CFTC News Release 4438-00
For Release August 29, 2000
U.S. DISTRICT COURT IN WEST VIRGINIA ENTERS ORDER OF PRELIMINARY INJUNCTION AGAINST ROBERT L. DORMAGEN AND DELTA FINANCIAL CORPORATION IN CFTC ANTI-FRAUD ENFORCEMENT ACTION
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on August 18, 2000, U.S. District Court Judge Joseph R. Goodwin of the Southern District of West Virginia (Parkersburg Division) entered a consent order of preliminary injunction and other equitable relief against Robert L. Dormagen of Crossville, Tennessee (formerly of Ravenswood, West Virginia) and Delta Financial Corporation, a West Virginia corporation, defendants in a six-count CFTC anti-fraud complaint filed on July 3, 2000 (see CFTC News Release 4418-99, July 6, 2000).
The CFTCís complaint alleged that from July 1996 through July 1999, Dormagen fraudulently operated a commodity pool called Capital Group III, L.P. (CGIII), a West Virginia limited partnership.
The defendants, without admitting or denying the allegations in the CFTC complaint, consented to the entry of an order that enjoins and prohibits them, until further order of the court, from directly or indirectly violating the anti-fraud and registration sections of the Commodity Exchange Act and the Commissionís regulations.
In addition, the consent order 1) prohibits the defendants from destroying any documents that relate to the business practices of either Dormagen or Delta Financial, 2) requires the defendants to produce an accounting of all assets held in either defendant's name or in which either of them has had any direct or indirect beneficial interest from March 1, 1996, through the date of the order, and 3) temporarily freezes all assets of the defendants (except that Dormagen is permitted to withdraw and utilize a certain amount per month for reasonable and ordinary living expenses).
The CFTC complaint charges Dormagen, through his activities at CGIII, with defrauding 11 pool participants of approximately $175,300 by misappropriating and converting pool funds, distributing false account statements, and making material misrepresentations to pool investors. The complaint further alleges that Dormagen acted as an unregistered futures commission merchant by soliciting and accepting at least $165,000 from five individuals to trade commodity futures and options on their behalf. Dormagen allegedly defrauded these five individuals by misappropriating and converting their funds, distributing false account statements to them, and commingling their funds with the funds of non-commodity futures customers.
Delta Financial is charged with acting as an unregistered futures commission merchant and defrauding at least one individual based on Dormagenís actions as an agent of Delta Financial. The complaint also alleges that Dormagen, acting as an agent and principal of Delta, defrauded a single individual who sought to invest $500,000 through Dormagen. Dormagen allegedly used at least $125,000 of this customerís funds in unauthorized commodity futures and options trading, without the customerís knowledge.
In its continuing litigation, the CFTC intends to seek a permanent injunction, disgorgement, restitution, and civil monetary penalties of not more than the higher of $110,000 per violation (or $100,000 for violations prior to November 27, 1996) or triple the monetary gain to the defendants, among other remedial relief.
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