I want to illustrate the factual situation described in the short article described below and the ethical issue(s) presented, including:
(1) The individual and organization factors that led to the ethics problems in the article(s), and
(2) Your judgment about why many underlying issues in ethical problems and crises seem to generalize from one specific organization to many others.
SEC Charges CRE Capital Corporation and James G. Ossie With Conducting Multi-Million Dollar Ponzi Scheme
Posted January 15th, 2009 by Indie Research ... in Government, Washington
FOR IMMEDIATE RELEASE 2009-6
Washington, D.C., Jan. 15, 2009— The Securities and Exchange Commission today charged Atlanta-area firm CRE Capital Corporation and its president James G. Ossie with operating a Ponzi scheme. The SEC has obtained an emergency court order freezing their assets and appointing a receiver for CRE.
Additional Materials:
• Litigation Release No. 20853
• SEC Complaint
According to the SEC's complaint, CRE and Ossie fraudulently obtained at least $25 million from investors during 2008 by representing that it would use their money to engage in a currency trading program. Most investors were advised that they would receive guaranteed returns of 10 percent every 30 days, although a few investors were promised as much as 20 percent. In fact, CRE's currency trading was not profitable and returns were paid to investors out of principal and money invested by later investors. CRE also falsely claimed that the firm and its program were audited by an outside accounting firm, which had concluded that CRE was not a Ponzi scheme. The SEC's complaint also charged CRE and Ossie with fraud relating to their offer to sell $100 million in CRE stock that was slated to begin in early 2009.
"The SEC's emergency action in this case will protect investors from further harm — both those who have invested and need all remaining assets preserved as well as those who were contemplating an investment," said Katherine S. Addleman, Regional Director of the SEC's Atlanta Regional Office. "We also want to remind investors to be skeptical of promoters promising exorbitant returns. Such claims should be a red flag to investors."
The SEC's complaint alleges violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to emergency relief, the Commission's complaint seeks disgorgement of the defendants' ill-gotten gains plus prejudgment interest and financial penalties.
The defendants immediately consented to the emergency relief sought by the SEC, and the Honorable Judge Richard W. Story, U.S. District Judge for the Northern District of Georgia, issued an order permanently enjoining CRE and Ossie from further violations and freezing their assets. A receiver was appointed to take control of CRE.
The SEC's investigation is continuing.
The SEC acknowledges the assistance of the Commodity Futures Trading Commission. The CFTC has filed a related action against the defendants.