U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19095 / February 22, 2005

SECURITIES AND EXCHANGE COMMISSION v. MARY PATTEN, et al., No. CV 03-8619 DSF (JTLx) (C.D. Cal.)

COURT ENTERS JUDGMENTS AGAINST OPERATORS OF $6 MILLION "PRIME BANK" SECURITIES FRAUD

On February 7, 2005, the Honorable Dale S. Fischer, U.S. District Judge for the Central District of California, entered a Default Judgment against defendants Mary Patten and her company Valenvalls Investment Corporation, Ltd. The Commission's complaint alleged that Patten and Valenvalls -- along with co-defendants Scott Hamilton and Harold Miller -- acted as the primary brokers of the "VV-PP," a purported "high-yield" trading program, through which the defrauded investors lost at least $6 million.

The Court enjoined Patten and Valenvalls from further violations of the anti-fraud and registration provisions of the federal securities laws (Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder). The Final Judgment against Patten and Valenvalls orders that they pay disgorgement, prejudgment interest and civil penalties in an amount that will be determined by the Court at a later date.

Previously -- on November 29, 2004 and January 19, 2005 -- the Court entered Final Judgments by Consent against defendants Scott Hamilton and Harold Miller, respectively. Hamilton and Miller consented to the entry of Final Judgments against them without admitting or denying the allegations in the Commission's complaint. The Court enjoined Miller and Hamilton from further violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, and Sections 10(b) and 15(a)(1) of the Exchange Act and Rule 10b-5 thereunder. The Final Judgment against Miller requires him to pay a civil penalty of $39,999 and disgorgement of $1.00. The Final Judgment against Hamilton waives payment of disgorgement and did not impose a civil penalty, based on Hamilton's sworn statement of financial condition and other information furnished to the Commission. Finally, in separate administrative proceedings, Hamilton and Miller also consented to orders permanently barring them from association with any broker or dealer. See In the Matter of Harold Miller, Admin. Proc. File No. 3-11811 (February 8, 2005) and In the Matter of Scott Hamilton, Admin. Proc. File No. 3-11778 (December 20, 2004).

The Commission filed the complaint in this matter on June 6, 2003. The Commission's complaint alleged that Hamilton and Miller -- through oral representations and written offering materials distributed to investors through a network of brokers -- falsely represented that: (1) investors' funds would be used to trade Medium Term Notes ("MTNs") on a secret market; (2) MTN trading would yield returns averaging 100 percent per week; (3) investors' funds would be pooled at Valenvalls, an allegedly insured financial institution that would pay an additional 20 percent return (over and above the guaranteed 100 percent per week); and (4) the VV-PP was "fed controlled" and subject to International Monetary Fund rules and regulations.

According to the complaint, after having potential investors referred from Hamilton and Miller, Patten sent the potential investors promotional materials about Valenvalls, which falsely represented that: (1) investors would receive individual accounts at Valenvalls, promoted as an 'international financeria' that could trade bonds, currency, real estate, and securities, and (2) Valenvalls would pay investors a 20 percent return on their investment (over and above the guaranteed 100 percent per week). The complaint also alleged that Patten sent investors account statements falsely indicating that their funds were earning 20 percent in individual Valenvalls accounts. Ultimately, the complaint alleged, the defendants lulled investors with misrepresentations that the VV-PP was proceeding as planned, when in fact Patten had diverted investors' funds to her personal use. See also Litigation Release No. 18179 (June 6, 2003).

http://www.sec.gov/litigation/litreleases/lr19095.htm