U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19137 \ March 15, 2005
SECURITIES AND EXCHANGE COMMISSION v. BRYAN JAMES HAWES, FINANCIAL MANAGEMENT ADVISORY SERVICES, INC., AND FINANCIAL MANAGEMENT SERVICES, INC., (Defendants) AND ALPHA & OMEGA TRANSPORTATION, INC. (Relief Defendant), Civil Action No. 03-1786 (W.D. PA.) (filed November 20, 2003).
COURT ENTERS FINAL JUDGMENT AGAINST BRYAN J. HAWES FOR SECURITIES FRAUD
HAWES CONSENTS TO PERMANENT INJUNCTION AND A COMMISSION ORDER BARRING HIM FROM SECURITIES INDUSTRY
On March 9, 2005, the Honorable Donetta W. Ambrose, Chief Judge for the United States District Court for the Western District of Pennsylvania, entered a final judgment against Bryan James Hawes, a financial planner and investment adviser, for violating the antifraud provisions of the federal securities laws. In its Complaint filed on November 20, 2003, the Securities and Exchange Commission alleged that Hawes, individually and through entities he controlled, through an egregious abuse of trust and fraudulent dealings, misappropriated at least $1.2 million from investors whose assets he purported to manage. The Commission's complaint also alleged that Hawes stole from people he had known for many years, including his own elderly parents.
As alleged in the complaint, Hawes conducted his fraudulent schemes through two businesses he created: FMS, an insurance business, and FMAS, an investment adviser business. In one scheme, the complaint alleged, Hawes, through FMS, falsely told certain investors that he had purchased, as they had directed, annuity policies as investment vehicles. The complaint further alleged that, in fact, for some investors, Hawes never bought the policies but rather took the policy "premium" for himself. For other investors, the complaint alleged that Hawes initially purchased the annuities but later liquidated them without the clients' knowledge or authorization, keeping the proceeds for himself. Additionally, in a separate alleged scheme, Hawes, through FMAS, charged exorbitant and unauthorized management fees to investors who believed he was managing their assets. Hawes then hid his fraud from these investors by sending false account statements to the investors showing inflated balances and omitting the unauthorized fee deductions.
On April 8, 2004, Hawes pleaded guilty to two counts of mail fraud before the United States District Court for the Western District of Pennsylvania. On August 18, 2004, Hawes was sentenced to 98 months imprisonment and was ordered to pay $2,601,961.60 in restitution. Hawes is currently incarcerated.
Hawes, without or admitting or denying the allegations in the Commission's complaint, consented to the entry of the final judgment, which permanently enjoins him from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act"). According to the terms of the final judgment, all balances in accounts frozen in the Commission's initial action filed against Hawes will be applied in partial satisfaction of the criminal restitution order. In addition, under the terms of the final judgment, the other defendants in the original action were dismissed because they were essentially alter egos of Hawes and are in bankruptcy.
On March 15, 2005, based on the entry of the final judgment against Hawes, the Commission also instituted settled administrative proceedings against Hawes pursuant to Section 15(b) of the Exchange Act and Section 203(f) of the Advisers Act. Without admitting or denying the Commissions findings, Hawes consented to the entry of the Commission's order, which bars him from associating with any broker, dealer or investment adviser. In the Matter of Bryan James Hawes, Administrative Proceeding File No. 3-11857); Investment Advisers Act of 1940 Release No. 2365 (March 15, 2005).
For additional information about this matter, see also Litigation Release 18475, (November 20, 2003).