SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16618 \ July 3, 2000
SECURITIES AND EXCHANGE COMMISSION V. MARK GATCH AND HENRY BENJAMIN
SCHMIDT, Case No. C-1-97-599 (SSB) (S.D. Ohio, W.D.)
The Securities and Exchange Commission announced that in a decision
dated June 9, 2000, the Honorable Sandra S. Beckwith of the United
States District Court for the Southern District of Ohio has held that
Henry Benjamin Schmidt violated the antifraud provisions, as well as
other provisions, of the federal securities laws. Schmidt, age 66,
resides in St. Petersburg, Florida. Schmidt co-founded, owned, and
operated Ben Mar Investments, Inc. ("Ben Mar"), an unregistered
investment adviser in the Greater Cincinnati area. Ben Mar effectively
operated as a Ponzi scheme from 1992 through March 1995, resulting in
investor losses in excess of $12 million. Mark Gatch, the co-founder
and owner of Ben Mar, of Amelia, Ohio, previously settled the
Commission´s civil action against him, and is serving a five-year
prison term in connection with his operation of Ben Mar.
The Court, in ruling for the Commission on all counts of the
complaint, found that Schmidt
* Recklessly made representations to investors regarding Ben Mar´s
trading strategy and performance, in violation of Section 17(a) of
the Securities Act of 1933 ("Securities Act"), Section 10(b) of
the Securities and Exchange Act of 1934 ("Exchange Act") and Rule
10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment
Advisers Act of 1940 (AAdvisers Act@). The Court found that
Schmidt acted with scienter, failing to make even the most
elementary inquiries of Gatch or to seek basic information
regarding Ben Mar´s holdings or performance, in an extreme
departure from the standards of reasonable care he owed to
investors.
* Sold unregistered securities in violation of Section 5 of the
Securities Act. Schmidt sold promissory notes that promised
interest based on the performance of an investment pool managed by
Ben Mar (the "Ben Mar Fund"). In soliciting investors, Schmidt
told investors that they could expect to earn profits on their
investment of 4% to 5% per month, based on past performance.
* Aided and abetted Gatch´s violations of Section 203 of the
Advisers Act by assisting in Ben Mar´s operation as an
unregistered investment adviser.
* Failed to provide for an independent annual audit of funds and
securities held on behalf of clients, in violation of Section
206(4) of the Advisers Act and Rule 206(4)-2 thereunder.
Judge Beckwith permanently enjoined Schmidt from further violations of
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION V. MARK GATCH AND HENRY BENJAMIN
SCHMIDT,
The Securities and Exchange Commission announced that in a decision dated June 9, 2000, the
Schmidt co-founded, owned, and operated Ben Mar Investments, Inc., an unregistered investment
Mark Gatch, the co-founder and owner of Ben Mar, of Amelia, Ohio, previously settled the
The Court, in ruling for the Commission on all counts of the complaint, found that Schmidt *
* Sold unregistered securities in violation of Section 5 of the Securities Act.
Schmidt sold promissory notes that promised interest based on the performance of an
* Aided and abetted Gatch´s violations of Section 203 of the Advisers Act by assisting in Ben
* Failed to provide for an independent annual audit of funds and securities held on behalf of
Judge Beckwith permanently enjoined Schmidt from further violations of these provisions of
Judge Beckwith further ordered that Schmidt disgorge over $1.8 million dollars in ill-gotten
Judge Beckwith found that third-tier civil penalties against Schmidt were also appropriate,
For further information, see Litigation Release No. 15394 and Litigation Release No. 15530.
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