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ORDER TO MAKE RESTITUTION NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CRF-16-8209-S |
I. PRELIMINARY STATEMENT
| 1. | 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 (“Regulations”) promulgated under the Act. |
| 2. | Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an investigation into the activities of Respondents to determine if Respondents have violated, are violating or are about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. |
As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. | As a result of the Investigation, the Commissioner has reason to believe that a basis exists to issue a cease and desist order against Respondents as authorized by Section 36b-27(a) of the Act. |
| 5. |
As a result of the Investigation, the Commissioner has reason to believe that a basis exists to order that Respondents make restitution as authorized by Section 36b-27(b) of the Act. |
| 6. | As a result of the Investigation, the Commissioner has reason to believe that a basis exists to impose a fine upon Respondents as authorized by Section 36b-27(d) of the Act. |
II. RESPONDENTS
| 7. |
John W. Evans (“Evans”) is an individual whose last address known to the Commissioner is 253 Gay Street, Sharon, Connecticut 06069. At all times pertinent hereto, Evans held himself out as having rights to certain intellectual property, including cooling system related patents (the “Evans IP”). Evans Technology Holding Company (“ETHC”) is an unincorporated entity controlled by Evans and variously described by Evans as a limited liability company to be formed and a general partnership. ETHC was purportedly organized for the purpose of holding the Evans IP. |
| 8. | Bonnie A. Evans, spouse of Evans, is an individual whose address last known to the Commissioner is 253 Gay Street, Sharon, Connecticut 06069. |
III. STATEMENT OF FACTS
| 9. | In or about 2007, Evans met with two individuals (“Agent A and Agent B”), nonparties to this action and since deceased, to discuss investor funding of Evans’ technologies and ideas through a private placement. The concept of ETHC as a funding vehicle resulted from that meeting. According to offering materials provided to investors, ETHC would be formed as a limited liability company when it produced revenue. |
| 10. | On December 2, 2007, Agent A and Agent B, with the knowledge and consent of Respondents, met with prospective investors and disseminated the ETHC offering documents. Over the following year, Respondents, through Agents A and B, offered and sold percentage interests in ETHC from Connecticut to at least one Connecticut investor and several out-of-state investors, raising a total of $141,000. Each investor signed a purchase agreement and provided a check or money order made out to Evans personally. Evans and Bonnie A. Evans executed certain documents as “senior partners.” |
| 11. | None of the investors had any special expertise in the Evans IP. Rather, the investors were passive and totally dependent on Respondents in achieving a return on their investment. |
| 12. | The percentage interests in ETHC constituted securities within the meaning of Section 36b-3(19) of the Act. Such securities were not registered in Connecticut under Section 36b-16 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status. |
| 13. | Between December 2007 and October 2008, Respondents, in connection with the offer and sale of the ETHC percentage interests, failed to disclose to at least one investor the risks of investing in the Evans venture, the registration status of the securities and the basis for income projections, and provided documents to investors which contained several misleading statements and omissions of material fact. |
| 14. | Agent A and Agent B also received interests in ETHC in exchange for their assistance in soliciting investors. Agent A and Agent B have never been registered in any capacity under the Act. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST,
ORDER TO MAKE RESTITUTION AND
ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act -
Offer and Sale of Unregistered Securities
| 15. | Paragraphs 1 through 14, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 16. |
Respondents offered and sold securities in or from Connecticut to at least one investor, as more fully described in paragraph 10, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 12. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under 36b-27(b) of the Act, and the imposition of a fine upon Respondents pursuant to Section 36b-27(d) of the Act. |
b. Violation of Section 36b-4 of the Act –
Fraud in the Offer and Sale of a Security
| 17. | Paragraphs 1 through 16, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 18. |
The conduct of Respondents, as more fully described in paragraphs 10 through 13, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an 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 are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person. Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act. |
c. Violation of Section 36b-6(b) of the Act –
Employing an Unregistered Agent of Issuer
| 19. | Paragraphs 1 through 18, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 20. |
Respondents employed two unregistered agent of issuers [sic], as described more fully in paragraph 14. Such conduct constitutes a violation of Section 36b-6(b) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act and the imposition of a fine upon Respondents pursuant to Section 36b-27(d) of the Act. |
V. ORDER TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Evans has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4, and at least one violation of Section 36b-6(b) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Bonnie A. Evans has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4, and at least one violation of Section 36b-6(b) of the Act;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist against Respondents, an Order to Make Restitution against Respondents and the imposition of a fine upon Respondents is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a fine not to exceed the maximum fine of one hundred thousand dollars ($100,000) per violation upon Respondents;
WHEREAS, the Commissioner ORDERS that JOHN W. EVANS CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) offering and selling unregistered securities; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an 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 are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) employing unregistered agents of issuer;
WHEREAS, the Commissioner ORDERS that BONNIE A. EVANS CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) offering and selling unregistered securities; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an 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 are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) employing unregistered agents of issuer;
WHEREAS, the Commissioner ORDERS that JOHN W. EVANS AND BONNIE A. EVANS MAKE RESTITUTION of any sums obtained as a result of their violations of Sections 36b-16 and 36b-4(a) of the Act, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut. Specifically, the Commissioner ORDERS that:
| 1. | Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with a written disclosure which contains (a) the name and address of each of the individuals who purchased securities from Respondents from December 2, 2007 through the present, (b) the amount collected from each investor, (c) the date of each investment, and (d) the amount of any refunds of principal or purported interest payments made to each investor; |
| 2. | Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondents shall reimburse each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to each investor’s purchase of the securities. Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected investor; and |
| 3. | Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondents have reimbursed each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to each investor’s purchase of the securities. |
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to Section 36b-27 of the Act, each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. To request a hearing, complete and return the enclosed Appearance and Request for Hearing Form to the above address. If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. If a hearing is requested, the hearing will be held on November 30, 2016, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, each Respondent will have the right appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
If any Respondent does not request a hearing within the time period prescribed or fails to appear at any such hearing, the allegations herein against any such Respondent will be deemed admitted. Accordingly, the Order to Cease and Desist and Order to Make Restitution shall remain in effect and become permanent against any such Respondent and the Commissioner may order that the maximum fine be imposed upon any such Respondent.
| Dated at Hartford, Connecticut, | _____/s/____________ | |
| this 22nd day of September 2016. | Jorge L. Perez | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 23rd day of September 2016, I caused to be mailed by certified mail, return receipt requested, the foregoing Order to Cease and Desist, Notice of Intent to Fine, Order to Make Restitution and Notice of Right to Hearing to: John W. Evans, c/o Stephen P. Fogerty, Esq., Halloran & Sage LLP, 315 Post Road West, Westport, Connecticut 06880-4739 certified mail no. 7012 3050 0000 6997 6285; and Bonnie A. Evans, 253 Gay Street, Sharon, Connecticut 06069, certified mail no. 7012 3050 0000 6997 6292.
| ___/s/_____ | |
| W. C. Hall | |
| Paralegal |