Remember that cop who shot the Air Force veteran three times for obeying his order? He was acquitted on all counts.

Maeve Reston
LA Times
Friday September 21, 2007

A San Bernardino County jury Thursday acquitted a former sheriff's deputy of attempted voluntary manslaughter for opening fire on an unarmed, off-duty Air Force police officer after a high-speed chase last year, a brutal shooting videotaped by a bystander and aired nationwide.

Ivory John Webb Jr., 46, the son of a former Compton, Calif., police chief, was the first law enforcement officer ever to face criminal charges for an on-duty shooting in San Bernardino County in Southern California. Webb, who also was acquitted of assault with a deadly firearm, faced up to an 18-year prison sentence.
The jury of eight men and four women had spent less than half a day deliberating after the four-week trial in the San Bernardino courtroom, a case dominated by the video footage of the January 2006 shooting on a residential street in Chino, Calif., and dueling experts on police tactics and use of deadly force.

The prosecution's case focused on 1 minute, 15 seconds of raw, shadowy video, recorded about 10:30 p.m. Jan. 29, 2006, that showed Webb towering over Elio Carrion and then opening fire as Carrion appeared to be following his order to get up from a sprawled position on the pavement.

Carrion survived the shooting and is on duty at Barksdale Air Force Base in Louisiana.

Carrion, a 23-year-old senior airman who was home on leave after a six-month tour in Iraq, had been a passenger in a Corvette that led Webb on a chase that reached 120 mph through residential neighborhoods, ending when the car crashed into a block wall and Carrion jumped out of the car and onto the ground.

In the video, Carrion is seen raising his left hand toward Webb at least twice and then Carrion appears to use his right hand to gesture as he tells Webb several times, "We're here on your side" and "We mean you no harm." Webb tells Carrion to keep his hands on the ground and then appears to tell Carrion to "get up." When Carrion says, "OK, I'm getting up," and starts to rise, Webb shoots him three times.

Prosecutor R. Lewis Cope also leaned heavily on police tactics experts, arguing the tape showed an angry deputy whose repeated tactical errors led him to fire on Carrion without provocation, including Webb's failure to wait for backup to arrive.

Lead tactics expert Joe Callanan, a former Los Angeles County sheriff's lieutenant who trained officers on the use of force during 22 years with the department, said Webb engaged in "extraordinarily risky" behavior and shouldn't have left the safety of his patrol car.

During his testimony, Callanan also insinuated that Webb's decision to fire his weapon was a "deliberate" act -- not a panicked response -- because the deputy paused for at least a half-second between each of the three shots he fired.

"Rapid fire is more typical of panic situation. Timed fire is more deliberate, more thoughtful," Callanan testified.

However, an expert witness for the defense told jurors that Webb was clearly justified in shooting because, as the video recording showed, Carrion ignored commands to keep his hands on the ground and appeared to reach into his Oakland Raiders jacket for a weapon just before the deputy opened fire.

"There were a couple of times where (Webb) would have been justified in firing," Inglewood (Calif.) Police Sgt. Kent Ferrin testified. "He showed great restraint." Webb's lead attorney, Michael Schwartz, hammered Carrion's credibility, arguing that Carrion was not a heroic Iraq veteran portrayed in the media but a "nameless, faceless suspect" who endangered Webb's life and the lives of others by failing to stop his drunk friend from leading police at more than 100 mph through residential streets.

Schwartz accused Carrion of intentionally misleading the jury about how drunk he was on the night of the shooting.

He argued a military policeman like Carrion should have known better than to argue with a police officer and disobey commands to stop talking and keep his hands on the ground when he was being held at gunpoint.

Schwartz argued that Webb fired in self-defense not just because of one movement by Carrion, but because of a combination of threatening movements that followed a pattern of noncompliance by the airman.

Webb, the only officer present during the shooting, initially told detectives that Carrion had lunged at him after ignoring orders to stay on the ground.

Several days later, after watching a clip of the video, the 46-year-old former deputy told detectives he believed Carrion was reaching for a weapon when he fired.

During the trial, the prosecutor seized on those conflicting statements, saying it showed Webb initially tried to deceive investigators and then was forced to change his story when he realized the shooting was caught on tape.

Webb's attorney dismissed the prosecutor's claims that Webb made conflicting statements to investigators, arguing that Webb's description of what happened in a two-hour interview after the shooting was supported by what was seen in the videotape.

Not every statement uttered that night, Schwartz said, can be heard on the videotape. He said even the transcript of the muddied voices on videotape was in dispute.

Gang of Off-Duty Police Assault Cameraman

[ Click to title to see original article with video]

Officers Caught-On-Video Damaging Camera While Seeking to Intimidate Free Speech and Assault Journalist

JonesReport.com | September 19, 2007

A gang of off-duty New York police assaulted a cameraman, shouted verbal epithets and damaged a camera on a side street near Times Square just days before the sixth anniversary of 9/11.

The cameraman, Aaron Dykes, was filming a 9/11 Truth group that was passing through the street en route to Fox Studios only a few blocks away. Off duty police officers and other members of their group began shouting "a**holes" at the 9/11 truth group when one of the officers told the cameraman to "stop filming" and warned "I wouldn't walk this way," referring to the sidewalk he was blocking off.

The police included officers from throughout New York state (according to some of the recognized badges, which included one from Nassau County, NY) and may have come from other locations as well.

When Dykes refused to stop filming, another officer stepped up to batter the camera while stating "How you doing tonight." (see still frames below)

This prompted yet another officer to shove on the cameraman, saying "Get your f'n camera out of here."

This was witnessed by on-duty officer Donnellan who told the temperamental cops to ignore the cameraman. However, this did not stop the rest of the crowd from unleashing on the cameraman.

This off-duty cop ordered the on-duty officer to "Get that camera out of here right now," referring to the Infowars cameraman filming in the public street.

School board actions violate Brown Act

On Sept. 5, the Bear Valley Unified School District board meeting was delayed waiting for a board member to arrive. When president Ken Turney pounded the gavel and called for the meeting to begin, he made some changes to the agenda. Those changes may have violated the Brown Act.

Turney announced that four items on the open session of the Sept. 5 meeting were being moved until after the board met in closed session. The items weren’t listed on the closed session agenda. Nothing but an unnamed pending litigation case that’s been on the agenda for months was listed.

The Ralph M. Brown Act is a state law that is often called the open meeting law. It assures the public that government does its business openly and not behind closed doors. The Act requires things such as agendas, and posting the agenda and meeting notices 72 hours before the regular meeting. The Act requires the agenda to list items for discussion and action, and allows for the public to comment on items on the agenda among other things.

Closed sessions are allowed for certain discussion and action items, but those items must be disclosed on the posted agenda.

Turney, when he adjourned the open session portion of the Sept. 5 meeting, said, “We do have need for a closed session, and there will be action taken.”

The school board’s agenda has a standard item that appears on every school board agenda: Public Employee Discipline/Dismissal/Release/Reassignment/Transfer/Appointment Request. There were no specifics listed under this heading Sept. 5. Shelley Black, school board administrative secretary and secretary to the board, said the district’s legal counsel advised the district to put that on the agenda years ago. Black said it allows the board to enter into closed session if a serious employee issue arises after the agenda is posted.

According to Tom Newton, attorney for California Newspaper Publishers Association, the blanket public employee listing isn’t legal. The Brown Act was amended in 1994 to prevent government bodies from using a generic and intentionally vague summary item on agendas as a way to retreat behind closed doors without a specific item for discussion. If an agency covered by the Brown Act has a specific need for a closed session, it should be listed, Newton said.

The four items pulled from the open session of the Sept. 5 school board meeting dealt with facilitator agreements and mentor stipends. The first item was a facilitator agreement with Johanna Hofmeister for training she will provide the district’s certificated personnel.

The second item is a facilitator agreement with Elena Peavy. Peavy’s contract is for part-time counseling services at Big Bear Middle School for the 2007-08 school year per the Middle School Supplemental Counseling Program.

The third facilitator agreement pulled for discussion and action in closed session by the school board is an agreement with Mike Clifton to provide support and training for Big Bear High School coaches for the 2007-08 school year.

Hofmeister, Peavy and Clifton are former employees of the Bear Valley Unified School District, but are not considered current employees. Newton said in each case, the contract or facilitator agreements should have been discussed in open session. A government agency can go into closed session to discuss public employees or officers including individuals who function as an employee, Newton said. In this case, Peavy could be considered functioning as an employee, but the item should have been listed under closed session, Newton said.

The fourth item pulled for discussion and action, did have to do with employees. It asked the board to approve on site mentor teachers for the current school year and the stipends paid for assisting new teachers. The mentor teachers and the new teacher the mentors are assigned to are listed on a staff memo prepared by Laurie Bruton, director of curriculum for the school district.

Black said after the closed session, the board returned to open session to consider the four items. The facilitator agreements for Hofmeister and Clifton were approved 4-0. The agreement with Peavy 3-1 with Trustee Larry Poland voting no. The mentor teachers item died for lack of a motion and second.

The personnel exception in the Brown Act is to avoid undue embarrassment of public employees, Newton explained. But only specific items can be discussed behind closed doors under the act. Black does not attend closed sessions, but agreed that the items pulled for discussion didn’t qualify under the personnel exemption.

Carole Ferraud, district superintendent, said only two of the four items were discussed in closed session, the item regarding Peavy and the mentor teacher item. She said it’s her guess that Turney didn’t want to single anyone out, so he pulled all four items. Ferraud said she would speak to Turney about the action. However, Ferraud said the two items that were discussed fall under the personnel exemption.

Ferraud also said she has asked Black to check with legal counsel about the blanket listing for personnel items. The Grizzly asked Ferraud to also check with the district’s legal counsel about bringing the four items back at a future meeting for discussion and action in open session to cure the possible Brown Act violation.

Contact Judi Bowers at 909-866-3456, ext. 137 or by e-mail at jbowers@bigbeargrizzly.net.


School board actions violate Brown Act


By JUDI BOWERS

Wednesday, September 12, 2007 12:35 PM PDT



Editor

On Sept. 5, the Bear Valley Unified School District board meeting was delayed waiting for a board member to arrive. When president Ken Turney pounded the gavel and called for the meeting to begin, he made some changes to the agenda. Those changes may have violated the Brown Act.

Turney announced that four items on the open session of the Sept. 5 meeting were being moved until after the board met in closed session. The items weren’t listed on the closed session agenda. Nothing but an unnamed pending litigation case that’s been on the agenda for months was listed.

The Ralph M. Brown Act is a state law that is often called the open meeting law. It assures the public that government does its business openly and not behind closed doors. The Act requires things such as agendas, and posting the agenda and meeting notices 72 hours before the regular meeting. The Act requires the agenda to list items for discussion and action, and allows for the public to comment on items on the agenda among other things.

Closed sessions are allowed for certain discussion and action items, but those items must be disclosed on the posted agenda.


Turney, when he adjourned the open session portion of the Sept. 5 meeting, said, “We do have need for a closed session, and there will be action taken.”

The school board’s agenda has a standard item that appears on every school board agenda: Public Employee Discipline/Dismissal/Release/Reassignment/Transfer/Appointment Request. There were no specifics listed under this heading Sept. 5. Shelley Black, school board administrative secretary and secretary to the board, said the district’s legal counsel advised the district to put that on the agenda years ago. Black said it allows the board to enter into closed session if a serious employee issue arises after the agenda is posted.

According to Tom Newton, attorney for California Newspaper Publishers Association, the blanket public employee listing isn’t legal. The Brown Act was amended in 1994 to prevent government bodies from using a generic and intentionally vague summary item on agendas as a way to retreat behind closed doors without a specific item for discussion. If an agency covered by the Brown Act has a specific need for a closed session, it should be listed, Newton said.

The four items pulled from the open session of the Sept. 5 school board meeting dealt with facilitator agreements and mentor stipends. The first item was a facilitator agreement with Johanna Hofmeister for training she will provide the district’s certificated personnel.

The second item is a facilitator agreement with Elena Peavy. Peavy’s contract is for part-time counseling services at Big Bear Middle School for the 2007-08 school year per the Middle School Supplemental Counseling Program.

The third facilitator agreement pulled for discussion and action in closed session by the school board is an agreement with Mike Clifton to provide support and training for Big Bear High School coaches for the 2007-08 school year.



Hofmeister, Peavy and Clifton are former employees of the Bear Valley Unified School District, but are not considered current employees. Newton said in each case, the contract or facilitator agreements should have been discussed in open session. A government agency can go into closed session to discuss public employees or officers including individuals who function as an employee, Newton said. In this case, Peavy could be considered functioning as an employee, but the item should have been listed under closed session, Newton said.

The fourth item pulled for discussion and action, did have to do with employees. It asked the board to approve on site mentor teachers for the current school year and the stipends paid for assisting new teachers. The mentor teachers and the new teacher the mentors are assigned to are listed on a staff memo prepared by Laurie Bruton, director of curriculum for the school district.

Black said after the closed session, the board returned to open session to consider the four items. The facilitator agreements for Hofmeister and Clifton were approved 4-0. The agreement with Peavy 3-1 with Trustee Larry Poland voting no. The mentor teachers item died for lack of a motion and second.

The personnel exception in the Brown Act is to avoid undue embarrassment of public employees, Newton explained. But only specific items can be discussed behind closed doors under the act. Black does not attend closed sessions, but agreed that the items pulled for discussion didn’t qualify under the personnel exemption.

Carole Ferraud, district superintendent, said only two of the four items were discussed in closed session, the item regarding Peavy and the mentor teacher item. She said it’s her guess that Turney didn’t want to single anyone out, so he pulled all four items. Ferraud said she would speak to Turney about the action. However, Ferraud said the two items that were discussed fall under the personnel exemption.

Ferraud also said she has asked Black to check with legal counsel about the blanket listing for personnel items. The Grizzly asked Ferraud to also check with the district’s legal counsel about bringing the four items back at a future meeting for discussion and action in open session to cure the possible Brown Act violation.

Contact Judi Bowers at 909-866-3456, ext. 137 or by e-mail at jbowers@bigbeargrizzly.net.

San Bernardino lawman accused of assaulting women he arrested

A San Bernardino County sheriff's deputy was arrested Friday on suspicion of taking bribes and sexually assaulting five women he arrested between April and July, investigators said.

Matthew Linderman, 30, of Victorville, was booked into West Valley Detention Center. He is scheduled to be arraigned Monday in Superior Court in Victorville, although that could be postponed if he posts $500,000 bail.

The first of the alleged assaults was reported early last month, said Sgt. Rick Ells, a sheriff's department spokesman.

The deputy, who had patrol duties at the Mall of Victor Valley in Victorville, was initially put on administrative leave. As of Friday he was no longer with the sheriff's department, said Ells, who declined to provide details.

Ells would only say Linderman had been with the department for less than 10 years.

Detectives suspect that Linderman engaged in "inappropriate, illegal" sexual conduct with women he arrested, Ells said, adding: "We don't have a place for that in our department."

Sheriff Gary Penrod was out of the office and unavailable for comment Friday. Linderman could not be reached for comment.

According to the criminal complaint filed in court, Linderman is accused of soliciting four bribes on April 18, May 2 and July 30, soliciting another to engage in lewd conduct on April 18, oral copulation under the color of authority on May 2 and sexual battery by restraint on July 30.

Six of the eight counts are felonies.

The five women named as victims in the complaint are identified only by their first name and last initial.

The complaint against Linderman says one woman was touched while unlawfully restrained, two were forced to commit lewd acts with each other, and one was made to perform oral sex on Linderman by threat of arrest.

The sheriff's department declined to release Linderman's booking photograph.

Such photos are often released by authorities in the hope that other victims may recognize their attacker and come forward.

Ells said no additional victims are expected.

"At this point," he said, "we think we've located everybody."

Reach Paul LaRocco at 909-806-3064 or plarocco@PE.com

Victorville deputy arrested on sex-crime charges

A sheriff's deputy has been arrested on suspicion of sex crimes and soliciting bribes from women while on duty.

Deputy Matthew Linderman was taken into custody about 9 a.m. Friday at sheriff's headquarters in San Bernardino, according to sheriff's spokeswoman Arden Wiltshire. He posted bail.

Linderman, who has been with the department since 1998 and was assigned to the Victorville station, was charged with seven counts in a felony complaint filed Friday in Victorville Superior Court.

The deputy was a part of a two-man team in the Retail Theft Unit. The team's duties included handling thefts, shoplifting and other crimes in the city's stores.

Sheriff's deputies began an investigation after receiving a complaint about Linderman, Wiltshire said. All of the victims were adults.

"We take these complaints very seriously," Wiltshire said. "A thorough investigation was conducted, and the report was submitted to the district attorney."

Wiltshire would not discuss specific details of the case.

Prosecutors charged Linderman with sexual battery by restraint, soliciting another to engage in lewd conduct, oral copulation under color of authority and four counts of soliciting a
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bribe.

If convicted, the deputy could face more than 30 years in state prison.

Linderman, 30, was booked into West Valley Detention Center in Rancho Cucamonga and was being held on $500,000 bail.

Prosecutors in Victorville said Linderman could be arraigned as early as Monday.

The crimes are alleged to have occurred between April and July, according to the complaint reviewed by Gary Roth, chief deputy district attorney in Victorville.

But Roth said he could not elaborate.

"I really can't go into the facts," Roth said. "That will all be presented in court."

The case has been assigned to Deputy District Attorney Steve Sinfield for prosecution.

Contact writer Mike Cruz at (909) 386-3880 or via e-mail at mike.cruz@sbsun.com.

Administrative Proceeding Release No. 33-8838, In the Matter of MARTIN S. DUFFIELD and RAUL A. JORDAN,

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 8838 / September 5, 2007
SECURITIES EXCHANGE ACT OF 1934
Release No. 56353 / September 5, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12745
In the Matter of
MARTIN S. DUFFIELD
and RAUL A. JORDAN,
Respondent.
ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTIONS 15(b) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) and Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Martin S. Duffield and Raul A. Jordan (“Respondents”).
II.
In anticipation of the institution of these proceedings, the Respondents have each submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are admitted, Respondents consent to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial
2
Sanctions and a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b) and 21C of the Securities Exchange Act of 1934, as set forth below.
III.
On the basis of this Order and Respondents’ Offers, the Commission finds that:
Summary
These proceedings arise out of the offer and sale of promissory notes as part of a fraudulent scheme orchestrated by Daniel W. Heath through his company, D.W. Heath & Associates, Inc. (“Heath & Associates”). From 1996 until late April 2004, Heath & Associates, through sales agents such as Respondents Martin S. Duffield and Raul A. Jordan, raised over $138 million from more than 1,400 investors nationwide, most of whom were senior citizens, in an unregistered notes offering in two Heath-controlled entities, Private Capital Management, Inc. (“PCM”) and the PCM Fixed Income Fund I, LLC (“PCM Fund”) (collectively “PCM Notes”). Respondents offered and sold more than $6 million in PCM Notes to approximately 80 investors. Respondents made material misstatements and omitted material facts in selling the notes. First, Respondents falsely represented that the PCM Notes were “safe” and “secured” because they were “backed by assets” owned by companies that borrowed funds from PCM, and that returns were “guaranteed.” Second, they failed to disclose that they were paid a sales commission by Heath & Associates, or falsely claimed that they received no commission at all or misled prospective investors about the sources of the funds used to pay their commissions. Third, Respondents failed to disclose that in March 1998, the California Department of Corporations (“DOC”) had issued two desist-and-refrain orders against Heath, Heath & Associates, PCM, and the PCM Fund for the unregistered sale of securities and for acting as unregistered broker-dealers (“D&R Orders”). During the relevant period, Respondents were associated with registered broker-dealers and sold the PCM Notes without notice to or approval from those firms, and thereby engaged in the practice of selling away.
Respondents
1. Martin S. Duffield (“Duffield”) was a senior financial consultant with Heath & Associates from July 2001 to April 2004. From January 2000 to June 2004, Duffield was also a registered representative associated with broker-dealers registered with the Commission. Duffield, 51 years old, is a resident of West Covina, California.
2. Raul A. Jordan (“Jordan”) was a senior financial consultant with Heath & Associates from July 2001 to April 2004. From January 2000 to December 2002, Jordan was also a registered representative associated with broker-dealers registered with the Commission. Jordan, 51 years old, is a resident of Pasadena, California.
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Relevant Entities
3. Heath & Associates, incorporated in California in 1998, purported to be a financial services company that provided investment advice and estate planning services to senior citizens. Heath & Associates’ principal places of business were Brea, California and Hemet, California. It was the servicing agent and marketing agent for PCM and the placement and service agent for the PCM Fund. On March 30, 1998, the DOC issued two desist-and-refrain orders against Heath & Associates, Heath, PCM, and the PCM Fund for the unregistered sale of securities and for acting as unregistered broker-dealers. Heath & Associates was not registered with the Commission. Heath & Associates was placed under a court-ordered receivership in SEC v. D.W. Heath & Associates, Inc., et al., Civil Action No. CV-04-02949 JFW (Ex) (C.D. Cal.), Litigation Release No. 18689 (May 3, 2004).
4. PCM, a business entity of unknown form, was a fictitious business name for Daniel W. Heath, who was its co-founder, president, chief executive officer, and chief financial officer. PCM was purportedly the general manager of the PCM Fund. PCM was not registered with the Commission, and no registration statement had been filed or was in effect with respect to the notes offered by PCM. PCM was placed under a court-ordered receivership in SEC v. D.W. Heath & Associates, Inc., et al.
5. PCM Fund, a business entity of unknown form, was another fictitious business name for Daniel W. Heath. The PCM Fund was not registered with the Commission, and no registration statement had been filed or was in effect with respect to the notes offered by the PCM Fund. The PCM Fund was placed under a court-ordered receivership in SEC v. D.W. Heath & Associates, Inc., et al.
Background
6. From July 2001 to April 2004, Duffield and Jordan offered and sold over $6 million in PCM Notes to approximately 80 elderly investors who had attended free lunch workshops sponsored by Heath & Associates. At the workshops, Duffield and Jordan explained the benefits of investing in corporate notes that were secured or backed by assets. They compared the notes to a home mortgage, where the lender can foreclose on the property if the borrower defaults. They told prospective investors that corporate notes were much safer than stocks and bonds, did not fluctuate in price, and paid a much higher rate of return than bank certificates of deposit. After the presentations, Duffield and Jordan encouraged the attendees to sign up for a complimentary one-on-one consultation.
7. During these one-on-one consultations, Duffield and Jordan met with prospective investors at an office opened under the name Heath & Associates in Pasadena, California, and they handed out business cards that said each was a Heath & Associates “senior financial consultant.” Although prospective investors expected to receive a free financial check-
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up at these consultations, the real purpose of the meetings was to solicit them to invest in the PCM Notes.
8. During the follow-up meetings, Duffield and Jordan represented that PCM pooled investor funds to make loans to small and medium-sized companies. They claimed that PCM was experienced in making these loans as well as managing the loan portfolio for the benefit of investors. They assured prospective investors that the notes were “safe” and “secured” because they were “backed by assets” owned by PCM’s borrowers. They represented that the notes paid “guaranteed” annual returns ranging from 4.5% to 9%. If a prospective investor did not have sufficient funds readily available, Duffield and Jordan encouraged the investor to liquidate other investments regardless of surrender fees and other charges in order to invest in the notes. They also encouraged investors to use funds held in Individual Retirements Accounts.
9. Duffield and Jordan did not provide prospective investors with offering materials consistently, even after investors asked for documentation on the notes. Although Jordan received copies of the PCM Fund private placement memorandum (“PPM”) from Heath & Associates, Jordan stopped giving them out because, when he did so, prospective investors declined to invest due to the lack of financial information in the PPM. Jordan admitted that he “didn’t feel comfortable” when he read the PPM because of the dearth of financial and other information. Rather than giving prospective investors a meaningful disclosure document, Duffield and Jordan often based their sales presentations on a 16-page glossy, color brochure from PCM, which provided no financial statements or other material information about the risks of the investment. Some prospects were not even given the brochure. Some investors received the brochure only after they invested. In short, the brochure contained statements about seniors’ fears of outliving their money: “Maintaining your standard of living is one concern. The other is how long your money will last….The danger of outliving your assets is real.” Duffield and Jordan often repeated these same themes in their one-on-one consultations, telling prospective investors that the notes provided a “guaranteed,” “steady flow” of additional income or were an “income producing investment.”
10. Duffield and Jordan did not conduct any due diligence on the notes, PCM, or its purported borrowers. Instead, they relied solely upon representations about the investment from Heath or other unlicensed sales agents.
11. Duffield and Jordan told prospective investors that the PCM Notes were “safe” and “secured” because they were “backed by assets” owned by PCM’s borrowers. These representations were false because neither PCM nor the PCM Fund filed the necessary documents to secure the loans to unaffiliated borrowers such as UCC-1 financing statements, mortgages, trust deeds, or liens. Consequently, the investors’ security interest in any such collateral was not perfected and their funds were at risk. In fact, the vast majority of funds PCM provided to borrowers was not documented in any way and was essentially unsecured cash advances by PCM. Duffield and Jordan had no basis to represent that the notes were safe, secured, and backed by assets.
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12. Duffield and Jordan received commissions from the sale of the PCM Notes. Duffield and Jordan failed to disclose to prospective investors that they received a commission on the sale of the PCM Notes. In some instances, when asked, Duffield and Jordan falsely told prospective investors that they received no commission at all or misled the investors about the sources of the funds used to pay their commissions. Duffield told at least one investor that he was paid a commission by the companies that borrowed money from PCM, assuring her that “You’ll never have to write me a check.” In fact, Duffield and Jordan received a 6% commission on every sale from Heath & Associates. In addition, Heath & Associates paid them a “bonus” of 1% to 2% if they persuaded the investor to accept a lower interest rate or a longer term of maturity, but they did not disclose this arrangement to investors. Duffield and Jordan were paid commissions of $264,040 and $270,337, respectively, from the sale of the PCM Notes.
13. Duffield and Jordan failed to disclose to potential investors the D&R Orders against Heath, Heath & Associates, PCM, and the PCM Fund after Duffield and Jordan found out about the orders in March 2003. Duffield and Jordan continued to offer and sell the notes even though they knew that Heath and his entities were cited for conducting an unregistered offering of the PCM Notes, and that none was a registered broker-dealer as was required. Moreover, they misled existing investors by minimizing the importance of the D&R Orders. Duffield and Jordan told existing investors that the D&R Orders no longer applied because either the “problem” had been resolved years ago or because they were not selling securities. In fact, as Duffield and Jordan well knew, Heath and his entities were engaged in precisely the same violative conduct at issue in the prior D&R Orders.
14. As a result of the conduct described above, Duffield and Jordan willfully violated Sections 5(a) and 5(c) of the Securities Act, which prohibit the unregistered offer and sale of securities in interstate commerce unless an exemption from registration applies.
15. As a result of the conduct described above, Duffield and Jordan willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct in the offer and sale of securities and in connection with the purchase or sale of securities.
16. As a result of the conduct described above, Duffield and Jordan willfully violated Section 15(a) of the Exchange Act, which requires brokers and dealers who effect securities transactions through interstate commerce to be registered with the Commission or, if the broker or dealer is a natural person, be associated with a registered broker or dealer that is not a natural person.
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Disgorgement and Civil Penalties
17. Respondent Jordan submitted a sworn Statement of Financial Condition dated December 8, 2006, amended July 27, 2007, and other evidence and has asserted his inability to pay disgorgement plus prejudgment interest and a civil penalty. Respondent Duffield submitted a sworn Statement of Financial Condition dated December 8, 2006, amended August 1, 2007, and other evidence and has asserted his inability to pay disgorgement plus prejudgment interest and a civil penalty.
IV.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Respondents’ Offers.
Accordingly, pursuant to Section 8A of the Securities Act and Sections 15(b)(6) and 21C of the Exchange Act, it is hereby ORDERED that:
A. Respondents shall cease and desist from committing or causing any violations and any future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.
B. Respondent Duffield be, and hereby is barred from association with any broker or dealer.
C. Respondent Jordan be, and hereby is barred from association with any broker or dealer, with the right to reapply for association after five (5) years to the appropriate self-regulatory organization, or if there is none, to the Commission.
D. Any reapplication for association by Respondents Duffield and Jordan will be subject to the applicable laws and regulations governing the reentry process, and reentry may be conditioned upon a number of factors, including, but not limited to, the satisfaction of any or all of the following: (a) any disgorgement ordered against the Respondents, whether or not the Commission has fully or partially waived payment of such disgorgement; (b) any arbitration award related to the conduct that served as the basis for the Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or not related to the conduct that served as the basis for the Commission order; and (d) any restitution order by a self-regulatory organization, whether or not related to the conduct that served as the basis for the Commission order.
E. IT IS FURTHERED ORDERED that Respondent Duffield shall pay disgorgement of $264,040 plus prejudgment interest, but that payment of all but $42,000 is waived based upon Respondent’s sworn representations in his Statement of Financial Condition dated December 8, 2006, amended August 1, 2007, and other documents submitted to the Commission. Respondent Duffield shall, within ten (10) days of the entry of the Order, pay disgorgement of $42,000 to Robb
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Evans & Associates, LLC, the court-appointed receiver for Heath & Associates, PCM, and the PCM Fund pursuant to Rule 1102 of the Commission’s Rules on Fair Fund and Disgorgement Plans [17. C.F.R. § 201.1102]. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier’s check or bank money order; (B) made payable to Robb Evans & Associates, LLC; (C) hand-delivered or mailed to Robb Evans & Associates, LLC, 11450 Sheldon Street, Sun Valley, CA 91352; and (D) submitted under cover letter that identifies Duffield as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to the Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036. Based upon Respondent Duffield’s sworn representations in his Statement of Financial Condition dated December 8, 2006, amended August 1, 2007, and other documents submitted to the Commission, the Commission is not imposing a penalty against Respondent Duffield.
F. IT IS FURTHERED ORDERED that Respondent Jordan shall pay disgorgement of $270,337 plus prejudgment interest, but that payment of all but $5,000 is waived based upon Respondent’s sworn representations in his Statement of Financial Condition dated December 8, 2006, amended July 27, 2007, and other documents submitted to the Commission. Respondent shall, within ten (10) days of the entry of the Order, pay disgorgement of $5,000 to Robb Evans & Associates, LLC, the court-appointed receiver for Heath & Associates, PCM, and the PCM Fund pursuant to Rule 1102 of the Commission’s Rules on Fair Fund and Disgorgement Plans [17. C.F.R. § 201.1102]. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier’s check or bank money order; (B) made payable to Robb Evans & Associates, LLC; (C) hand-delivered or mailed to Robb Evans & Associates, LLC, 11450 Sheldon Street, Sun Valley, CA 91352; and (D) submitted under cover letter that identifies Jordan as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to the Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036. Based upon Respondent Jordan’s sworn representations in his Statement of Financial Condition dated December 8, 2006, amended July 27, 2007, and other documents submitted to the Commission, the Commission is not imposing a penalty against Respondent Jordan.
G. The Division of Enforcement may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondents provided accurate and complete financial information at the time such representations were made; and (2) seek an order directing payment of disgorgement, prejudgment and postjudgment interest, and the maximum civil penalty allowable under the law. No other issue shall be considered in connection with this petition other than whether the financial information provided by Respondents was fraudulent, misleading, inaccurate, or incomplete in any material respect. Respondents may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of disgorgement and interest should not be ordered; (3) contest the amount of disgorgement and interest to be ordered; or (4) assert any defense to liability or
8

Schlarmann testifies at Heath investment-fraud trial

Larre Schlarmann, who pleaded guilty two years ago to 10 felonies related to investment fraud, took the witness stand today in Corona to testify against his former business partners at Daniel W. Heath & Associates.

Schlarmann, 52, is currently serving a 15-year sentence in state prison for his role in what authorities say was a $190 million Ponzi scheme that preyed on elderly investors.

His 2005 guilty plea left three defendants in the case, who are now on trial. They are Daniel W. Heath, 50; Heath’s father, John, 81; and Denis T. O’Brien, 53.

Schlarmann entered the courtroom of Judge Ronald Taylor at about 9:45 this morning, wearing a shirt and tie with his hands cuffed in front of him. A baliff removed the handcuffs before Schlarmann was sworn in by the court clerk.

Speaking before a courtroom gallery that was largely filled with people who had lost money in the alleged fraud, many of them from Orange County, Schlarmann, under questioning from prosecutor Mike Quesnel, explained the history of his business dealings with Daniel Heath.

The two met in the early 1980s, when both were living in Chino and attending the same church, Schlarmann said. At the time, Schlarmann said, he was working in the grocery business, while Heath was working for Arrowhead Water Co. as a delivery driver and salesman.

About 1985, Heath went to work selling insurance for the International Order of Foresters, a fraternal organization, Schlarmann said. At about the same time, Heath loaned Schlarmann roughly $1,500 to set up shop as a mortgage broker in Chino. Schlarmann later moved his business to Big Bear.

In Big Bear, Schlarmann found himself trying to arrange financing for the owner of a small resort who wanted to expand into an adjacent property. Heath helped Schlarmann raise the money by arranging for some of his Foresters clients to make loans to the project, Schlarmann said.

Later, the resort property went into foreclosure, leading one of the investors to sue Heath and Foresters, Schlarmann said. When Foresters found out that Heath had been directing its members into outside investments, Heath’s employment with Foresters ended, Schlarmann said.

Heath nevertheless continued to raise money for investors to finish work on the resort property and operate it after it was foreclosed on. The property became known as Big Bear Manor and was owned by Heath and Schlarmann.

Big Bear Manor lost money for virtually the entire time that Heath and Schlarmann owned it, which was about 13 years, Schlarmann said. Heath continued to raise money from investors to cover the operating losses of the resort, Schlarmann said.

In 2004, when Heath’s offices in Brea and Hemet were raided and shut down by state and federal investigators, the resort probably owed more than $3 million to Heath’s investors, much of which was in the form of unsecured loans, Schlarmann said. Those investments were never “safe and secure,” Schlarmann said.

Prosecutors have previously shown the jury marketing materials that Heath gave to investors, which promised safe and secure returns to senior citizens.

After Heath’s firm was shut down, a court appointed receiver sold Big Bear Manor for about $1.2 million to Schlarmann’s brother, Schlarmann said.

The trial, which is starting its second week, is expected to last eight to 12 weeks. Schlarmann will continue testifying this afternoon.