Facts

Morgan Peabody sold debentures and promissory notes issued by Sherwood Secured Income Fund and WFG Holdings from January 2007 through September 2008, ceasing operations in 2008.

The Securities and Exchange Commission filed suit against Morgan Peabody, its CEO, David Williams, Sherwood, WFG Holdings, and Williams Financial Group, alleging fraud.

PLAINTIFF'S CONTENTIONS:
The SEC contended that Williams told investors the funds raised by the WFG sales would be used to expand Morgan Peabody's operations, and 90 percent of funds would be invested in real estate. The SEC alleged that the funds were transferred to Williams instead, and that substantially less than 90 percent were invested in real estate.

DEFENDANTS' CONTENTIONS:
Williams denied being the sole owner of the corporation, and contended the funds transferred to him were legitimate commission payments and other funds transferred to Williams Financial were for real estate investments.

Damages

The SEC sought $3.3 million in misappropriated funds by Williams.

Result

The parties entered into a bifurcated settlement in which defendants agreed to pay $3.420,159.18 in disgorgement and prejudgment interest. The SEC also sought civil penalties, which were not included in the consent. Upon motion of the SEC, the court also awarded civil penalties of $3,420,159.18 against the defendants. The total judgment against defendants is $6,840,318.16.