlico and Baylor also violated Exchange Act Section 15(a). The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against each defendant, and bars prohibiting Pavlico and Baylor from serving as an officer or director of a public company.
Separately, the Federal Bureau of Investigation arrested Pavlico on November 29, 2011, charging him with wire fraud.