November 13, 2013
Federal Court in California Orders Thomas B. Breen, a Principal of National Equity Holdings, Inc., to Pay $1.75 million to Settle Fraud Charges in CFTC Action
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order against a principal of National Equity Holdings, Inc. (National Equity), Thomas B. Breen, of Orange County, California, requiring Breen to jointly pay restitution to defrauded customers in accordance with a restitution Order set in a related criminal action of $1,059,096, and imposes a civil monetary penalty of $700,000 against Breen, as well as permanent trading and registration bans.
The Order, entered on November 5, 2013 by the Honorable James Selna of the U.S. District Court for the Central District of California, stems from a CFTC Complaint filed on November 8, 2011, against Defendants National Equity, Robert J. Cannone, Francis Franco, and Breen, charging them with fraudulent solicitation, misappropriation, and registration violations (see CFTC Press Release 6142-11).
The Order finds, and Breen acknowledges, that from at least June 2009 to May 2010, Breen, by and through National Equity, fraudulently solicited and accepted over $1.4 million to trade commodity futures contracts through a pool. In their solicitations, Breen, by and through National Equity, (1) falsely claimed to have a successful and experienced trader (Franco) for the pool, (2) misrepresented the likelihood of profits and the risks associated with trading commodity futures, (3) failed to disclose that they were not properly registered with the CFTC to operate a pool, and (4) failed to disclose their intended uses of pool participant funds.
The Order further finds that Breen and National Equity traded only a portion of the pool participant funds in proprietary accounts, and sustained overall and significant losses. Breen and National Equity concealed their fraud and trading losses from the pool participants by issuing false account statements reflecting profits. Approximately one year later, they claimed that participants’ fund were all lost in trading, but promised to return their funds.
The CFTC’s litigation continues against Defendant Francis Franco to determine the appropriate amount of a civil monetary penalty to be imposed and whether a personal trading ban should be imposed. However, on April 11, 2013, the court entered a consent Order of permanent injunction against Defendants National Equity and Cannone, requiring them to pay over $3.6 million of restitution and monetary penalties, among other sanctions, to settle the CFTC action (see CFTC Press Release 6567-13).
In related actions, Cannone, as well as the other Defendant Francis Franco, pled guilty to criminal violations of the Commodity Exchange Act, as amended. Cannone was sentenced to 27 months in federal prison, and ordered to pay the $1.05 million in restitution, jointly and severally with the other defendants. Franco was sentenced to 25 months, while Breen was sentenced to 40 months.
The CFTC thanks the Federal Bureau of Investigation, Orange County Office, and the U.S. Attorney’s Office for the Central District of California, Santa Ana Office, for their assistance.
CFTC Division of Enforcement staff members responsible for this case are Michelle S. Bougas, Heather Johnson, James H. Holl, III, and Gretchen L. Lowe.
Last Updated: November 13, 2013