The Securities and Exchange Commission has obtained a court order to halt a bank scheme by two individuals who allegedly stole $2.1 million from at least 13 investors-money they then used to purchase luxury cars and take a trip to the Bahamas, SEC officials said.
The SEC alleges that Frank L. Pavlico III, of Clarks Summit, Pa., and Brynee K. Baylor, a Silver Springs, Md.-based lawyer, offered investors what they claimed were risk-free investments that would return up to 20 times the original investment within as few as 45 days. They claimed the investments involved the leasing and trading of foreign bank instruments in complex transactions involving unidentified parties and secret trading platforms, according to the SEC.
In reality, the SEC says, the investments were fictitious. Pavlico, 41, and Baylor, 37, used phony contracts and legal documents, digitally-created computer screen shots and copies of fictitious foreign bank instruments to dupe investors, according to the SEC.
The Federal Bureau of Investigation arrested Pavlico on Nov. 29 on charges of wire fraud.
Pavlico and Baylor defrauded at least 13 investors out of more than $2 million since August 2010, according to the SEC's complaint, filed Nov. 30 in federal court in Washington D.C. and unsealed by the court late yesterday.
According to the SEC's complaint, Pavlico and Baylor used investor funds to pay for business expenses of Baylor's law firm, Baylor & Jackson, and for personal expenditures. Pavlico purchased a Range Rover and a Jaguar. Baylor made purchases at expensive restaurants and retailers, including Jimmy Choo, and financed a trip to the Bahamas in September 2010, according to the SEC. Investor funds also were used to make payments to nine individuals and entities-including Baylor's law partner, Dawn R. Jackson-who were named as relief defendants in the SEC's complaint for the purpose of recovering funds unrightfully in their possession
The SEC claims that Pavlico and Baylor used vague and complex terms in their communications to confuse investors, and claimed that confidentiality concerns prevented them from providing more details regarding the status of the investment. In addition, the SEC claims that Pavlico and Baylor provided investors with bogus excuses to explain the delay in providing the promised returns, such as feigned illnesses and that the European bankers involved in the transaction were on vacation.
The SEC also claims that Baylor and her law firm acted as "counsel" for Pavlico's company The Milan Group, vouching for Pavlico and acting as an escrow agent, was receiving and diverting the majority of investor funds, according to the SEC.
Stephen L. Cohen, associate director of the SEC's Division of Enforcement, said Pavlico and Baylor essentially produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing they were entering into a sophisticated investment opportunity.
"This case is particularly egregious because attorneys hold a special position of trust, and Baylor and her law firm cloaked the Milan investment in the guise of licensed legal services to deceive investors and steal their money," Cohen added.
U.S. Federal District Judge Rosemary M. Collyer granted the SEC's request for a temporary restraining order, asset freezes and other emergency relief to prevent Pavlico, Milan, Baylor, and Baylor & Jackson from engaging in the investment program. The SEC is seeking permanent injunctive relief and financial penalties against Pavlico, Milan, Baylor and Baylor & Jackson, as well as disgorgement from them and the relief of the defendants' ill-gotten gains.