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United States Securities and Exchange Commission v. Powers

United States District Court, Seventh Circuit

January 29, 2014

UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
PHILIP T. POWERS, FRANK I. REINSCHREIBER AND GLOBAL FINANCIAL MANAGEMENT, LLC Defendants,

PLAINTIFF'S AGREED MOTION FOR ENTRY OF FINAL JUDGMENT AGAINST DEFENDANTS FRANK I. REINSCHREIBER AND GLOBAL FINANCIAL MANAGEMENT, LLC

JEFFREY COLE, District Judge.

Plaintiff Securities and Exchange Commission moves, on an agreed basis, for the entry of a final judgment against defendants Frank I. Reinschreiber and Global Financial Management, LLC (together "Defendants"). In support of its motion, the SEC has attached Defendants' consent to the entry of the final judgment as Exhibit 1 to this motion, and has attached the proposed final judgment referenced in that consent as Exhibit 2 to this motion. The SEC respectfully requests that the Court enter the final judgment, and grant such other and further relief as the Court deems just and proper.

EXHIBIT 1

CONSENT OF DEFENDANTS FRANK I. REINSCHREIBER AND GLOBAL FINANCIAL MANAGEMENT, LLC

1. Defendants Frank I. Reinschreiber and Global Financial Management, LLC ("Defendants") waive service of a summons, acknowledge having been served with the Third Amended Complaint ("Complaint") in this action, enter general appearances, and admit the Court's jurisdiction over them and over the subject matter of this action.

2. Without admitting or denying the allegations of Count I of the Complaint (except as to personal and subject matter jurisdiction, which Defendant admits), Defendants hereby consent to the entry of the final judgment in the form attached hereto (the "Final Judgment"") and incorporated by reference herein, which, among other things^

(a) permanently restrains and enjoins Defendants from violations of Section 15(a) of the Exchange Act [15 U.S.C. § 77o(a)];
(b) orders Defendants to pay, jointly and severally, disgorgement in the amount of $78, 348, plus prejudgment interest thereon in the amount of $1, 623;
(c) orders Defendants to cooperate with the Plaintiff in order to cause the transfer into the Registry of the Court for distribution to the Plaintiff, of the funds in the accounts identified below in the name of Global Financial Management, LLC at the time of the asset freeze in this action (plus any additions thereto), which are funds to which Defendants claim no entitlement. Rather, according to Defendants, this sum represents investor funds that had been transferred to Defendants in their capacity as escrow agent at the time of the asset freeze entered in this matter. The subject accounts are:
(d) orders Defendants to pay a civil penalty in the amount of $25, 000 under Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]; and
(e) permanently bars Defendants from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. A penny stock is any equity security that has a price of less than five dollars, except as provided in Rule 3a51-1 under the Exchange Act [17 C.F.R. 240.3a51-1].

3. Defendants acknowledge that the civil penalty paid pursuant to the Final Judgment may be distributed pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002. Regardless of whether any such Fair Fund distribution is made, the civil penalty shall be treated as a penalty paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Defendants agree that they shall not, after offset or reduction of any award of compensatory damages in any Related Investor Action based on Defendants' payment of disgorgement in this action, argue that they are entitled to, nor shall they further benefit by, offset or reduction of such compensatory damages award by the amount of any part of Defendants' payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Defendants agree that they shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the United States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this action. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Defendants, or either of them, by or on behalf of one or more investors based on substantially the same facts as alleged in the Complaint in this action.

4. Defendants agree that they shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any civil penalty amounts that Defendants pay pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors. Defendants further agree that they shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any penalty amounts that Defendants pay pursuant to the Final Judgment, regardless of whether such penalty amounts or any part thereof are added to a distribution fund or otherwise used for the benefit of investors.

5. Defendants waive the entry of findings of fact and conclusions of law pursuant to Rule 52 of the ...


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