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Entries in disgorgement (1)

Wednesday
Oct192011

SEC Halts $35 Million Ponzi Scheme

The Securities and Exchange Commission announced that it obtained an emergency order freezing the assets of a Texas man accused of operating a $35 million Ponzi scheme through the sale of distressed mortgages.  James G. Temme, 42, of Plano, and the entities he controls, including Stewardship Fund, LP, were charged with multiple violations of federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. In addition to the emergency asset freeze already obtained, the SEC is also seeking injunctive relief, civil monetary penalties, and disgorgement of ill-gotten gains with prejudgment interest.

According to the SEC, Temme controlled various limited partnerships, including Stewardship, which functioned as the general partner of at least sixteen entities through which interests were marketed to investors.  Since at least 2008, Temme lured potential investors by describing a plan to purchase non-performing home mortgage loans.  Temme would then work with homeowners in restructuring the non-performing loans into performing loans.  Investors would then share either in the payment stream from those performing loans or from the resale of the repackaged mortgages or underlying properties.   

Prior to the SEC instituting its enforcement action, Temme and the Stewardship entities were the targets of multiple civil lawsuits that raised similar allegations.  However, rather than curtail the fraud, the SEC alleges that Temme continued to raise funds from new investors.  This included at least $1.6 million in a Texas bank account, which represented the recommendation of the Stewardship Philanthropy Fund 4, LP ("SPF") by an investment adviser representative of a major investment bank.  That account was later closed due to questionable activity, but Temme continued to move funds around in efforts to pay various investor groups.  But Temme did not stop there and continued to solicit new investors.  In early 2011, Temme pitched the newly-created Equitas Housing Fund III, LP, which also promised to acquire non-performing home loans.  This resulted in new investor funds exceeding $3 million.  Since 2008, Temme raised at least $35 million from over 30 individuals and entities. 

The SEC has also sought the appointment of a receiver to marshal assets for the benefit of defrauded investors.  A hearing has been scheduled by United States District Judge Michael Schneider for October 27th.  

A copy of the SEC's Complaint is here