UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN



COMMODITY FUTURES TRADING COMMISSION,

Plaintiff

vs.

THOMAS W. LAMAR,

Defendant

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CIVIL ACTION NO. 98-70169

COMPLAINT FOR INJUNCTIVE

AND OTHER EQUITABLE RELIEF

I.

SUMMARY

1. From approximately March 1989 through at least October 1996, Defendant Thomas W. Lamar ("Defendant" or "Lamar") made misrepresentations of material facts, created and issued false statements to investors, misappropriated investors' funds and commingled investors' funds with funds of his own, all in connection with his operation of the Lamar Investments Group commodity futures trading pool (the "LIG" pool). In this scheme, the Defendant received, lost, and/or misappropriated at least $2 million from approximately 85 investors. Lamar lost approximately $1.05 million in investor funds trading futures in accounts in the name of LIG and $250,000 in investor funds trading futures in his own name. Lamar also misappropriated approximately $560,000 to pay his own personal expenses. As more fully set forth below, the Defendant has engaged in acts and practices that violated Sections 4b(a)(i-iii), 4m(1), 4n(3)(B), 4n(4), and 4o(1) of the Commodity Exchange Act, as amended ("Act"), 7 U.S.C. §§ 6b(a)(i-iii), 6m(1), 6n(3)(B), 6n(4), and 6o(1)(1994), and Sections 4.20(a)-(c), 4.21, 4.22, 4.30, and 4.31 (b) of the Commodity Futures Trading Commission Regulations ("Regulations"), 17 C.F.R. §§ 4.20(a)-(c), 4.21, 4.22, 4.30, and 4.31 (b)(1997).

2. Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1, Plaintiff Commodity Futures Trading Commission ("Commission" or "Plaintiff") brings this action to enjoin the Defendant's unlawful acts and practices, and to compel his compliance with the Act and the Regulations. In addition, the Commission seeks an accounting, the disgorgement of the Defendant's ill-gotten gains, restitution, and such other relief as this Court may deem necessary or appropriate.

Unless enjoined by this Court, the Defendant is likely to continue to engage in the acts and practices alleged in this Complaint and in similar acts and practices, as more fully described below.

II.

JURISDICTION AND VENUE

1 This Court has jurisdiction over this action pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1, which provides that whenever it shall appear to the Commission that any person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of the Act or any rule, regulation, or order promulgated thereunder, the Commission may bring an action against such person to enjoin such practice or to enforce compliance with the Act. This Court also has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1345.

2 Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. § 13a-1(e), because the Defendant is found in, inhabits, or transacts business in the Eastern District of Michigan, and the acts and practices in violation of the Act have occurred within this District, among other places.

III.

THE PARTIES

1 Plaintiff Commission is the independent federal regulatory agency charged with the administration and enforcement of the Act, 7 U.S.C. §§ 1-25 (1994), and the Regulations promulgated thereunder, 17 C.F.R. §§ 1.1-190 (1997).

2 Defendant Thomas W. Lamar, at all times between March 1989 and October 1996 (the "relevant period"), resided at 5409 Elizabeth Lake Rd., Waterford, Michigan 48327. Lamar has never been registered with the Commission in any capacity.

3 At all times during the relevant period, Lamar transacted business in the Eastern District of Michigan. Using the means and instrumentalities of interstate commerce, Lamar formulated, directed, controlled, and participated in the fraudulent acts and practices set forth in this Complaint.

IV.

FACTS

1 Beginning in approximately March 1989 and continuing through at least October 1996, Lamar solicited, accepted, and received approximately $2 million from at least 85 pool participants ("investors") in and around Troy, Michigan as well as in California, Illinois, and Minnesota, for the purpose of trading commodity futures, among other investment vehicles, on their behalf.

2 During the relevant period, Lamar operated sixteen investment accounts (twelve futures trading and four money market or stock accounts) in his own name and eight investment accounts (six futures trading and two money market or stock accounts) in the name of LIG, the trading pool. Although all of these accounts were active at some time during the relevant period, Lamar conducted his trading primarily in the futures accounts in the name of LIG and he suffered the majority of his trading losses in these accounts.

3 During the relevant period, Lamar also opened seven bank accounts (five checking and two savings) in his own name, as well as a checking account in the name of "Lamar Investments Group" (the "LIG bank account") for which he was the signatory. Lamar used the LIG bank account to receive and distribute pool participant funds and to transfer funds to and from the numerous trading accounts he controlled.

4 During the relevant period, Lamar lured friends, acquaintances, and members of his extended family into his investment scheme through direct written misrepresentations and through word of mouth recommendations from participating investors concerning the status and performance of the LIG pool. Most early participants were friends of Lamar or his wife, or members of Lamar's extended family. This initial group of investors then told other friends and family members about supposed "profits" Lamar reported to them and many of those persons later participated in the LIG pool. Lamar also solicited investors from a prostate cancer support group which he attended during his recovery from cancer in the early 1990's. The number of LIG pool participants grew steadily over the duration of the scheme. The vast majority of investors were individuals over the age of 55 who entrusted Lamar with all or a significant portion of their retirement savings.

5 After soliciting investors, Lamar accepted an initial deposit from investors of $5,000 for each "investment unit" of the LIG Pool. Lamar regularly distributed in person and through the mail an "LIG Monthly Account Status" report (the "MAS report") to each participating investor which purported to show month-end balances, realized and unrealized profits, monthly fees of $25 per investment unit, and commissions charged. The MAS reports did not reflect overall pool results, but only the purported results for the individual to whom they were sent. The MAS reports also failed to disclose significant monthly trading losses, which, over time, accumulated to more than $1.3 million. With the exceptions of reports mailed in December 1989 and February 1990, the MAS reports distributed by Lamar to investors consistently showed trading profits.

6 During the relevant period, the MAS reports consistently falsely showed increasing balances, i.e., principal plus reported profits not withdrawn by investors. In fact, as early as August 1990, the balances reported to investors in the MAS reports exceeded actual pool funds. MAS reports consistently showed fictitious profits of approximately two percent of the previous month's reported balance.

7 Although Lamar's trading on behalf of the LIG pool experienced occasional profitable months, Lamar was largely unsuccessful. During the relevant period, Lamar's actual trading usually resulted in a net monthly loss as demonstrated by the following approximate aggregate annual profits or (losses): 1989 ($31,000.00); 1990 ($310,000.00); 1991 ($174,000.00); 1992, $40,000.00; 1993 ($248,000.00); 1994 ($395,000.00); 1995 ($283,000.00); and, 1996, $9,600.00. Lamar lost an aggregate of over $1.3 million trading primarily contracts for the purchase and sale of commodities for future delivery.

8 Lamar operated the LIG pool as a typical Ponzi-scheme where earlier investors receive returns on their principal not based upon profits, but rather from deposits of principal from new investors. Lamar's scheme remained afloat only by reason of the regular, additional capital contributions that Lamar solicited from friends, family, and acquaintances.

9 During the relevant period, Lamar made numerous transfers from the funds deposited by investors of between $1,000 and $5,000 to his personal bank accounts during the operation of the LIG pool. Lamar transferred an aggregate of approximately $560,000 of investor funds for his own personal use.

10 During the relevant period, Lamar failed to provide full and complete disclosure to the pool participants of all futures market positions taken or held by him, as the principal of the LIG Pool. Lamar failed to regularly furnish accurate statements of account to each participant and the statements he did furnish did not include complete information as to the current status of all trading accounts in which Lamar had an interest. Lamar also failed to provide account statements and annual reports to pool participants showing total pool value and activity.

11 During the relevant period, Lamar identified the LIG pool only as a d/b/a sole proprietorship and thus failed to operate the LIG pool as an entity cognizable as a legal entity separate from the pool operator. Furthermore, Lamar, while acting as a Commodity Pool Operator ("CPO"), failed to deliver to pool participants a disclosure document for the pool containing the information set forth in Regulation 4.24, 17 C.F.R. § 4.24 (1997). Further, while acting as a CPO and a Commodity Trading Advisory ("CTA"), Lamar solicited, accepted or received funds and entered into an agreement to direct the participants' trading accounts without first receiving from the participants signed acknowledgments.

12 During the relevant period, Lamar, while acting as a CPO, accepted investor funds in his own name, rather than in the name of the pool. Similarly Lamar, acting as the pool's CTA, accepted funds in the name of the CTA. Furthermore, Lamar commingled pool funds with his own when he deposited investor funds into futures trading and bank accounts which contained his own funds.

V.

VIOLATIONS OF THE COMMODITY EXCHANGE ACT

COUNT I

VIOLATIONS OF SECTION 4b(a)(i)-(iii)

OF THE ACT, 7 U.S.C. § 6b(a)(i)-(iii):

FRAUDULENT STATEMENTS IN CONNECTION

WITH COMMODITY FUTURES CONTRACTS

1Paragraphs 1 through 19 are hereby realleged and incorporated herein by reference.

2 At various times during the relevant period, Lamar, in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, on or subject to the rules of any contract market, for or on behalf of any other persons, where such contracts for future delivery are or may be used for the purposes set forth in Section 4b(a) of the Act, 7 U.S.C. § 6b(a): (i) cheated or defrauded or attempted to cheat or defraud other persons by transferring LIG investor funds to certain investors out of funds deposited by other investors which he reported were profits earned on investments, failing to disclose that he thus operated the LIG pool as a Ponzi scheme, writing checks from the LIG pool bank account to his personal checking account for his personal use, and moving pool participants' funds directly into his own trading accounts; (ii) willfully made or caused to be made to other persons false reports or statements thereof by creating and distributing MAS reports which failed to disclose near-total losses of pool principal and continued to report fictitious profits; and, (iii) willfully entered or caused to be entered for other persons false records thereof by mailing or otherwise distributing the false MAS reports to participating LIG pool investors, all in violation of Section 4b(a)(i)-(iii) of the Act,

7 U.S.C. § 6b(a)(i)-(iii).

COUNT II

VIOLATIONS OF SECTIONS 4o(1)(A) and (B)

OF THE ACT, 7 U.S.C. § 6o(1)(A) and (B):

FRAUD IN CONNECTION WITH A COMMODITY POOL OPERATOR AND COMMODITY TRADING ADVISOR



1. Paragraphs 1 through 19 are realleged and incorporated herein by reference.

2. At various times during the relevant period, Lamar, acting as a CTA, and CPO, by use of the mails or other instrumentalities of interstate commerce, directly or indirectly, employed devices, schemes or artifices to defraud prospective clients and participants, or engaged in transactions, practices, or a course of business which operated as a fraud or deceit upon prospective clients and participants, in violation of Sections 4o(1)(A) and (B) of the Act, 7 U.S.C. § 6o(1) by the same conduct listed in Paragraph 21.

COUNT III

VIOLATION OF SECTION 4m(1) OF THE ACT, 7 U.S.C. §6m(1):

FAILURE TO REGISTER AS A COMMODITY POOL OPERATOR AND/OR COMMODITY TRADING ADVISOR

1. Paragraphs 1 through 19 are realleged and incorporated herein by reference.

2.A CTA is any individual who, for compensation or profit, engages in the business of advising others, either directly or through publications, writings or electronic media, as to the value or advisability of trading in any contract of sale of a commodity for future delivery made or to be made on or subject to the rules of a contract market. Section 1a(5) of the Act, 7 U.S.C. § 1a(5). With certain exceptions and exemptions not applicable here, any person who makes use of the mails or other means or instrumentalities of interstate commerce in connection with his business as a CTA is required to be registered as such with the Commission. Section 4m(1) of the Act, 7 U.S.C. § 6m(1).

3. A CPO is any individual engaged in a business that is of the nature of an investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in any commodity futures contract." Section 1a(4) of the Act, 7 U.S.C. § 1a(4). With certain exceptions and exemptions not applicable here, any person who makes use of the mails or other means or instrumentalities of interstate commerce in connection with his business as a CPO is required to be registered as such with the Commission. Section 4m(1) of the Act, 7 U.S.C. § 6m(1).

4. During the relevant period, Lamar engaged in the business of running a commodity futures trading pool and in connection with his running of the pool, Lamar solicited, accepted and received funds through capital contributions for the purpose of futures trading. In so doing, Lamar acted as a CPO as defined by Section 1(a)(4) of the Act, 7 U.S.C. § 1(a)(4). During the relevant period Lamar offered advice to the LIG pool and received compensation for this service, and thus Lamar acted a CTA as defined by Section 1a(5) of the Act, 17 U.S.C. § 1a(5). During the relevant period, Lamar, while acting as a CTA and CPO, used the mails and instrumentalities of interstate commerce, without being registered with the Commission as such and thereby violated Section 4m(1) of the Act, 7 U.S.C. § 6m(1).







COUNT IV

VIOLATION SECTIONS 4n(3)(B) AND 4n(4)OF THE ACT, 7 U.S.C. §§ 6n(3)(B) AND 6n(4) (1994), AND SECTIONS 4.21, 4.22, 4.30 AND 4.31(B) OF COMMISSION REGULATIONS, 17 C.F.R. §§ 4.21, 4.22, 4.30 AND 4.31(B) (1997): FAILURE TO PROPERLY DISCLOSE AND REPORT MARKET AND TRADING INFORMATION TO POOL PARTICIPANTS AND FAILURE TO OPERATE AND ADVISE THE LIG POOL IN ACCORDANCE WITH COMMISSION REGULATIONS

1. Paragraphs 1 through 19 are realleged and incorporated herein by reference.

2. Section 4n(3)(B) of the Act, 7 U.S.C. § 6n(3)(B), requires that a CPO disclose to pool participants the futures market positions taken by the pool's principals. Lamar failed to provide full and complete disclosure to the pool participants of all futures market positions taken or held by Lamar, the individual principal of the pool, in violation of Section 4n(3)(B) of the Act.

3. Section 4n(4), 7 U.S.C. § 6n(4), requires that a CPO furnish statements of account on a regular basis to pool participants containing complete and current information about the pool's status. Lamar failed to furnish statements of account on a regular basis to each pool participant, and the statements he did furnish did not include complete, accurate, or truthful information as to the current status of all trading accounts in which Lamar had an interest, in violation of Section 4n(4) of the Act.

4. Lamar also failed to provide account statements and annual reports to pool participants showing total pool value and activity and thereby violated Regulation 4.22, 17 C.F.R. § 4.22.

5. Lamar, acting as the pool's CTA, accepted funds in the name of the CTA, in violation of Regulation 4.30, 17 C.F.R. § 4.30.

6. Lamar, while acting as a CPO, failed to deliver to pool participants a disclosure document for the pool containing the information set forth in Regulation 4.24, in violation of Regulation 4.21(a), and Lamar solicited, accepted or received funds and entered into agreements to direct the participants' trading accounts without first receiving from participants signed acknowledgments as required and therefore violated Regulations 4.21(b), 17 C.F.R. §§ 4.21 (a) and 4.21(b).

7. Lamar, while acting as a CTA, solicited, accepted or received funds and entered into agreements to direct the participants' trading accounts without first receiving from participants signed acknowledgments and therefore violated Regulations 4.31(b), 17 C.F.R. § 4.31(b).

COUNT V

VIOLATION SECTIONS 4.20 OF THE COMMISSION'S

REGULATIONS, 17 C.F.R. § 4.20:

MISHANDLING OF INVESTOR FUNDS

1. Paragraphs 1 through 19 are realleged and incorporated herein by reference.

2. Lamar identified the LIG pool only as a d/b/a sole proprietorship and thus failed to operate the LIG pool as an entity cognizable as a legal entity separate from the pool operator, Lamar, in violation of Regulation 4.20(a), 17 C.F.R. § 4.20(a). Lamar accepted investor funds in his own name, thus in a name other than that of the pool, in violation of Regulations 4.20(b), 17 C.F.R. §4.20(b).

3. Lamar commingled pool funds with his own when he deposited investor funds into futures trading and bank accounts which contained his own funds, in violation of Regulation 4.20(c), 17 C.F.R. § 4.20(c).

VI.

RELIEF

WHEREFORE, Plaintiff respectfully requests that this Court:

A. Enter a permanent injunction enjoining the Defendant Lamar and any person insofar as he or she is acting in the capacity of officer, agent, servant, employee and attorney of the Defendant, and any person insofar as he or she is acting in active concert or participation with the Defendant who receives actual notice of such order by personal service or otherwise, from directly or indirectly:

1. violating Section 4b(a)(i-iii) of the Act, 7 U.S.C. § 6b(a)(i-iii), in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, made or to be made, for or on behalf of any other person by (i) cheating or defrauding or attempting to cheat or defraud such other person; (ii) willfully making or causing to be made to such other person any false report or statement thereof, or willfully entering or causing to be entered for such person any false record thereof; (iii) willfully deceiving or attempting to deceive such other person;

2. violating Section 4m(1) of the Act, 7 U.S.C. § 6m(1), by using the mails and instrumentalities of interstate commerce, without being registered with the Commission as a CTA and a CPO;

3. violating Section 4o(1) of the Act, 7 U.S.C. § 6o(1), by employing devices, schemes or artifices to defraud commodity customers and/or pool participants or prospective customers or participants, and engaging in transactions, practices or courses of business that operate as a fraud or deceit upon commodity customers and/or pool participants or prospective customers or participants;

4. violating Sections 4n(3)(B) and 4n(4), 7 U.S.C. §§ 6n(3)(B) and 6n(4), by failing to provide full and complete disclosure to the pool participants of all futures market positions taken or held by the individual principals of the pool while not registered as a CPO or CTA and failing to furnish statements of account on a regular basis to each pool participant, with complete, accurate, or truthful information as to the current status of all trading accounts;

5. violating Regulation 4.20(a), 17 C.F.R. § 4.20(a), by failing to operate a commodity pool as an entity cognizable as a legal entity separate from the pool operator, Regulation 4.20(b), 17 C.F.R. §4.20(b), by accepting investor funds in his own name rather than in the name of the pool, and Regulation 4.20(c), 17 C.F.R. § 4.20(c), by commingling pool funds with his own by depositing investor funds into futures trading and bank accounts which contained his own funds.

6. violating Regulation 4.21(a), 17 C.F.R. § 4.21 (a), while acting as a CPO, by failing to deliver to pool participants a disclosure document for the pool containing the information set forth in Regulation 4.24, and Regulation 4.21(b), 17 C.F.R. § 4.21(b), by soliciting, accepting or receiving funds and entering into an agreement to direct the participants' trading accounts without first receiving from participants a signed acknowledgment;

7. violating Regulation 4.22, 17 C.F.R. § 4.22, by failing to provide account statements and annual reports to pool participants showing total pool value and activity;

8. violating Regulation 4.30, 17 C.F.R. §  4.30, by accepting funds in the name of the CTA; and

9. violating Regulation 4.31(b), 17 C.F.R. § 4.31(b), while acting as a CTA, by soliciting, accepting or receiving funds and entering into an agreement to direct the participants' trading accounts without first receiving from participants a signed acknowledgment.

B. Direct the Defendant:

1. to disgorge to any officer appointed and directed by the Court all benefits received including, but not limited to salaries, commissions, loans, fees, revenues and profits derived, directly or indirectly, from acts or practices which constitute violations of the Act, as described herein including pre-judgment and post-judgment interest thereon; and

2. to make restitution by making whole each and every customer or participant whose funds were received or utilized by the Defendant in violation of the provisions of the Act, as described herein, including pre-judgment and post-judgment interest thereon; and

C. Order other ancillary and equitable relief as this Court may deem necessary and appropriate under the circumstances.

Respectfully submitted,





________________________

Michael C. Loughney

Attorney for Plaintiff

Commodity Futures Trading

Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

(202) 418-5404

(202) 418-5531 (facsimile)



Local Counsel, February 12, 1998



Office of the United States Attorney

Eastern District of Michigan

211 W. Fort Street, Suite 2300

Detroit, Michigan 48226