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Bay Area Investment Adviser and Real Estate Dev't Company Owner to Pay Penalties for Investment Scam
SEC v. Mark Joseph Peterson Boucher and Gary Paul Johnson
No. CV 08-4088, U.S. District Court for the Northern District of California, 08/27/2008
Holding
Mark J. P. Boucher, a Portola Valley investment adviser and publisher of an investment newsletter, and Gary Paul Johnson, part owner of a Southern California real estate development company, settled charges filed by the Securities and Exchange Commission ("SEC") that they misled clients into investing in two failed real estate development companies. In particular, Boucher, without admitting or denying the allegations in the SEC's complaint, agreed to a permanent injunction from further violations of Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder ("Exchange Act"), and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Boucher will also pay a $100,000 civil penalty. In addition, Boucher has consented to the institution of public administrative proceedings against him in which he will be barred from serving as an investment adviser with a right to reapply after five years. On the other hand, Johnson, without admitting or denying the allegations, likewise agreed to a permanent injunction from further violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Johnson also consented to an order requiring him to disgorge more than $1.8 million in ill-gotten gains and approximately $700,000 in prejudgment interest, and to pay a civil penalty of $120,000.
Detailed Summary
Based on its complaint filed on August 27, 2008, the SEC alleged that Boucher helped raise around $20 million for the real estate companies, Sunquest Development, LLC ("Sunquest" and Pinnacle West, LLC ( “Pinnacle") by falsely representing that the investments were secured by real estate, when in reality Pinnacle owned no property, and the Sunquest owned a single property that was wholly underwater in debt. See http://www.sec.gov/litigation/litreleases/2008/lr20689.htm.
The SEC also filed separate charges against the owners of Sunquest and Pinnacle, John E. Brake and Gary P. Johnson (both of Southern California) for misappropriating millions of dollars of investor funds to finance everything from beachfront homes to undisclosed side businesses. The case against Brake was entitled Securities and Exchange Commission v. John E. Brake, Case No. CV 08-4089 (N.D. Cal. filed August 27, 2008). Id.
In the end, neither company successfully developed a real estate project, and investors lost millions of dollars. The SEC alleged that many investors became interested because Boucher - a hedge fund manager and the author of the book The Hedge Fund Edge - recommended the investments in a monthly newsletter he circulated to his advisory clients. Id.
The SEC’s complaints alleged that defendants misused investor funds to pay for a wide variety of personal expenses. Among other things, Brake allegedly used investor funds to pay for a beachfront home rental in Carmel, California, luxury automobiles, a personal chauffeur, private jet travel, jewelry and designer clothing, while Johnson used investor funds to launch a failed furniture business. The SEC also claimed that Boucher used investor money to pay a portion of the mortgage on his personal residence.
View a PDF of the settlement.Service
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