New York Securities Lawyer Blog
On August 10, 2016, the Securities and Exchange Commission (“SEC”) filed a complaint against Merrill Robertson, Jr. (“Mr. Robertson”), Sherman C. Vaughn, Jr. (“Mr. Vaughn”), and Cavalier Union Investments, LLC (“Cavalier Union”) (collectively the “Defendants”), alleging that they violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (the “Securities Act”), as well as Section 10(b) of the Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder (the “Complaint”).
Mr. Robertson was a professional football player for the Philadelphia Eagles, and is currently a co-owner and Managing Principal of Cavalier Union who previously held Series 7 and 66 securities licenses between April 2008 and December 2009. He is a resident of Chesterfield, Virginia. Mr. Vaughn, along with Mr. Robertson, is a co-owner and Managing Principal of Cavalier Union. Mr. Vaughn has never been registered with the SEC, and has filed for personal bankruptcy four times, which had not been disclosed to investors. Mr. Vaughn is also a resident of Chesterfield, Virginia. Cavalier Union is based in Midlothian, Virginia, and was formed in February 2010. Cavalier Union is not registered with the SEC.
According to the Complaint, the Defendants bilked more than $10 million from over 60 investors by fraudulently inducing them to invest in Cavalier Union promissory notes that purported to pay a fixed rate of return of between 10 and 20 percent by investing in “cash-producing tangible assets”, but were in fact part of a Ponzi scheme that allowed Mr. Robertson and Mr. Vaughn to live lavishly. These investors were comprised of “unsophisticated senior citizens and former football coaches, donors, alumni, and employees of schools [Mr. Robertson] had attended”, and Mr. Robertson and Mr. Vaughn “lied about their sophistication, the safety and security of the [Cavalier Union] promissory notes, and [Cavalier Union’s] financial condition” and “claimed that [Cavalier Union] used investor money to invest in a broad range of business ventures, such as restaurants, real estate, alternative energy, and assisted living facilities.”
In reality, Cavalier Union quickly became insolvent after its formation and began to bounce checks. Despite failing to make interest payments to investors and the closure of the few restaurants in which it did invest, Cavalier Union continued to receive funds from unknowing investors. In 2014, the Defendants raised $1 million in funds after losing the few assets they did hold, and in 2016, the Cavalier Union website listed businesses that had shuttered in 2014 as current assets.
According to the Complaint, the Defendants sent fraudulent statements to investors which indicated false account values, fabricated investment funds, and non-existent Cavalier Union holdings. In addition, they purported to secure the promissory notes sold to investors with security agreements and UCC financing statements, which in reality were never created.
According to Sharon B. Singer, Director of the SEC’s Philadelphia Regional Office, the Complaint “alleges that Robertson and Vaughn preyed on elderly victims and others who placed their trust in these individuals, only to have their savings stolen.”
The SEC is requesting that the Defendants be permanently restrained and enjoined from further violating any of the aforementioned laws and regulations, and that the Defendant be ordered to “disgorge any and all ill-gotten gains, together with prejudgment interest, derived from the activities set forth” in the Complaint. In addition, the SEC is requesting that the Defendants be ordered to pay civil penalties.
The United States Attorney’s Office is also pursuing criminal charges against Mr. Robertson.
The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses as a result of investment and securities fraud. If you are a victim of fraud, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.