U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18996 / December 13, 2004
Securities and Exchange Commission v. SEC v. Delta Rental Systems, Inc., et al., Case No. 91-2136-CIV-DAVIS (S.D. Fla.)
The Securities and Exchange Commission ("Commission") announced that Philip R. Gratz, a former stockbroker who conducted business as Phoenix World Wide Enterprises, Inc. ("Phoenix"), was sentenced on November 19, 2004, to a term of imprisonment of eighty-seven months by United States District Court Judge Jose E. Martinez in Miami, Florida. Judge Martinez also ordered Gratz to pay restitution in the amount of approximately $8 million to victims of his securities fraud scam.
On July 19, 2004, Gratz pleaded guilty to one count of mail fraud, in violation of Title 18, United States Code, Sections 1341 and 2; one count of wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2; one count of securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff(a); and one count of criminal contempt, in violation of Title 18, United States Code, Section 401(3).
This case arose out of Gratz's illegal conduct while under an injunction from a prior Commission case. On April 30, 1992, the United States District Court for the Southern District of Florida in the case of SEC v. Delta Rental Systems, Inc., et al., Case No. 91-2136-CIV-DAVIS (S.D. Fla.) entered a Final Judgment of Permanent Injunction and Other Relief (the "Permanent Injunction") against Gratz. The Permanent Injunction prohibited Gratz from committing future violations of, among others, the anti-fraud provisions of the federal securities laws. In violation of the Permanent Injunction, from November 1998 to March 2003, Gratz, while doing business through Phoenix, conducted a scheme through which he defrauded various investors located in different states throughout the country, including investors residing in the Southern District of Florida.
On March 20, 2003, the Commission filed an emergency civil contempt action against Gratz in the United States District Court for the Southern District of Florida in order to put a halt to the scheme. In that action, the Commission charged Gratz with disobeying the provisions in the Permanent Injunction that enjoined him from future violations of the anti-fraud provisions of the federal securities laws. The following day, the Court granted the SEC's request for emergency relief, entered a temporary asset freeze, and appointed a Receiver to take over Phoenix. On May 20, 2003, with Gratz's consent, the Court entered an order on civil contempt sanctions, ordering Gratz to disgorge all ill-gotten gains, imposing an asset freeze, and awarding attorney's fees. On October 22, 2003, with Gratz's consent, the Court entered a Final Judgment on Civil Contempt and ordered Gratz to disgorge his ill-gotten proceeds.
The Commission's filing of its emergency civil contempt action against Gratz in March 2003 was based on the same activity that led to the criminal case. To carry out his scheme, Gratz solicited individuals to invest money with him in return for guaranteed annual "interest" payments ranging from 25% to 50%. During investor solicitations, Gratz falsely represented to investors, among other things, that he would invest all of their funds in the stock market. In truth, Gratz misappropriated over $3 million in investor funds for his and his family's personal use and benefit, including to purchase, among other things, a luxury home, real estate properties, two Mercedes Benz automobiles, artwork, jewelry and watches, home furnishings, a vacation to St. Barthelemy and a country club membership; and to pay for personal credit card expenses, which included, among other things, vacations, airfare, lodging, cruises, limousines, restaurants, designer clothes, and retail store purchases. Gratz induced investors to invest money by making false statements and omissions of material facts concerning, among others, the use of investor funds, the profitability of his securities trading, and his prior criminal and disciplinary history. The criminal contempt violation stemmed from Gratz's violation of the Permanent Injunction.
The SEC acknowledges the cooperative efforts of the United States Attorney for the Southern District of Florida and the United States Postal Inspection Service, Miami Division.