Securities and Exchange Commission
Litigation Release No. 17780 / October 10, 2002
SEC v. Terry L. Dowdell, et al., Civil Action No. 3:01CV00116 (W.D. Va.) (Honorable James H. Michael, Jr.)
On September 30, 2002, the Honorable James H. Michael, Jr., Senior U. S. District Judge for the Western District of Virginia, Charlottesville Division, entered orders finding Kenneth G. Mason and Birgit Mechlenburg in civil contempt for violating the accounting and asset freeze provisions contained in a temporary restraining order ("TRO"), and extended in subsequent orders, that the court had entered on November 19, 2001 in connection with the SEC's lawsuit against Mechlenburg, Mason and others.
The lawsuit stems from a massive international Ponzi scheme orchestrated by Terry L. Dowdell, in which Dowdell, utilizing various marketers, raised more than $70 million from investors in the U.S. and abroad for a fictitious trading program purportedly involving the purchase and sale of foreign bank instruments and purportedly being operated by Vavasseur Corporation, a Bahamian corporation that is also named as a defendant in this action. Dowdell previously admitted the fraud, and consented to the disgorgement of all of his assets. According to the SEC's complaint, Mason and Mechlenburg were marketers for the program, and received hundreds of thousands of dollars in commissions in connection with their introduction of investors into the program.
The contempt motion against Mason, filed on June 20, 2002, arose from his omission of a bank account containing approximately $27,000 from an accounting he submitted to the Court in November, in violation of accounting requirements contained in the TRO, and for his dissipation of those funds without the knowledge or permission of the court, in violation of the asset freeze requirements of the TRO. The ruling came after an evidentiary hearing was held on the matter. This is the second time that the Court has held Mason in contempt. The Court previously found Mason in contempt on March 14, 2002, following the SEC's filing of the motion on February 6, 2002, for transferring $5,000 out of one of his accounts on the day that he learned of the TRO.
The contempt motion against Mechlenburg, filed on August 16, 2002, arose from her transfer of all of her assets overseas in violations of the asset freeze and repatriation provisions of the TRO. The SEC learned of this transfer from a neighbor of Mechlenburg, who reported in July 2002 that two gentleman were loading the contents of Ms. Mechlenburg's rented home into a large industrial shipping container. The shipping container was shipped our of the country before the SEC could obtain an order preventing it's removal. Mechlenburg had previously moved to an undisclosed location in Europe shortly after the Court entered a permanent injunction against Dowdell. Mechlenburg failed to appear at the contempt hearing, and her whereabouts are currently unknown.
Additional information on how prime bank and other banking-related investment schemes work can be found at the SEC's Prime Bank Fraud Information Center (http://www.sec.gov/divisions/enforce/primebank.shtml) in the enforcement section of the SEC's Web site. See previous Litigation Release No. 17242, November 19, 2001 and Release No. 17454, April 2, 2002.