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IN THE MATTER OF: JOHN CALASH (Collectively, the "Respondents") * * * * * * * * * * * * * * * * * * * |
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I. PRELIMINARY STATEMENT
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of Respondents to determine if they had violated, were violating or were about to violate provisions of the Act or Regulations;
WHEREAS, on December 17, 2012, the Commissioner, acting pursuant to Sections 36b-27(a), 36b-27(b) and 36b-27(d) of the Act, issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Notice”) against Respondents, which Notice is incorporated by reference herein;
WHEREAS, on December 17, 2012, the Notice was sent by certified mail, return receipt requested, to Respondents to their address last known to the Commissioner at 33 Blueberry Hill Road, Madison, Connecticut 06443;
WHEREAS, on January 14, 2013, the Notices that were mailed to Respondents on December 17, 2012 were returned to the Department of Banking marked “Return to Sender – Unclaimed – Unable to Forward”;
WHEREAS, on January 15, 2013, in accordance with Section 36b-33(h) of the Act, the Notice was served on the Commissioner, and on January 17, 2013, Notice of Service on the Banking Commissioner In the Matter of: John Calash dated January 17, 2013, and Notice of Service on the Banking Commissioner In the Matter of: Susan Calash dated January 17, 2013 (collectively “Notices of Service”), were sent by registered mail, return receipt requested, to Respondents at 33 Blueberry Hill Road, Madison, Connecticut 06443. The Notices of Service were unclaimed by Respondents;
WHEREAS, Respondents failed to request a hearing on the matters set forth in the Notice within 14 days of the date of the Notices of Service;
WHEREAS, on February 1, 2013, the Order to Cease and Desist and Order to Make Restitution became permanent;
WHEREAS, on February 19, 2013, Certifications rendering the Order to Cease and Desist and Order to Make Restitution permanent as of February 1, 2013 (“Certifications”), were sent to Respondents at 33 Blueberry Hill Drive, Madison, Connecticut, which Certifications are incorporated by reference herein;
WHEREAS, on March 19, 2013, Orders Imposing Fine were issued to Respondents imposing a fine of One Hundred Thousand Dollars ($100,000) against J. Calash and a fine of Thirty Thousand Dollars ($30,000) against S. Calash. On March 19, 2013, the Orders Imposing Fine were sent by certified mail, return receipt requested, to Respondents at 33 Blueberry Hill Road, Madison, Connecticut 06443;
WHEREAS, on April 5, 2013, Respondents, through their legal counsel, filed with the Commissioner a Petition for Reconsideration and/or Motion to Open Judgment (“Petition”) pursuant to Connecticut General Statutes Section 4-181a(b);
WHEREAS, Respondents’ Petition stated that Respondents vacated 33 Blueberry Hill Drive, Madison, Connecticut on or about June 28, 2012 due to a bank foreclosure; that Respondents moved to 131 Hillside Avenue, Milford, Connecticut 06460 on or about June 28, 2012; that Respondents’ Milford home was destroyed by Hurricane Sandy on October 29, 2012; and that Respondents now reside at 69 Hines Street, Apt. B, West Haven, Connecticut 06516;
WHEREAS, Respondents’ Petition set forth that Respondents did not become aware of the Notice until March 25, 2013, when J. Calash conducted an internet search, and learned of it;
WHEREAS, based upon the additional information provided by Respondents’ counsel, the Commissioner determined that because Respondents were no longer residing at the address last known to the Commissioner of 33 Blueberry Hill Road, Madison, Connecticut 06443, Respondents did not receive actual notice of the Notice;
WHEREAS, pursuant to Section 4-181a(b) of the Connecticut General Statutes, “[o]n a showing of changed conditions . . . the [Commissioner] may . . . modify the final decision, at any time, at the request of any person”;
WHEREAS, the Commissioner determined that Respondents demonstrated a showing of changed conditions due to the fact that Respondents did not receive actual notice of the Notice, and determined that the Notice should be modified to reflect Respondents’ current address and to ensure actual notice to Respondents pursuant to Section 36b-27 of the Act;
WHEREAS, on April 25, 2013, the Commissioner issued a Decision on Petition for Reconsideration and Order to Modify December 17, 2012 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine, and Notice of Right to Hearing (collectively, the “Decision”);
WHEREAS, the Decision ordered that Paragraph 9 of the Notice be modified to read as follows: “J. Calash and Susan Calash ('S. Calash') (collectively 'the Calashes') are a married couple whose address last known to the Commissioner is 69 Hines Street, Apt. B, West Haven, Connecticut 06516.”
WHEREAS, the Decision ordered that the March 19, 2013 Orders Imposing Fine issued to Respondents be vacated and that the February 19, 2013 Certifications be rescinded;
WHEREAS, on May 7, 2013, Respondents requested a hearing on the matters alleged in the Notice;
WHEREAS, on May 9, 2013, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer, in which the Commissioner notified the Respondents that the hearing would take place on May 21, 2013, and designated Department of Banking Attorney Stacey Serrano as the Hearing Officer;
WHEREAS, on May 16, 2013, upon the consent of both parties, the hearing was continued to June 20, 2013;
WHEREAS, on June 20, 2013, hearing proceedings were conducted before Hearing Officer Stacey Serrano. The hearing was not completed on June 20, 2013, and was therefore continued to July 11, 2013;
WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, an administrative proceeding initiated under Section 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;
WHEREAS, Section 36b-27(f) of the Act provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a), (b) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, Respondents and the Commissioner now desire to resolve the matters alleged in the Notice without the need to continue the hearing or to conduct additional administrative proceedings;
WHEREAS, the issuance of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;
WHEREAS, Respondents agree that the Notice may be used in construing the terms of this Consent Order, and agree to the language in this Consent Order;
WHEREAS, Respondents specifically assure the Commissioner that none of the violations alleged in the Notice shall occur in the future;
AND WHEREAS, Respondents have provided documentation to the Division evidencing that, subsequent to making the within described payment of One Hundred Thousand Dollars ($100,000) towards partial restitution (as described in detail below), Respondents will be financially unable to pay the fine that otherwise would have been assessed against them pursuant to the Notice and this Consent Order.
WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:
| 1. | To be afforded an opportunity for a hearing within the meaning of Section 36b-27 of the Act and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail themselves of Section 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. | To present their position in a hearing in which each is represented by counsel; |
| 4. | To have a written record of the hearing made and a written decision issued by a hearing officer; and |
| 5. | To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, Respondents, through their execution of this Consent Order, acknowledge the following allegations of the Commissioner, and do not admit or deny these allegations, but agree that sufficient evidence exists from which the Commissioner could find facts to substantiate the issuance of an order to cease and desist, an order to make restitution, and/or an order imposing a maximum administrative fine of One Hundred Thousand Dollars ($100,000) per violation of the Act, or any regulation, rule or order adopted or issued under the Act:
| 1. | J. Calash violated Section 36b-16 of the Act through the offer and sale of unregistered securities in or from Connecticut to at least one investor, which securities were not registered in Connecticut under the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they subject to an exemption claim or claim of covered security status; | |
| 2. | J. Calash violated Section 36b-6(a) of the Act by transacting business as an unregistered agent of issuer; and | |
| 3. | J. Calash and S. Calash violated Section 36b-4(a) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person; |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondents an opportunity for a hearing;
AND WHEREAS, Respondents acknowledge the possible consequences of an administrative hearing and voluntarily consent to the entry of the sanctions described below.
WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing on them the following sanctions in full and final resolution of all allegations made by the Commissioner in the Notice:
| 1. | Respondents shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any person, organization or other device; |
| 2. | No later than the date this Consent Order is entered by the Commissioner, the Commissioner shall appoint an Independent Partial Restitution Fund Administrator (the “Administrator”) to establish and oversee disbursements from a partial restitution fund (the “Calash Partial Restitution Fund”) created for the benefit of Steadfast Holdings Group, Inc. f/k/a Beere Financial Group Inc. (“Steadfast”) investors known to the Commissioner and/or contemplated in paragraph 20 of the Notice (the “Investors”); |
| 3. | The Administrator is authorized to exercise such powers as are necessary for the effective administration of the Calash Partial Restitution Fund. The Administrator shall establish a non-interest bearing bank account at a FDIC-insured financial institution in the name of the Calash Partial Restitution Fund (“CPRF Account”) with the tax identification number of J. Calash, to, inter alia, hold the funding deposit made by Respondents pursuant to paragraph 4 hereof and serve as the vehicle for disbursements from the Calash Partial Restitution Fund. Subject to general oversight by the Commissioner, the Administrator shall have sole authority to deposit and withdraw funds and to otherwise administer and control the CPRF Account. All funds remitted by Respondents shall be deposited in the CPRF Account; |
| 4. | No later than October 15, 2013, Respondents shall fund the CPRF Account by remitting to the Administrator the sum of $100,000 by cashier’s check, certified check or money order made payable to the “Calash Partial Restitution Fund.” Such remittance shall be made for the purpose of providing partial restitution to the Investors, and shall constitute Respondent’s sole funding obligation pursuant to the terms of this Consent Order. J. Calash and S. Calash shall be jointly and severally liable for the $100,000 funding amount pursuant to this Consent Order; |
| 5. | The Administrator shall notify the Division once the CPRF Account has been funded in accordance with paragraph 4; |
| 6. | Within five (5) days following the funding of the CPRF Account by Respondents pursuant to this Consent Order, the Administrator shall forward to the Investors a copy of the Notice and this Consent Order and request that each affected investor file with the Administrator a proof of claim reflecting each investor’s investment in Steadfast. The Administrator shall set a deadline of 90 days from the date the Notice and Consent Order are mailed to Investors (the “Claim Deadline”) for all proof of claims to be submitted to the Administrator. The Administrator shall notify the Division after all Investors are mailed a copy of the Notice and Consent Order; |
| 7. | Within ten (10) days following the Claim Deadline, and after evaluating and verifying each investor’s proof of claim, the Administrator shall provide the Division with an accounting of the name of each Investor with a valid proof of claim and the corresponding pro rata share of each Investor’s disbursement (the “Interim Accounting”); |
| 8. | Within ten (10) days of providing the Interim Accounting to the Division, the Administrator shall disburse partial restitution from the Calash Partial Restitution Fund to each Investor with a valid proof of claim based on the Investor’s pro rata share of all valid claims made as of the Claim Deadline; |
| 9. | Within five (5) days of disbursing partial restitution to each Investor with a valid proof of claim, the Administrator shall provide the Division with a final accounting, which shall include the name of each Investor with a valid proof of claim and the amount paid to each Investor from the CPRF Account (“Final Accounting”); |
| 10. | In addition to the Interim Accounting and Final Accounting, the Administrator shall provide such notifications and reports to the Commissioner as the Commissioner and/or the Administrator deems necessary; |
| 11. | The authority of the Administrator shall terminate on the earlier of March 30, 2014, or the date when partial restitutionary payments have been made to all Investors with a valid proof of claim in accordance with this Consent Order. Should the Administrator become unable to serve during his or her tenure, the Commissioner may appoint a successor Independent Partial Restitution Fund Administrator and make appropriate adjustments to the performance timetable set forth in this Consent Order; |
| 12. | The Administrator’s compensation and expenses, which shall be borne exclusively by Respondents and payable solely from the CPRF established hereunder, shall consist of a standard hourly fee, plus reasonable and necessary out-of-pocket expenses, such as mileage, postage and copying services. The Administrator’s compensation and expenses shall not exceed, in the aggregate, 10% of the amount on deposit in the CPRF. Extraordinary expenses, if any, shall require the prior written approval of the Division Director; |
| 13. | The Administrator, for the period of its engagement and for a period of two years from completion of the engagement, shall not enter into any employment, consultant, attorney-client, auditing or other professional relationship with Respondents, or any of Respondents’ present or former affiliates, directors, officers, employees, or agents acting in their capacity as such. Any firm with which the Administrator is affiliated in the performance of his or her duties under this Consent Order shall not, without prior written consent of the Commissioner, enter into any employment, consultant, attorney-client, auditing or other professional relationship with Respondents, or any of Respondents’ present or former affiliates, directors, officers, employees, or agents acting in their capacity as such for the period of the engagement and for a period of two years after the engagement; |
| 14. | Respondents shall reasonably cooperate in all respects with the efforts of the Administrator to disburse the Calash Partial Restitution Fund to the Investors including, inter alia, providing such assistance as may be needed in establishing an account at a financial institution and identifying and locating the Investors. Respondents shall provide the Administrator with access to such relevant files, books, records and personnel as the Administrator reasonably requests in performing his or her functions pursuant to this Consent Order; |
| 15. | In the event of nonperformance or violation by Respondents of any term or condition addressed to them as set forth in this Consent Order, Respondents consent to the immediate entry and imposition of a One Hundred Thousand Dollar ($100,000) fine, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith; |
| 16. | In the event of nonperformance or violation by Respondents of any term or condition addressed to them as set forth in this Consent Order, Respondents consent to the immediate entry and imposition of an order of full restitution in the amount of $767,500, plus interest, to the Investors, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith; |
| 17. | In the event of nonperformance or violation by Respondents of any term or condition addressed to them as set forth in this Consent Order, all of the allegations in the Notice are deemed admitted by Respondents for the purposes of any and all matters and/or actions by and between the Commissioner and Respondents, and Respondents knowingly, willfully and voluntarily waive their right to notice and an administrative hearing in conjunction therewith; |
| 18. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Respondents based upon evidence of which the Division was unaware on the date hereof relating to a violation of the Act or any regulation or order under the Act; and |
| 19. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | _______/s/____________ | |
| this 12th day of September 2013. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, John Calash, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.
| ____/s/__________ |
| John Calash |
State of: Connecticut
On this the 9 day of September 2013, before me, Daniel Drago, the undersigned officer, personally appeared John Calash, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
_____/s/________________________________
Notary Public
Date Commission Expires: October 31st, 2017
CONSENT TO ENTRY OF ORDER
I, Susan Calash, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.
| _____/s/_______ |
| Susan Calash |
County of: New Haven
On this the 9 day of September 2013, before me, Daniel Drago, the undersigned officer, personally appeared Susan Calash, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that she executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand.
____/s/_________________________________
Notary Public
Date Commission Expires: October 31st, 2017