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IN THE MATTER OF: 4 L.I.F.E., INC. ("4LIFE") TERRY MAYFIELD ("Mayfield") * * * * * * * * * * * * * * * * * |
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ORDER IMPOSING FINE |
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, 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;
WHEREAS, the Commissioner, through the Securities and Business Investments Division of the Department of Banking (“Department”), conducted an investigation into the activities of Respondents, pursuant to Section 36b-26(a) of the Act, to determine if Respondents had violated, were violating or were about to violate provisions of the Act or Regulations;
WHEREAS, on March 8, 2007, the Commissioner, acting pursuant to Sections 36b-27(a) and 36b-27(d) of the Act, issued an Order to Cease and Desist (“Order”), Notice of Intent to Fine (“Fine Notice”), and Notice of Right to Hearing against Respondents (collectively “Notice”), which Notice is incorporated by reference herein;
WHEREAS, the Order provided that it would remain in effect and become permanent against Respondents if a hearing was not requested within 14 days of its receipt;
WHEREAS, the Fine Notice stated that the Commissioner intended to impose a fine against Respondents, that a hearing would be held on the matters alleged in the Fine Notice on May 15, 2007 (“Fine Hearing”), and that if Respondents failed to appear at the Fine Hearing, the Commissioner may order that a maximum fine of Two Hundred Thousand Dollars ($200,000) be imposed upon 4 LIFE and a maximum fine of Two Hundred Thousand Dollars ($200,000) be imposed upon Mayfield;
WHEREAS, on March 8, 2007, the Notice was sent to by registered mail, return receipt requested, to 4 LIFE (Registered Mail No. RB028033848US);
WHEREAS, on March 8, 2007, the Notice was sent to by registered mail, return receipt requested, to Mayfield (Registered Mail No. RB028033851US);
WHEREAS, on April 2, 2007, the Notice sent to 4 LIFE was returned to the Department marked “Returned To Sender – MLNA”;
WHEREAS, on March 13, 2007, Mayfield received the Notice;
WHEREAS, on April 12, 2007, the Notice was served on the Commissioner, and on April 18, 2007, Notice of Service on the Banking Commissioner was sent to 4 LIFE in accordance with Section 36b-33(h) of the Act;
WHEREAS, Section 36b-33(h) of the Act provides, in pertinent part, that “[w]hen any person, including any nonresident of this state, engages in conduct prohibited or made actionable by sections 36b-2 to 36b-33, inclusive, . . . and such person has not filed a consent to service of process under subsection (g) of this section and personal jurisdiction over such person cannot otherwise be obtained in this state, that conduct shall be considered equivalent to such person’s appointment of the commissioner or the commissioner’s successor in office to be such person’s attorney to receive service of any lawful process in any noncriminal suit, action, or proceeding against such person or such person’s successor executor or administrator which grows out of that conduct and which is brought under said sections . . . with the same force and validity as if served on such person personally. Service may be made by leaving a copy of the process in the office of the commissioner, and it is not effective unless (1) the plaintiff, who may be the commissioner in a suit, action, or proceeding instituted by the commissioner, forthwith sends notice of the service and a copy of the process by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to the defendant or respondent at the defendant’s or respondent’s last known address or takes other steps which are reasonably calculated to give actual notice, and (2) the plaintiff’s affidavit of compliance with this subsection is filed in the case on or before the return day of the process, if any, or within such further time as the court allows”;
WHEREAS, the Commissioner alleged in the Notice that Respondents offered and sold unregistered securities to at least two Connecticut investors, which securities were not registered in Connecticut under the Act, in 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 under Section 36b-27(d) of the Act;
WHEREAS, the Commissioner alleged in the Notice that the conduct of Respondents constitutes, in connection with the offer, sale or purchase of any security, employing any device, scheme or artifice to defraud, making 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, and that 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, and for the imposition of a fine against Respondents under Section 36b-27(d) of the Act;
WHEREAS, the Commissioner found in the Order, with respect to the activity described therein, that Respondents violated Sections 36b-16 and 36b-4(a) of the Act;
WHEREAS, on March 28, 2007, a certification was issued rendering the Order against Mayfield permanent as of March 28, 2007, which certification is incorporated by reference herein;
WHEREAS, on May 22, 2007, a certification was issued rendering the Order against 4 LIFE permanent as of May 3, 2007, which certification is incorporated by reference herein;
WHEREAS, Attorney William Nahas, Jr., was appointed Hearing Officer for the Fine Hearing;
WHEREAS, on March 26, 2007, the Commissioner issued a Redesignation of Hearing Officer appointing Paul A. Bobruff, Principal Attorney, as Hearing Officer, and stating that the Fine Hearing would be held on May 15, 2007, at 10 a.m., at the Department;
WHEREAS, by letter dated May 15, 2007, Brian J. Woolf, Esq., filed an appearance on behalf of Mayfield, and requested a continuance of the Fine Hearing;
WHEREAS, on May 15, 2007, during a telephone conference, Hearing Officer Bobruff granted Attorney Woolf’s request for a continuance of the Fine Hearing;
WHEREAS, by letter dated June 12, 2007, Hearing Officer Bobruff rescheduled the Fine Hearing to July 24, 2007, at 9 a.m.;
WHEREAS, by letter dated July 23, 2007, Hearing Officer Bobruff rescheduled the Fine Hearing to August 27, 2007, at 9 a.m.;
WHEREAS, by letter dated August 16, 2007, Hearing Officer Bobruff rescheduled the Fine Hearing to September 25, 2007, at 10 a.m.;
WHEREAS, by letter dated September 25, 2007, Hearing Officer Bobruff rescheduled the Fine Hearing to October 26, 2007, at 1 p.m.;
WHEREAS, by letter dated October 26, 2007, Hearing Officer Bobruff rescheduled the Fine Hearing to December 7, 2007, at 9 a.m.;
WHEREAS, by letter dated November 19, 2007, Hearing Officer Bobruff rescheduled the Fine Hearing to January 16, 2008, at 10:30 a.m.;
WHEREAS, by letter dated January 17, 2008, Hearing Officer Bobruff rescheduled the Fine Hearing to February 20, 2008, at 9 a.m.;
WHEREAS, by letter dated February 19, 2008, Hearing Officer Bobruff rescheduled the Fine Hearing to March 31, 2008, at 9 a.m.;
WHEREAS, by letter dated March 28, 2008, Attorney Woolf requested a continuance of the Fine Hearing scheduled for March 31, 2008, at 9 a.m.;
WHEREAS, by letter dated March 28, 2008, Hearing Officer Bobruff denied Attorney Woolf’s request for a continuance of the Fine Hearing scheduled for March 31, 2008, at 9 a.m.;
WHEREAS, on March 31, 2008, Respondents failed to appear at the Fine Hearing;
WHEREAS, Attorney Jesse B. Silverman represented the Department at the Fine Hearing;
WHEREAS, Section 36a-1-31(b) of the Regulations of Connecticut State Agencies provides, in pertinent part, that “[w]hen a party fails to appear at a scheduled hearing, the allegations against the party may be deemed admitted. Without further proceedings or notice to the party, the presiding officer shall submit to the commissioner a proposed final decision containing the relief sought in the notice, provided the presiding officer may, if deemed necessary, receive evidence from the department, as part of the record, concerning the appropriateness of the amount of any . . . fine . . . sought in the notice”;
WHEREAS, Section 36b-27(d)(2) of the Act provides, in pertinent part, that “[i]f 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”;
WHEREAS, Section 36b-31(a) of the Act provides, in pertinent 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”;
AND WHEREAS, Section 36b-31(b) of the Act provides, in pertinent 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-33, inclusive.”
II. FINDINGS OF FACT AND CONCLUSIONS OF LAW
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The facts as set forth in paragraphs 6 through 15, inclusive, of the Notice shall constitute findings of fact within the meaning of Section 4-180(c) of the Connecticut General Statutes, and the conclusions set forth in paragraphs 16 through 19, inclusive, of the Notice shall constitute conclusions of law within the meaning of Section 4-180(c) of the Connecticut General Statutes and Section 36a-1-52 of the Regulations of Connecticut State Agencies. |
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Section 36b-31(b) of the Act requires that the Commissioner find that an 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 Sections 36b-2 to 36b-33, inclusive, of the Act. Although the Commissioner is not required to make all these findings to make an order, since Section 36b-31(b) of the Act is clearly in the disjunctive, all of these elements are present in this case. While the term “public interest” is not defined in the Act, courts have determined that words of wide generality, like “public interest”, must take their meaning from the substantive provisions and purposes of the legislation and the words must be interpreted in the context of the regulatory scheme. See NAACP v. Federal Power Comm’n, 425 U.S. 662 (1976); N.Y. Central Sec. Corp. v. United States, 287 U.S. 12 (1932). “[I]t is for the legislature to determine what is in the public interest . . .”. Brosnan v. Sacred Heart Univ., 1997 Conn. Super. Lexis 2815, *47 (1997) (internal quotation marks omitted) (quoting West v. Egan, 18 Conn. Supp. 447, 450 (1953)). “[T]he primary purpose behind . . . [the Act] was to institute comprehensive registration requirements and thereby improve surveillance of securities trading.” State v. Andresen, 256 Conn. 313, 329 (2001) (internal quotation marks omitted) (quoting Connecticut National Bank v. Giacomi, 233 Conn. 304, 320 (1995)). “[S]tate securities laws, or ‘blue sky laws,’ are remedial statutes.” Id. at 322-23 (footnote omitted); see also, Papic v. Burke, 2007 Conn. Super. LEXIS 820 (Conn. Super. Ct. 2007). State securities laws contain antifraud provisions, require registration of brokers and sellers of securities and registration of securities themselves. Connecticut National Bank v. Giacomi, 233 Conn. at 320. The dominating purpose of state securities laws is to protect the public and to prevent and punish the fraudulent floating of securities. Andresen, 256 Conn. at 323. Thus, the “public interest” as it relates to the purposes of the Act includes comprehensive registration requirements to improve surveillance of securities trading, and to protect the public from fraudulent exploitation in the offer and sale of securities, which are key elements in the network of safeguards the legislature has enacted to protect the public investor. In this case, Respondents’ actions in violation of the Act involved disregarding a regulatory prohibition on offering and selling unregistered securities to at least two Connecticut investors and, in connection with the offer and sale of unregistered securities, employing a device, scheme or artifice to defraud, making an untrue statement of material facts or omitting to state a material fact necessary in order to make the statement 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, by guaranteeing a return of the monies invested and failing to disclose investment risks. There were repeated attempts by the two Connecticut investors to contact Respondents to seek repayment, but Respondents initially failed to return any funds to the Connecticut investors. The only mitigating factor regarding Respondents’ violations of the Act that justify a lesser sanction in this case is the repayment to two Connecticut investors of their principal investment. Respondents’ return of the principal investment only occurred after repeated attempts by the two Connecticut investors seeking a return of their investment had failed, and after the Department conducted an investigation and issued the Notice. Even considering this repayment to the two Connecticut investors, Respondents’ actions violated their agreements with the investors because Respondents never paid the investors the guaranteed interest, and Respondents failed to return the initial investment sum back within three to six months as required by the terms of the agreements with the investors. Respondents’ return of the principal investment to the two investors after the Notice was issued is a mitigating factor in determining the amount of the fine for Respondents’ violation of Section 36b-16 of the Act. However, Respondents’ return of the principal investment to the investors does not mitigate the fact that Respondents, in connection with the offer, sale or purchase of any security, employed any device, scheme or artifice to defraud, made untrue statements of material facts or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or engaged in any act, practice or course of business which operated as a fraud or deceit upon the two Connecticut investors in connection with the offer and sale of unregistered securities, in violation of Section 36b-4(a) of the Act. Consequently, the Commissioner finds that based upon the nature of 4 LIFE’s actions in violation of the Act, the facts require the imposition of a fine against 4 LIFE in the amount of $50,000 for violation of Section 36b-16 of the Act, and a fine against 4 LIFE in the amount of $100,000 for violation of Section 36b-4(a) of the Act. The Commissioner finds that based upon the nature of Mayfield’s actions in violation of the Act, the facts require the imposition of a fine against Mayfield in the amount of $50,000 for violation of Section 36b-16 of the Act, and a fine against Mayfield in the amount of $100,000 for violation of Section 36b-4(a) of the Act. The Commissioner finds that this proposed order imposing fine against Respondents is necessary and appropriate in the public interest and for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of Sections 36b-2 to 36b-33, inclusive, of the Act. |
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The Commissioner finds that the Notice was given to Respondents in compliance with Section 36b-27(d) of the Act and Section 4-177 of the Connecticut General Statutes.
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III. ORDER
Having read the record, I hereby ORDER, pursuant to Section 36b-27(d) of the Act, that:
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A fine of One Hundred Fifty Thousand Dollars ($150,000) be imposed against 4 L.I.F.E., Inc., to be remitted to the Department of Banking by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, no later than 45 days from the date this Order is mailed; |
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A fine of One Hundred Fifty Thousand Dollars ($150,000) be imposed against Terry Mayfield, to be remitted to the Department of Banking by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, no later than 45 days from the date this Order is mailed; and |
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This Order shall become effective when mailed.
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Dated at Hartford, Connecticut
this 10th day of October 2008. ________/s/_________
Howard F. Pitkin
Banking Commissioner
This Order was mailed by registered mail,
return receipt requested, to Respondents
on October 14, 2008.
4 L.I.F.E., Inc. Registered Mail No. RB027868537US
450 Stonewall Street, Suite 102
Atlanta, GA 30319
Terry Mayfield Registered Mail No. RB027868545US
120 Potters Pond Drive
Phoenixville, PA 19460
Brian J. Woolf, Esq. Registered Mail No. RB027868554US
The Law Offices of Brian J. Woolf, LLC
50 Founders Plaza, 2nd Floor
East Hartford, CT 06108-3209