SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17454 / April 2, 2002
SEC v. Terry L. Dowdell, et al., Civil Action No. 3 01CV00116 (W.D.
Va.)
On March 14, 2002, following a three-day hearing, the Honorable James
H. Michael, Jr., Senior U. S. District Judge for the Western District
of Virginia, issued a preliminary injunction against three
participants in a Ponzi scheme that raised over $50 million. The SEC
alleged that Defendants Vavasseur Corporation, a Bahamian corporation,
Kenneth G. Mason, an attorney residing in Wilmette, Illinois and
Birgit Mechlenburg, a resident of Lenox, Massachusetts, offered
fictitious "prime bank" securities that they claimed would provide
virtually risk-free returns of 4 percent per week for 40 weeks per
year - up to 160% per year. Judge Michael had previously issued a
preliminary injunction by consent against Defendants Terry L. Dowdell
and Dowdell, Dutcher & Associates, Inc., both of Charlottesville,
Virginia.
The Court found that the SEC showed it was likely to prove that the
Vavasseur trading program being marketed by Dowdell, Mason and
Mechlenburg was fraudulent. Although the defendants represented that
funds invested in Vavasseur would be placed in trading accounts in the
Bahamas and profits would be generated by trading activity, the Court
found that investor funds were never transferred to such accounts and
that Vavasseur engaged in no trading.
The Court found that the SEC showed it was likely to prove that
Vavasseur Corporation, Mason and Mechlenburg engaged in and are likely
to engage in violations of Section 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 Court found that the SEC showed it was likely to prove that Mason
was reckless in recommending the Vavasseur program. The Court stated
that the danger of the Vavasseur program was so obvious that Mason
must have been aware of it. The Court found that Mason's due diligence
was inadequate, particularly where Mason admitted to knowing of no
other successful high yield program, knowing that Dowdell had no track
record in program management, and knowing that Vavasseur bore striking
similarities to the "prime bank" schemes about which the SEC had
issued an investor alert.
The Court also found that the SEC showed it was likely to prove that
Mechlenburg was reckless in promoting the Vavasseur program. Unlike
Mason, who expressed some doubt about the legitimacy of Vavasseur,
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
On March 14, 2002, following a three-day hearing, the Honorable James H. Michael, Jr., Senior
The SEC alleged that Defendants Vavasseur Corporation, a Bahamian corporation, Kenneth G.
Judge Michael had previously issued a preliminary injunction by consent against Defendants
The Court found that the SEC showed it was likely to prove that the Vavasseur trading program
Although the defendants represented that funds invested in Vavasseur would be placed in
The Court found that the SEC showed it was likely to prove that Vavasseur Corporation, Mason
The Court found that Mason's due diligence was inadequate, particularly where Mason admitted
The Court also found that the SEC showed it was likely to prove that Mechlenburg was reckless
Unlike Mason, who expressed some doubt about the legitimacy of Vavasseur, Mechlenburg stated
In the mid-1990's Mechlenburg was permanently enjoined from violating certain sections of the
The Court also found that the SEC showed it was likely to prove that Mechlenburg unlawfully
In addition, the Court found Mason to be in civil contempt because he withdrew $5,000 from
See previous Litigation Release No., November 19, 2001.
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