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L & L FINANCIAL HOLDINGS, INC. * * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-07-7271-S |
PRELIMINARY STATEMENT
WHEREAS, the Banking Commissioner (the "Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the "Act"), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (the "Regulations");
WHEREAS, L & L Financial Holdings, Inc. ("L & L") of 720 Third Avenue, Suite 1611, Seattle, Washington is an issuer of securities;
WHEREAS, the Commissioner, acting pursuant to Section 36b-26 of the Act and through the Securities and Business Investments Division (the "Division") of the Department of Banking, has assessed the activities of L & L to determine if it has violated, is violating or is about to violate any provision of the Act or any regulation or order under the Act;
WHEREAS, the Commissioner alleges that, 1) on April 8, 2003, L &L employed one Stephen Patrick Johnston ("Johnston") of 6755 Mira Mesa Boulevard, Apt. 126, San Diego, California, as an Investor Relations Executive; 2) pursuant to his agreement with L & L, Johnston would receive a 35% commission, paid in cash upon the closing of investor subscriptions, such commission to be based upon the total investment funds generated through Johnston's efforts; 3) in or about August 2004, Johnston made at least one sale of L & L Class A common stock (the "2004 Offering") to a Connecticut investor and received $1,750 in commissions from L & L for such activity; 4) at no time was Johnston registered as an agent of issuer, as a broker-dealer or as a broker-dealer agent under the Act; and 5) at the time of the 2004 Offering, the Class A common stock was not registered under the Act nor the subject of a perfected exemption claim or claim of covered security status;
WHEREAS, the Commissioner also ascertained that on May 16, 2006, the State of California Department of Corporations entered a Desist and Refrain Order against L&L, Johnston and International Market Group, Inc., a Nevada corporation of which Johnston was president, based upon claims that from May 2003 through at least October 2004, they sold unregistered common stock and warrants through unsolicited telephone calls and engaged in fraudulent conduct by not telling investors that Johnston was receiving a 35% commission;
WHEREAS, Johnston has not responded to the Division's written requests for information on the 2004 Offering in Connecticut;
WHEREAS, the Commissioner alleges that L & L violated Section 36b-6(b) of the Act by employing an unregistered agent, and Section 36b-16 of the Act by offer or selling securities in this state absent registration or a perfected exemption claim or claim of covered security status;
WHEREAS, L & L has represented to the Division in writing that 1) in April 2005, it extended a $5,000 offer of rescission to the affected Connecticut investor; 2) since August 2004, it had not made any securities offerings in Connecticut; 3) it had severed its relationship with Johnston and had not engaged any non-registered person since; and 4) it would comply with Connecticut agent registration requirements prior to offering securities in Connecticut;
WHEREAS, on July 29, 2005, the Division received from L & L a filing pursuant to Section 36b-21(e) of the Act covering the 2004 Offering in Connecticut;
WHEREAS, the Commissioner acknowledges that L & L has been cooperative in providing requested documents to the Commissioner;
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-33, inclusive";
WHEREAS, Section 4-177(c) of the Connecticut General Statutes provides, in relevant part, that "[u]nless precluded by law, a contested case may be resolved by . . . consent order";
WHEREAS, the Commissioner finds that the entry of this Consent Order is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
WHEREAS, without holding a hearing and without trial or adjudication of any issue of fact or law, the Commissioner and L & L have reached an agreement to resolve this matter through the entry of this Consent Order;
WHEREAS, L & L expressly consents to the Commissioner's jurisdiction in this proceeding and to the entry of the sanctions in this Consent Order;
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, L & L, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. | To be afforded an opportunity for a hearing within the meaning of subsections (a) and (d) of Section 36b-27 of the Act and Section 4 177c(a) of the Connecticut General Statutes; |
| 2. | To present evidence and argument and to otherwise avail itself of Section 36b-27 of the Act and Section 4 177c(a) of the Connecticut General Statutes; |
| 3. | To present its position in a hearing in which it 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. |
FINDINGS OF THE COMMISSIONER AS TO EVIDENTIARY SUFFICIENCY TO INITIATE ADMINISTRATIVE PROCEEDINGS
WHEREAS, the Commissioner finds that sufficient grounds would exist to initiate enforcement proceedings against L & L, including, without limitation, the entry of an order to cease and desist against L & L under Section 36b-27(a) of the Act and the imposition of a fine of up to $100,000 per violation pursuant to Section 36b-27(d) of the Act, based on the following, all of which are more fully described above, after granting L & L an opportunity for a hearing:
| 1. | That, in or about August 2004, L & L violated Section 36b-6(b) of the Act by employing an unregistered agent; and |
| 2. | That, in or about August 2004, L & L violated Section 36b-16 of the Act by offer or selling securities in this state absent registration or a perfected exemption claim or claim of covered security status; |
CONSENT TO ENTRY OF SANCTIONS
WHEREAS L & L, through its execution of this Consent Order, acknowledges the possible consequences of an administrative hearing and voluntarily consents to the Commissioner issuing an order imposing on it the following sanctions:
| 1. | L & L, its officers, directors, agents, employees, representatives and successors in interest shall refrain 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 indirectly, including, without limitation, employing unregistered agents of issuer in violation of Section 36b-6(b) of the Act or selling securities in or from Connecticut in contravention to Section 36b-16 of the Act; |
| 2. | Effective on the date this Consent Order is entered by the Commissioner, L & L shall be BARRED for a period of ten (10) years from selling securities in or from Connecticut, notwithstanding any claim of exemption or covered security status that L & L otherwise could assert, and which claim L & L knowingly and voluntarily waives for purposes of this Consent Order; |
| 3. | Nothing in this Consent Order shall preclude L & L, upon a showing of good cause, from applying in writing for relief from the provisions of paragraph 2 of this Consent Order after seven (7) years have elapsed from the entry of this Consent Order. The grant of such relief shall be in the sole discretion of the Division Director; and |
| 4. | No later than the date this Consent Order is entered by the Commissioner, L & L shall remit to the department via check made payable to "Treasurer, State of Connecticut" the sum of two thousand five hundred dollars ($2,500), one thousand five hundred dollars ($1,500) of which shall constitute an administrative fine and one thousand dollars ($1,000) shall be applied to defray the costs associated with the Division's investigation of this matter; |
CONSENT ORDER
NOW THEREFORE, the Commissioner enters the following:
| 1. | The Sanctions set forth above be and are hereby entered; |
| 2. | Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement against L & L based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms hereof is not being observed or if any representation made by L & L and reflected herein is subsequently discovered to be untrue; and |
| 3. | This Consent Order shall become final when issued. |
________/s/_________
Howard F. Pitkin
Banking Commissioner
So ordered at Hartford, Connecticut
this 26th day of April 2007.
CONSENT TO ENTRY OF ORDER
I, Dickson Virchill Lee, state on behalf of L & L Financial Holdings, Inc. that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of L & L Financial Holdings, Inc. and that L & L Financial Holdings, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein.
L & L Financial Holdings, Inc.
By _________/s/_________________
Dickson Virchill Lee
Chief Executive Officer
On this 16 day of April 2007, personally appeared Dickson Virchill Lee, signer of the foregoing Consent Order, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of L & L Financial Holdings, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.
____________/s/_____________
Notary Public
My Commission Expires: 1-23-10