Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_04-cv-01802/USCOURTS-casd-3_04-cv-01802-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

CASE NO. 04-CV-01802-JM(BLM)

ORDER GRANTING 

MOTION FOR ENTRY OF

vs. DEFAULT JUDGMENT

GLOBAL HEALTH; GLOBAL CLEARING;

GLOBAL STRATEGIES; GOLDMAN

QUINTERO & ASSOCIATES; VINCE

DORY; and JOSHUA ADAMS,

Defendants.

The Securities and Exchange Commission (“SEC”) moves for entry of default

judgment against Global Health, Global Clearing, Global Strategies, and Goldman

Quintero & Associates (collectively “Defendants”). Defendants have not filed a

response to the motion. The individual defendants, Vince Dory and Joshua Adams,

have similarly not responded to the motion. Pursuant to Local Rule 7.1(d)(1), this

matter is appropriate for decision without oral argument. For the reasons set forth

below, the motion for entry of default judgment is granted. By separate order, the court

enters final judgment against Defendants. 

BACKGROUND

On September 9, 2004 the SEC commenced this action alleging that Defendants

were violating various securities laws through a fraudulent investment scheme.

Defendants Global Clearing, Global Strategies, and Goldman Quintero & Associates

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purported to act as brokers and individual defendants Vince Dory and Joshua Adams

held themselves out as account representatives of these entities.

The scheme involved cold-calling potential investors, primarily elderly investors,

and convincing them to buy shares in a non-existent, non-registered security: Global

Health. As part of the scheme, Defendants allegedly falsified stock certificates and told

investors that the FDA had approved Global Health’s new drug. Defendants claimed

that Global Health had developed a successful new cancer treatment. As part of the

scheme, Defendants provided forged documents, on FDA letterhead, indicating that

clinical trials of the cancer drug “demonstrate the effectiveness of this specific therapy,

with little or no side effects.” Upon receipt of checks from investors, the monies were

deposited in Mexican bank accounts.

On September 9, 2004 the SEC moved for a temporary restraining order (“TRO”)

enjoining future securities law violations. The court granted the TRO and imposed an

asset freeze. The SEC attempted service but were unable to locate any of the

Defendants. Pursuant to court order, Defendants were served at their place of business

and by publication in three newspapers of general circulation. Defendants have not

responded to the complaint nor have the individual defendants.

On September 19, 2006 the Clerk of Court entered default against each

Defendant. The SEC now moves for entry of default judgment against each Defendant.

A motion for entry of default judgment against individual defendants Vince Dory and

Joshua Adams is calendared for January 2007.

DISCUSSION

Federal Rule of Civil Procedure 55(b) provides, in pertinent part, that after entry

of default, “the party entitled to a judgment by default, shall apply to the court therefor.”

Ordinarily, the default itself establishes defendant’s liability. “Upon default, the wellpleaded allegations of the complaint relating to liability are taken as true,” but not

allegations as to the amount of damages. Dundee Cement Co. v. Howard Pipe &

concrete Products, 722 F.2d. 1319, 1323 (3rd Cir. 1983); TeleVideo systems Inc. v.

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Heidenthal, 826 F.2d. 915, 917 (9th Cir. 1994). The amount of damages may be

determined from the allegations of the complaint although those allegations are not

controlling. Dundee, 722 F.2d. at 1323-24. Where plaintiff is entitled to reasonable

attorney’s fees by either contract or statute, the court will determine the amount to be

awarded. James v. Frame, 6 F.3d 307, 311 (3rd Cir. 1993).

The granting or denying of a default judgment is within the court’s sound

discretion. See Draper v. Combs, 792 F.2d 915 (9th Cir. 19986). The following factors

are considered in determining whether to grant a default judgment: the substantive

merits of plaintiff’s claim; the sufficiency of the complaint; the amount of money at

stake; the possibility of prejudice to plaintiff if relief is denied; and the possibility of

dispute as to any material facts in the case. Moreover, where practicable, policy

considerations militate in favor of considering cases on their merits rather than

resolving matters through default judgment procedures. Schwab v. Bullock's, Inc., 508

F.2d 353, 355 (9th Cir. 1974).

Here, the complaint’s allegations establish that Defendants violated the Federal

Securities Laws by, among other things, violating the registration provisions of Sections

5(a) and 5(c) of the Securities Act, 15 U.S.C. §§77e(1) and 77e(c), by selling

unregistered securities. Defendants sold Global Health, an unregistered security,

without complying with the registration requirements. Defendants Global Clearing,

Global Strategies and Goldman Quintero & Associates also violated the broker

registration provisions of 15 U.S.C. §78o(a)(1) when they actively and fraudulent

engaged in the sale of investments without complying with the brokerage registration

requirements. Defendants also violated the anti-fraud provisions of Section 10(b) when

they knowingly made material misrepresentations in connection with the sale of Global

Health securities. Having established liability, the only other issue concerns appropriate

remedies. 

Permanent Injunction. Section 20(b) of the Securities Act, 15 U.S.C. §77t(b),

and section 21(d) of the Exchange Act, 15 U.S.C. §78u(d)1), provide that upon proper

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showing, a permanent injunction shall be granted in enforcement actions brought by the

SEC. The SEC’s burden is met upon a showing that establishes a reasonable likelihood

of a future violation of the securities laws. SEC v. Murphy, 626 F.2d 633, 655 (9th Cir.

1980). Looking to the totality of the circumstances, the court concludes that Defendants

have acted brazenly and egregiously by falsely claiming – by means of forged FDA

documents – that Global Health, a non-existent company, had obtained FDA approval

to sell a non-existing drug for curing cancer. Defendants’ wrongful conduct occurred

over a prolonged period of time. Accordingly a permanent inunction is warranted to

protect the public and to prohibit Defendants from continuing with their fraudulent

schemes.

Disgorgement. The SEC also seeks the remedy of disgorgement. Disgorgement

is an equitable remedy designed to compel a defendant “to give up the amount by which

he was unjustly enriched” and to deter him and others from committing securities law

violations by making them unprofitable. SEC v. J.T. Wallenbrock, 440 F.3d 1109,

1113 (9th Cir. 2006). The court finds that disgorgement is an appropriate remedy and,

based upon the evidence submitted by the SEC, concludes that Defendants ill-gotten

gains total $247,250. The court also awards prejudgment interest through December

1, 2006 in the amount of $11,328.39, pursuant to 28 U.S.C. §1961, for a total amount

of $258,578.39.

Civil Penalties. Section 20(d) of the Securities Act and section 21(d)(3) of the

Exchange Act explicitly provide for the payment of civil monetary penalties in SEC

enforcement cases. 15 U.S.C. §77t(d) and 78u(d)(3). Civil penalties were enacted by

Congress “to achieve the dual goals of punishment of the individual and deterrence of

future violations.” SEC v. Moran, 944 F.Supp. 286, 296 (S.D.N.Y. 1996). Penalties

are available in three separate tiers. The first tier provides for a penalty of up to

$60,000. The second tier provides for a penalty of up to $300,000 where the violation

involved “fraud, deceit, manipulation, or deliberate or reckless disregard or a regulatory

requirement.” The Third tier provides for a penalty of up to $600,000 or the amount of

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the defendant’s gain if, in addition to the second tier elements, the violation directly or

indirectly resulted in substantial losses (or the risk of substantial losses) to other

persons. The amount of civil penalty is determined from the totality of circumstances.

In light of the egregious, continuous, and substantial federal securities laws violations

of Defendants, the court requires Defendants to pay a civil penalty in the amount of

$100,000.

In sum, the court enters default judgment against Defendants. By separate order,

the court enters final judgment against Defendants.

IT IS SO ORDERED.

DATED: December 11, 2006

 Hon. Jeffrey T. Miller United States District Judge cc: All Parties 

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