| * * * * * * * * * * * * * * * * * * * * IN THE MATTER OF: THE MCCALL BUSINESS GROUP, LLC CAUZAE MCCALL (Collectively "Respondents") * * * * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-2007-7225-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”). |
| 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, has conducted an investigation into the activities of Respondents to determine if they have violated, are violating or are about to violate provisions of the Act or Regulations. Section 36b-26(a) of the Act provides, in pertinent part:
The commissioner may, subject to the provisions of the Freedom of Information Act . . . (1) [m]ake such public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated, is violating or is about to violate any provision of sections 36b-2 to 36b-33, inclusive, or any regulation or order thereunder . . . . |
| 3. | As a result of the investigation by the Division, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. |
As a result of the investigation by the Division, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the Act, which provides, in pertinent part:
Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . or that the further sale or offer to sell securities would constitute a violation of said sections . . . the commissioner may, in the commissioner’s discretion, order (1) the person . . . to cease and desist from the violations . . . of the provisions of said sections . . . or from the further sale or offer to sell securities constituting or which would constitute a violation of the provisions of said sections . . . . After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. |
| 5. |
As a result of the investigation by the Division, the Commissioner has the authority to impose a fine on Respondents pursuant to Section 36b-27(d) of the Act, which prior to October 1, 2003, provided, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . the commissioner may send a notice to such person or persons by registered mail, return receipt requested . . . . Any such notice shall include: (A) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (B) a short and plain statement of the matter asserted or charged; (C) the maximum fine that may be imposed for such violation; and (D) the time and place for the hearing. Such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.
(2) The commissioner shall hold a hearing upon the charges made unless such person or persons fail to appear at the hearing. Said hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. If such person or persons fail to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, . . . to any person or persons named in such order. Section 36b-27(d) of the Act currently provides, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . the commissioner may send a notice to (A) such person . . . by registered mail, return receipt requested . . . . Any such notice shall include: (i) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; and (iv) the time and place for the hearing. Any such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.
(2) The commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person has violated . . . any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, . . . to any person named in such order. |
| 6. | MBG is a Connecticut limited liability company with its principal place of business last known to the Commissioner at 3047 Pinewood Hills Drive, Matthews, North Carolina 28105. |
| 7. | McCall is an individual whose address last known to the Commissioner is 3047 Pinewood Hills Drive, Matthews, North Carolina 28105. |
III. STATEMENT OF FACTS
| 8. | From at least September 2003 to the present, MBG was an issuer of securities in the form of promissory notes (“MBG Notes”). |
| 9. | On or about September 8, 2003, McCall, on behalf of MBG, effected the sale of an MBG Note to at least one Connecticut investor for a total of $25,000. The terms of the note provided, inter alia, that “FOR VALUE RECEIVED, (the borrower), The McCall Business Group promises to pay to (the lender) . . . the principal sum of twenty-five thousand ($25,000) USD, with interest payable on the unpaid principal at the rate of 10 percent per annum”. (Emphasis in original.) The terms of the note also provided, inter alia, that “[t]his promissory note will be repaid (into escrow) in consecutive monthly installments of interest only on the last Friday of each month commencing one month following execution of this promissory note and continuing until September 1st, 2004 with the principle [sic] balance owing under this note being paid at the end of its term”. (Emphasis in original.) |
| 10. | On or about September 8, 2003, the principal place of business of MBG and the primary residence of McCall was 23 Schoolhouse Road, Old Saybrook, Connecticut 06475. |
| 11. | On or about May 17, 2004, McCall, on behalf of MBG, effected the sale of an MBG Note to at least one Connecticut investor for a total of $150,000. The terms of the note provided, inter alia, that “FOR VALUE RECEIVED, (the borrower), The McCall Business Group promises to pay to (the lender) . . . the principal sum of One Hundred Fifty Thousand ($50,000) [sic] USD, with interest payable on the unpaid principal at the rate of 7.5 percent per month”. (Emphasis in original.) The terms of the note also provided, inter alia, that “[t]his promissory note will be repaid in consecutive monthly installments of interest only on the . . . the 15th of each month commencing one month following execution of this promissory note and continuing until the last Friday of May 2005 [sic], with the principle [sic] balance owing under this note being paid at the end of its term, unless (the lender) exercises their right to renew and extend this agreement”. (Emphasis in original.) |
| 12. | On or about May 17, 2004, the principal place of business of MBG and the primary residence of McCall was 222 Stonehouse Lane, Guilford, Connecticut 06437. |
| 13. | Both MBG and McCall failed to disclose, inter alia, any risk factors related to the investment, any financial information on MBG or McCall or the relevant work history of the managing member of MBG. Further, at least one Connecticut investor was guaranteed a 100 percent return on her investment. |
| 14. | The MBG Notes that were offered and sold by Respondents were never registered in Connecticut as required by Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they covered securities. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE AGAINST RESPONDENTS
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 unregistered securities to at least two Connecticut investors, as more fully described in paragraphs 9 through 12, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 14. 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, and for the imposition of a fine against Respondents for one violation each under Section 36b-27(d) of the Act prior to October 1, 2003, and one violation each under Section 36b-27(d) of the Act. |
b. Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any 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 8 through 13, inclusive, constitutes, in connection with the offer, sale or purchase of any security, employing any device, scheme or artifice to defraud, making of any untrue statements of material facts 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 any act, practice or course of business which operates 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 for one violation each under Section 36b-27(a) of the Act, and for the imposition of a fine against Respondents for one violation each under Section 36b-27(d) of the Act prior to October 1, 2003, and one violation each under Section 36b-27(d) of the Act. |
V. ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION BY THE DIVISION, THE COMMISSIONER FINDS that, with respect to the activity described herein, The McCall Business Group, LLC d/b/a MBG Private Trading and Cauzae McCall have violated Sections 36b-16 and 36b-4(a) of the Act;
THE COMMISSIONER FURTHER FINDS that the issuance of this Order 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.
THE COMMISSIONER THEREFORE ORDERS that The McCall Business Group, LLC d/b/a MBG Private Trading and Cauzae McCall CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation: (1) offering and selling unregistered securities, and (2) in connection with the offer, sale or purchase of any security, employing a device, scheme or artifice to defraud, making of any untrue statements of material facts or 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 any act, practice or course of business which operates as a fraud or deceit upon any person;
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-27(a) of the Act, McCall Business Group, LLC d/b/a MBG Private Trading and Cauzae McCall will be afforded an opportunity for a hearing on the allegations set forth above.
A hearing will be granted to The McCall Business Group, LLC d/b/a MBG Private Trading and Cauzae McCall if a written request for a hearing is received by the Department of Banking, Legal Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If The McCall Business Group, LLC d/b/a MBG Private Trading and Cauzae McCall will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on May 30, 2007, 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 Connecticut General Statutes. At such hearing, The McCall Business Group, LLC d/b/a MBG Private Trading and Cauzae McCall will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
This Order shall remain in effect and become permanent against The McCall Business Group, LLC d/b/a MBG Private Trading if it does not request a hearing within the prescribed time period, and against Cauzae McCall if he does not request a hearing within the prescribed time period.
VI. NOTICE OF INTENT TO FINE RESPONDENTS AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of an investigation by the Division that MBG and McCall each committed two violations of Section 36b-16 of the Act and two violations of Section 36b-4(a) of the Act;
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondents would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a fine not to exceed Ten Thousand Dollars ($10,000) per violation that occurred prior to October 1, 2003, and One Hundred Thousand Dollars ($100,000) per violation that occurred subsequent to October 1, 2003, or a maximum fine of Two Hundred Twenty Thousand Dollars ($220,000) on MBG and a maximum fine of Two Hundred Twenty Thousand Dollars ($220,000) on McCall.
NOW THEREFORE, a hearing will be held in accordance with Section 36b-27(d)(2) of the Act and Chapter 54 of the Connecticut General Statutes.
The hearing will be held on May 30, 2007, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
At the hearing, Respondents will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law relating to the allegations stated herein. If any Respondent fails to appear at such hearing, the Commissioner may order that the maximum fine be imposed upon such Respondent.
Dated at Hartford, Connecticut
this 19th day of April 2007. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 20th day of April 2007, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by registered mail, return receipt requested, to The McCall Business Group, LLC d/b/a MBG Private Trading, 3047 Pinewood Hills Drive, Matthews, North Carolina 28105, registered mail no. RB028033922US; and to Cauzae McCall, 3047 Pinewood Hills Drive, Matthews, North Carolina 28105, registered mail no. RB028033936US.
________/s/_________
Jesse B. Silverman
Prosecuting Attorney