Release: #3946-96 (CIV 96-74525)
For Release: October 1, 1996
CFTC FILES CIVIL ANTI-FRAUD CHARGES IN MICHIGAN DISTRICT COURT AGAINST GARY BERUS INDIVIDUALLY AND D/B/A PROFIT MASTERS GROUP, MECA INTERNATIONAL, AND PATRICIA GALE
Complaint Alleges That Defendants Cheated and Defrauded
Approximately 50 Michigan Customers Out of Approximately $1 Million
Washington -- The Commodity Futures Trading Commission (CFTC) today announced the filing on September 30, 1996, of a seven-count civil complaint in the U.S. District Court for the Eastern District of Michigan against Gary Berus of Warren, Michigan (individually and doing business as Profit Masters Group), Meca International, Inc., a Michigan corporation controlled by Berus and located in Warren, and Patricia Gale of Gaylord, Michigan, a tax return preparer and financial planner.
The complaint alleges that from October 1992 to the present, the defendants violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations in that Berus, Meca International, and Gale fraudulently solicited approximately 50 elderly and retired Michigan residents to invest approximately
$1 million in two pools to trade, among other things, commodity futures contracts. The CFTC also charges that the defendants violated disclosure, reporting, and recordkeeping provisions of federal commodities law and CFTC regulations applicable to commodity pool operators.
In addition, the CFTC complaint alleges that Berus and Meca International fraudulently solicited approximately $376,000 from 10 individuals to trade commodity futures contracts in accounts managed by Berus, by, among other things, falsely representing their track record in trading such accounts and falsely stating that any losses could and would be limited to a specific amount.
As to the pools, the defendants are charged with cheating and defrauding customers by, among other things:
misrepresenting that pool investors had achieved and would continue to achieve significant profits ranging from 12 to 24 percent annually with little or no risk;
misrepresenting or failing to disclose the risks associated with commodity futures trading;
misrepresenting the track record of Berus' previous trading; and
misrepresenting the performances of the two commodity pools in written and oral statements, by reporting large profits when, in fact, neither of the pools was ever profitable.
Complaint Alleges that Berus and Meca Misappropriated Pool Funds, and Operated the Pools in a Manner Akin to a Ponzi Scheme
The complaint further alleges that Berus and Meca International misappropriated investors' funds in the pools and converted the funds to their own use for personal and unrelated business expenses, and to pay purported profits to other investors in a manner akin to a Ponzi scheme.
The CFTC complaint also charges that Berus and Meca International violated the CFTC registration requirements by acting in an unregistered capacity as commodity trading advisors in connection with the individual managed accounts and as unregistered commodity pool operators. Gale is charged with acting as an unregistered associated person of the commodity pool operators.
Finally, Berus and Meca International are charged with acting as unregistered commodity trading advisors by soliciting customers to purchase a computer software commodity trading system.
The CFTC is seeking preliminary and permanent civil injunctions against the defendants, restitution to customers, disgorgement of ill-gotten gains, and a civil monetary penalty against each defendant of up to $100,000, or triple the monetary gain, whichever is greater for each violation, among other remedial sanctions.
Simultaneous with the filing of the CFTC's action, the Securities and Exchange Commission filed a separate action, also in the U.S. District Court for the Eastern District of Michigan, alleging federal securities violations against Berus, Gale, and others in connection with several investment schemes related to the CFTC charges.
# # #