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SEC Halts Prime Bank Scheme by Washington D.C. Law Firm and Pennsylvania Company
FOR IMMEDIATE RELEASE
Washington, DC, Dec. 6, 2011 – The Securities and Exchange Commission today announced that it has filed charges and obtained an emergency court order to halt a prime bank scheme in which the perpetrators stole investor funds to purchase luxury cars, take a trip to the Bahamas, and pay the bills of a Washington D.C. law firm.
The SEC alleges that Pennsylvania resident Frank L. Pavlico III and Washington D.C. attorney Brynee K. Baylor offered investors risk-free returns of up to 20 times the original investment within as few as 45 days through the purported “lease” and “trading” of foreign bank instruments in highly complex transactions involving unidentified parties and secretive “trading platforms.” However, the bank instruments and trading programs were entirely fictitious. Pavlico and Baylor provided investors with phony contracts and legal documents, digitally-created computer screen shots, and copies of fictitious foreign bank instruments as purported proof of the ongoing success of the transactions. Baylor and her law firm Baylor & Jackson P.L.L.C. acted as “counsel” for Pavlico’s company The Milan Group, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.
“Pavlico and Baylor produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing this is a highly-sophisticated investment opportunity,” said Stephen L. Cohen, Associate Director of the SEC’s Division of Enforcement. “This case is particularly egregious because attorneys hold a special position of trust, and Baylor and her law firm cloaked the Milan investment in the guise of licensed legal services to deceive investors and steal their money.”
Prime bank schemes typically lure investors into believing they are being given an exclusive chance to participate in an international investing program involving complex financial instruments that generate astronomical profits. Promoters often stress secrecy as a key to the success of the investments, and explain away the lack of specificity by stating that the financial instruments are too technical and complicated for non-experts to understand.
According to the SEC’s complaint filed on November 30 in federal court in Washington D.C. and unsealed by the court late yesterday, Pavlico and Baylor defrauded at least 13 investors out of more than $2 million since August 2010. They used vague and complex terms in their communications to confuse investors, and claimed that confidentiality concerns prevented them from providing more fulsome details regarding the status of the investment. Pavlico and Baylor also provided investors with bogus excuses attempting to explain the delay in providing the promised returns, such as feigned illnesses and false representations that the European bankers supposedly involved in the transaction were on extended vacation.
The SEC alleges that Baylor provided investors with “attorney attestation” letters that assured them the investments were legitimate, and investor contracts that promised investment profits would be shared among investors, Milan, and Baylor & Jackson. Meanwhile, Pavlico was using a fake name of “Frank Lorenzo” to conceal his 2008 money laundering conviction from investors. He failed to disclose that he served 10 months in prison and was on supervised release at the time he was soliciting their investments.
According to the SEC’s complaint, Pavlico and Baylor used investor funds to pay Baylor & Jackson business expenses as well as personal expenditures. Pavlico purchased a Range Rover and a Jaguar. Baylor made purchases at expensive restaurants and retailers including Jimmy Choo, and financed a trip to the Bahamas. Investor funds also were used to make payments to nine individuals and entities – including Baylor’s law partner Dawn R. Jackson – named as relief defendants in the SEC’s complaint for the purpose of recovering funds unrightfully in their possession.
The Honorable Rosemary M. Collyer granted the SEC’s request for a temporary restraining order, asset freezes, and other emergency relief to prevent Pavlico, Milan, Baylor, and Baylor & Jackson from further engaging in the investment program. The SEC seeks permanent injunctive relief and financial penalties against Pavlico, Milan, Baylor, and Baylor & Jackson as well as disgorgement from them and the relief defendants of all ill-gotten gains.
Separately, the Federal Bureau of Investigation arrested Pavlico on Nov. 29, 2011, charging him with wire fraud.
The SEC’s investigation was conducted by Christopher McLean and Carolyn Morris. The SEC’s litigation will be led by James Kidney.
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For more information about this enforcement action, contact:
Stephen L. Cohen, Associate Director, SEC Division of Enforcement – 202-551-4472
Timothy N. England, Assistant Director, SEC Division of Enforcement – 202-551-4959