UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

UNITED STATES SECURITIES AND

EXCHANGE COMMISSION,

Case Number 09-12950

Plaintiff, Honorable David M. Lawson

v.

JOHN J. BRAVATA, RICHARD J. 

TRABULSY, ANTONIO M. BRAVATA,

BBC EQUITIES, LLC, BRAVATA 

FINANCIAL GROUP, LLC, and SHARI A. 

BRAVATA,

Defendants.

_____________________________________/

OPINION AND ORDER GRANTING PLAINTIFF’S

MOTION FOR SUMMARY JUDGMENT

This matter is before the Court on the motion by plaintiff United States Securities and

Exchange Commission (SEC) for summary judgment. The SEC filed an amended complaint

alleging that defendants John J. Bravata, Richard J. Trabulsy, Antonio M. Bravata, BBC Equities,

LLC, and Bravata Financial Group, LLC unlawfully sold unregistered securities (Count I), violated

the Securities Act by defrauding investors (Counts II and III), violated the Securities Exchange Act

by engaging in a scheme to defraud investors (Count IV), and unlawfully sold securities without

registering under the Securities Exchange Act as broker dealers (Count V). The SEC seeks

damages, fines, disgorgement, and injunctive relief against those defendants, and disgorgement from

“relief defendant” Shari A. Bravata because she enjoyed the proceeds of the fraudulent scheme. 

Shortly after the complaint was filed in the summer of 2009, the Court entered a preliminary

injunction that froze the defendants’ assets, and, after holding an evidentiary hearing, continued the

injunction, which has remained in effect throughout this lawsuit. 

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While this case was pending, the government indicted defendants John Bravata, Richard

Trabulsy, and Antonio Bravata for various counts of conspiracy and wire fraud stemming from the

conduct alleged in the amended complaint in this case. Trabulsy pleaded guilty and a jury convicted

John and Antonio Bravata. The SEC argues in its motion that under the doctrine of collateral

estoppel, the fraud elements of its claims are established conclusively, there are no material fact

disputes on the other elements, and therefore it is entitled to a judgment as a matter of law. John

Bravata, Antonio Bravata, and Shari Bravata have filed responses opposing the motion. The Court

has reviewed the parties’ submissions and finds that the relevant law and facts have been set forth

in the motion papers and that oral argument will not aid in the disposition of the motions. Moreover,

John and Antonio Bravata are in prison and not able to attend a hearing, so an oral presentation by

the plaintiff would be one-sided and not serve a useful purpose. Accordingly, it is ORDERED that

the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(f)(2). 

There is no doubt that the criminal convictions are conclusive as to the elements necessary

to establish the crimes of wire and mail fraud and conspiracy to commit wire and mail fraud. The

fraudulent scheme alleged in the superseding indictment dealt with the BBC securities offerings. 

The defendants’ responses to the motions attempt to relitigate the defenses in the criminal case

rejected by the jury and the trial judge when he denied the motion for judgment of acquittal. And

their arguments are conclusory and contain no references to the record in this case, except for

sections of the private placement memorandum (PPM), which does not withstand the force of the

criminal convictions. The Court finds that there are no issues of material fact that warrant a trial,

and the plaintiff is entitled to a judgment as a matter of law on the defendants’ liability. “Relief

defendant” Shari Bravata argues that she is entitled to a jury trial to adjudicate the disgorgement

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claim, but because that is an equitable remedy, the Court, not a jury, must decide it. The undisputed

facts show that the SEC is entitled to the relief it seeks, and therefore the Court will enter judgment

against the defendants as outlined below.

I. Facts and proceedings

Defendant John Bravata formed Bravata Financial Group in January 2003. He started BBC

Equities on May 1, 2006. Between 2006 and June 30, 2009, these defendants received $55.2 million

from approximately 440 investors. The SEC alleges, and the evidence establishes, that the

defendants engaged in the unauthorized sale of securities to generate those funds, and that the

securities it offered for sale were part of a fraudulent scheme in which earlier investors were paid

“returns” from new investments remitted by subsequent investors. That type of investment structure

is commonly known as a pyramid or Ponzi scheme. 

The Michigan Office of Financial and Insurance Regulation issued a cease and desist order

against BBC in March 2009, and, as mentioned above, this Court issued a preliminary injunction

that froze BBC’s operations and assets in July 2009. The Court held an evidentiary hearing over

several days before ordering the injunction continued. The facts discussed below include

consideration of the testimony taken at the preliminary injunction hearing only insofar as (1) any

statements made by a party witness may be taken as party admissions, and the party points to no

other specific contradictory facts in the record, see Fed. R. Evid. 801(d)(2)(a); and (2) other

uncontested facts were established at that hearing, see Fed. R. Civ. P. 65(a)(2) (stating that

“evidence that is received on [a] motion [for preliminary injunction] and that would be admissible

at trial becomes part of the trial record and need not be repeated at trial”). See also Cintas Corp. v.

Perry, 517 F.3d 459, 466 n.2 (7th Cir. 2008) (holding that where discovery did not produce much

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additional evidence, “[t]he district court correctly articulated the summary judgment standard and

did not err in referring to findings from the preliminary injunction phase of the lawsuit”);

Clinkscales v. Chevron U.S.A., Inc., 831 F.2d 1565, 1570 (11th Cir. 1987) (holding that a transcript

of preliminary injunction hearing could be considered on a motion for summary judgment, although

the party offering testimony bore the burden of producing it); Century 21 Real Estate LLC v. All

Professional Realty, Inc., 889 F. Supp. 2d 1198 (E.D. Cal. 2012) (holding that in deciding a motion

for summary judgment the court could consider the substance of the testimony from the transcript

of a prior evidentiary hearing on a motion for preliminary injunction without taking judicial notice

of the transcript).

A. Background facts

Defendants John Bravata and Richard Trabulsy operated BBC Equities, LLC and Bravata

Financial Group, LLC. BBC Equities and Bravata Financial solicited contributions from

individuals, representing that the funds would be invested and specific returns would be realized. 

As mentioned above, approximately 440 individual investors transferred to BBC Equities and

Bravata Financial funds totaling $52,943,630. None of the defendants was a registered securities

broker or dealer at the time. 

The records of the corporate defendants reveal that the returns paid out to (or reinvested for)

earlier investors came not from proceeds earned by the companies’ investments, but rather from

funds contributed by later investors. The records also show that the investors’ money was used by

the individual defendants to purchase several personal luxury items. 

1. Inception date

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There is a dispute over the date the investment scheme began. The SEC contends that BBC

began taking money from investors on May 22, 2006. The defendants argue that no investment in

BBC Equities occurred until October 2006. The company records show that the transfers of funds

by Roman Kuzma and Lily Trabulsy (Richard Trabulsy’s grandmother) into the personal bank

accounts of John and Shari Bravata and the account of Bravata Financial represent the initial

investments in BBC Equities. BBC Equities’s promotional materials represent that the “inception

date” of the BBC Equities offering was May 1, 2006. As noted above, John Bravata founded BBC

Equities on that same date, although at the time BBC Equities was known as Bravata Holdings X,

LLC. On May 19, 2006, John and Shari Bravata’s primary bank account had a balance of $198.18. 

On May 22, 2006, Roman Kuzma wired $100,000 to the Bravatas’ primary bank account, and he

wired an additional $299,985 to the Bravatas’ bank account on June 9, 2006. On June 8, 2006,

Bravata Financial’s bank account had a balance of $9,440.27. The next day, Lily Trabulsy paid

$210,000, which was deposited into Bravata Financial’s bank account. After receiving Lily

Trabulsy’s $210,000 deposit, Bravata Financial transferred $120,000 to John Bravata’s primary

checking account and issued Richard Trabulsy a $45,000 check with the notation “commissions.”

John Bravata argues that investor Kuzma did not subscribe to the units offered and sold by

BBC Equities in June 2006. Kuzma states that he entered into a partnership with John Bravata to

purchase two distressed commercial properties in Brighton and Ferndale, Michigan for potential

resale, and he loaned Bravata funds to establish a financial services business. However, Kuzma

testified that he could not remember the specific dates of interactions with Bravata in the 2005-2007

time frame, and that he gave Bravata money during that period to invest in real estate. In a

settlement agreement that Kuzma entered with Bravata and BBC Equities in August 2008, Kuzma

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asserted that he was entitled to receive 3,000,000 Class A shares of BBC Equities securities as a

result of Kuzma’s advancing Bravata $890,000 for “real estate interests.” Kuzma, Bravata, and BBC

Equities agreed that “the funds [Kuzma] advanced were on account of his interests in [BBCEquities-related] entities and not loans to Bravata.” SEC Ex. 75, p. 1. Therefore, Kuzma’s advances

can be considered as nothing other than the initial investment in BBC Equities. 

The funds received were to be used to invest in real estate. However, shortly after receiving

Kuzma’s funds, John Bravata purchased a 1995 Ferrari sports car. He contends that he paid for the

Ferrari from a $119,000 commission check that he earned during his employment at New York Life

Insurance Company. He maintains that the check was deposited into his personal account on June

9, 2006. The record shows, however, that the Kuzma funds were wired to the account earlier, when

the account balance was less than $200. Luz Aguilar, an accountant from the SEC, testified that the

New York Life commission check was in the amount of $60,000 and cleared the account on June

16, 2006. On June 13, 2006, Bravata wrote the Cauley Ferrari dealership a $5,000 check for a down

payment on a $90,288 Ferrari sports car, and on June 16, 2006, Bravata issued an $85,268.40

cashier’s check to Cauley Ferrari to complete the purchase of his Ferrari. Without the money he

received from Kuzma and Lily Trabulsy, Bravata did not have enough money to purchase the

Ferrari. Kuzma testified that he was unaware that Bravata purchased the Ferrari using Kuzma’s

money. 

2. Fraudulent nature of the investment scheme

Money was solicited from investors at a series of luncheon seminars, where John Bravata,

Antonio Bravata, and others made representations that the SEC contends were false. The defendants

maintain that they made several disclosures to prospective investors that countermanded some of

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the statements made at the presentation seminars. In fact, the first PPM disclosed the possibility that

new investors may help pay distributions to old investors. It stated that BBC had not derived

sufficient income from its investments for quarterly distribution payments, and all quarterly

payments of the preferred distribution had been paid from the proceeds received from other

investors. It also disclosed that there was no guarantee that the “Preferred Distribution” or any

redemption amounts would be paid when due. The PPM also stated that “given the early stage of

the Company’s development, the start-up and operating expenses incurred and other factors, the

Company would have insufficient resources to fully redeem all currently outstanding Class C

shares” in the case of liquidation. SEC Ex. 38, p. 25. The PPM continued to state that no assurances

could be given that acquisitions of real estate or real-estate-related investments made with the

proceeds of its offering would produce a return on investment or generate any operating cash flow,

and that the Company would use investor funds from “this” offering to pay the Preferred

Distributions or redemption amounts to the holders of interests until the Company showed a profit

from its operations (which it never did).

However, the uncontested evidence also demonstrates that many of the early investors —

at least 150 — never received a PPM before investing. See SEC Ex. 39. BBC Equities did not

distribute the first PPM until February 2007, and even then it was distributed only to certain

prospective investors. From May 22, 2006 through February 6, 2007, a total of 15 BBC Equities

investors wrote checks or sent wires totaling at least $3,274,073 to the defendants’ bank accounts

in exchange for Class A and C membership interests in BBC Equities securities. Before February

2007, John Bravata and Antonio Bravata gave presentations to prospective BBC Equities investors

at “free lunch” seminars held in restaurants, which likely is not the environment one would frequent

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when seeking “qualified investors.” John Bravata told prospective investors his “first rules of

investing,” and he represented that those rules — maximizing return without imperiling principal

— were the guiding philosophies of BBC Equities. He told prospective investors that BBC Equities

secured their principal investments, which were guaranteed by certificates of deposit being held at

Comerica Bank.

In fact, the value of BBC Equities’s certificates of deposit never exceeded $413,000. Neither

John nor Antonio Bravata told prospective investors before the PPM was constructed that BBC

Equities’s continued viability depended on a continuing flow of investor proceeds. John Bravata

did tell the prospects that if BBC Equities’s investors did not make money, then he did not make

money. He explained that no manager at BBC Equities received a salary; they only got paid if BBC

Equities made a profit. The evidence, however, shows that John Bravata did receive a salary and

paid himself from investor proceeds regardless of whether BBC Equities earned a profit. The salary

was paid through BBC Management, which in turn received payment from BBC Equities. Also

before the PPM was constructed and distributed, John and Antonio Bravata both told prospective

investors that BBC Equities guaranteed the returns on their investments and that BBC Equities

offered 12% guaranteed returns.

Robert DeFauw, an Ann Arbor resident and executive at an automotive parts manufacturer,

was one of the attendees at a presentation given by John Bravata at the Ritz Carlton in Dearborn in

the summer of 2006. He testified that John Bravata told approximately 20 to 30 prospective

investors that BBC Equities would use investor money to invest in real estate, and that as “angel

investors,” these prospective investors’ money would be protected and they could only lose their

money if all subsequent investors lost their money first. John Bravata made representations to the

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group consistent with those described above. SEC Exhibit 1, a video recording of presentations

made by Antonio and John Bravata in Jaunary 2008, shows John Bravata making representations

similar to those described by Mr. DeFauw.

James Deakin testified that he did not remember John Bravata making a sales pitch or

guaranteeing investment returns at the Ritz Carlton presentation, and he says that he received a PPM

in March 2007. He remembers a reference to “angel investors,” but he construed that term

differently than Mr. DeFauw. Mr. Deakin’s lack of memory of representations described by Mr.

DeFauw does not contradict DeFauw’s testimony, nor does it establish that John Bravata did not

make such representations. 

DeFauw met with John Bravata in BBC Equities’s Brighton office in September 2006. At

that meeting, Bravata told DeFauw that, in addition to guaranteeing DeFauw 10% annual interest

payments, if Bravata did not double DeFauw’s money, Bravata “wasn’t doing his job.” DeFauw

invested $50,000 in BBC Equities on September 22, 2006. He made his investment decision based

solely on the representations he received from Bravata and did not see a BBC Equities PPM until

one was shown to him by the SEC staff in mid-2009. The video evidence and testimony by

investors establish that the disclosures and warnings stated in the PPM did not provide cover for the

misrepresentations made by the defendants to prospective investors. 

Nor did the PPMs reflect the full story of how investor funds were applied. According to

BBC’s records, when the first PPM was used between February 2007 and April 2008, BBC Equities

solicited and received approximately $21.2 million from 136 investors. That PPM offered Class B

membership interests in BBC Equities that were entitled to share pro rata with the holders of the

Class A interests in profit distributions that would be declared by Bravata and Trabulsy; and Class

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C membership interests, which yielded annual dividends of 8%, 10%, or 12%, redeemable on

December 31, 2007, December 31, 2009, and December 31, 2011, respectively. It capped offering

expenses and organizational costs associated with the offering (which included commissions and

finder’s fees) at $800,000. A second PPM was used between April 2008 and June 30, 2009, during

which the defendants raised approximately $30.6 million from 369 investors. The second PPM

offered Class D membership interests in BBC Equities yielding 8% annual priority distributions. 

It represented that going forward John Bravata and Richard Trabulsy would receive no finder’s fees

for the investments they sold to BBC Equities’s investors.

The Second PPM reported that Bravata and Trabulsy originally contributed eight properties

to BBC Equities and later acquired 28 additional real estate properties cumulatively valued at

approximately $43 million, with only $34 million in mortgage debt. That suggests that about $9

million of the $21.2 million raised through the first PPM actually was directed toward the avowed

purpose of the enterprise: investing in real estate. The second PPM was silent on that point. The

second PPM represented that as of February 28, 2008, BBC Equities had a net asset value of

$11,294,718, with total assets of $46,670,615 and total liabilities of $35,375,897. In fact, however,

BBC Equities’s own outside auditor reported that as of December 31, 2007, BBC Equities had total

assets of $40,603,738 and total liabilities of $46,453,032.

3. Use of funds

Of the $55 million raised from investors, BBC Equities spent approximately $20.7 million

on real estate purchases to acquire 71 real estate investment properties. According to the Receiver’s

report dated October 19, 2009, at the time the complaint was filed those properties all were

encumbered well beyond their reasonable value and were essentially worthless. BBC Equities also

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paid out approximately $12.5 million to the earlier investors who did not elect a reinvestment option

for their interest payments. As of June 30, 2009, BBC Equities had paid BBC Management

approximately $6,082,628; and it had paid at least $2.1 million in purported commissions or

“finder’s fees” to BBC Equities’ unregistered brokers for selling BBC Equities securities, including

$386,521 to John Bravata and $216,045 to Richard Trabulsy. BBC Equities also entered into an

agreement with Bravata Financial Group to fund its operating expenses, and through April 30, 2009

it had transferred $7,225,062 from its bank account to Bravata Financial’s bank account. The

defendants have offered no evidence to contradict these numbers.

Luz Aguilar testified that over the relevant period, John Bravata had outside income from

sources other than the investment companies of approximately of $687,000, and Antonio Bravata

earned at least $127,000 from his outside insurance sales. However, it appears that Bravata

Financial earned less than $715,000 from selling life insurance.

From May 2006 through May 2009, BBC Equities transferred $821,632, BBC Management

transferred $250,634, and Bravata Financial transferred $1,324,087 to John and Shari Bravata’s

primary personal bank account. The SEC compiled a list of the items purchased by John and Shari

Bravata and Antonio Bravata that included luxury automobiles, jewelry, boats (along with Richard

Trabulsy), trips, artwork, and construction of a lavish home in Brighton, Michigan. The defendants,

including Shari Bravata, argue that some of the items were purchased with funds that came from

other sources, but they have not pointed to any evidence in the record to support those arguments. 

The SEC also asserted that a putative investment in vacation property located in Bonita

Springs, Florida never generated income and was used by the Bravatas as a personal vacation

residence. The defendants contend the Florida home was used for charity events and business

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meetings and produced income, but there is no convincing proof of that claim. The Bravatas also

made lavish use of corporate credit cards for personal purchases. Melissa Traver testified that the

business’s practice was for the card user to identify personal items, and a loan account would be

established for those items. However, there is no evidence that the “loans” were repaid, and the

purchases remained the obligation of the companies. Moreover, the amount of expenditures made

by the Bravatas and Mr. Trabulsy during the period exceeded the amounts that they earned from

outside income. 

4. Essential failure of BBC Equities

Defendant John Bravata founded BBC Equities, he maintained, on two cardinal principles:

first, protection of principal dollars; and second, maximizing returns without violating the first

principle. It is fair to say that hundreds of investors found that philosophy attractive and entrusted

Bravata with their money. But less than half of investors’ money was used to purchase real estate

— the main investment vehicle of BBC Equities as represented in presentations and the PPMs —

and the real estate that was purchased was highly leveraged and risky. BBC Equities never was

profitable, its operating expenses annually exceeded its revenue, and its net worth was increasingly

negative in each of the three years of its existence. It is apparent that the only hope investors had

of recovering their investments, not to mention realizing a return, was the recruitment of fresh

money from new investors. 

It also appears that neither John Bravata nor BBC Equities was meeting their financial

obligations. On July 8, 2009, the Internal Revenue Service levied on a life insurance policy owned

by John Bravata and held by Minnesota Life because of Bravata’s unpaid taxes in excess of

$178,000. Also on July 8, 2009, the Huntington National Bank obtained a $4.18 million judgment

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against BBC Equities and Richard Trabulsy in the United States District Court for the Northern

District of Ohio as a result of a defaulted promissory note relating to one of BBC Equities’s

investment properties. On July 16, 2009, the Huntington National Bank filed an action in a court

in this district alleging that John Bravata also was liable as a guarantor on the same defaulted

promissory note. Before the present lawsuit was filed, John Bravata paid a retainer to bankruptcy

counsel. 

John Bravata did not deny that he promised investors that their prospective returns would

be guaranteed by certificates of deposit in Comerica Bank or that he would not take a salary unless

BBC Equities did well. Instead, he invoked the Fifth Amendment as to those questions at the

evidentiary hearing on the preliminary injunction motion. He did testify that he did not tell

prospective investors that BBC Equities depended on its continued receipt of cash from investors

to operate (although that statement appears in the PPMs) but Bravata made that admission in a

conference call to BBC Equities investors on June 18, 2009. As disclosed by Defendants’ Hearing

Exhibit 143, on that conference call John Bravata said that the future of BBC Equities required

“getting new investors into the company.” He did not disclose to investors BBC Equities’s ominous

financial condition, instead asserting that “I am still very bullish on real estate.” Def.s’ Hrg. Ex.

143. 

During that call, Bravata announced that BBC Equities was starting a new venture capital

fund called BBC Capital, which eventually became known as Phoenix Venture Capital, LLC. John

Bravata began distributing a Phoenix PPM on July 16, 2009. That PPM describes Phoenix as a

“holding company” which holds “interests in companies that are engaged in providing insurance

products and financial services, construction management and business coaching and consulting.” 

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Hrg. Ex. 64 at 6. Bravata was attempting to raise up to $200 million from the sale of “Class C

shares” of Phoenix securities. 

The PPM also makes reference to the possibility of acquiring an unnamed real estate

subsidiary and a broker-dealer. Both Melissa Traver and James Bravata made reference to the later

transaction during their hearing testimony. However, no first-hand information was presented at the

hearing, there was no documentation presented that might hint at the possibility of such a

transaction, and the likelihood of BBC Equities having the wherewithal to consummate such

transactions in the spring or summer of 2009 was extremely remote in light of its dire financial

condition. Rather, the evidence points to the ineluctable conclusion that Phoenix Venture Capital

was another effort by the defendants to perpetuate the investment pyramid by gathering more

investors to support the promises made to earlier investors.

The Phoenix PPM suggests that the company might invest in industries including cable

broadcasting, interactive media, oil and gas development, and pharmaceuticals. However, it also

represents that Phoenix investor funds would be used to “retire[] existing debt encumbering real

estate owned by our subsidiaries,” but fails to disclose that BBC Equities is the subsidiary or that

BBC Equities’s debts exceeded $128 million. By mid-July 2009, some BBC Equities investors had

begun converting their BBC Equities securities to Phoenix shares. The SEC stepped in and filed its

complaint in this case on July 26, 2009, and this Court’s preliminary injunction followed.

B. Criminal prosecution

On May 12, 2011, the government unsealed an indictment charging John Bravata with

conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349. On July 14, 2011, the grand jury

presented a first superseding indictment, which added Richard Trabulsy and Antonio Bravata as co-

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defendants and fourteen counts of wire fraud under 18 U.S.C. § 1343 relating to certain named

investors. First Superseding Indictment [dkt. #26], United States v. Bravata, No. 11-20314 (E.D.

Mich. July 14, 2011). Count one of the first superseding indictment charged that from May 2006

through July 2009, the defendants:

[D]id knowingly and willfully conspire, combine, and agree with each other to

devise and execute a scheme and artifice to defraud and to obtain money and

property from investors by means of false and fraudulent material pretenses,

representations, and promises.

. . .

It was the purpose of the conspiracy for the defendants to defraud and obtain money

by making false and fraudulent material representations to investors in order to

induce or encourage investors to purchase shares in the defendants’ company, BBC.

Pl.’s Mot. for Summ. J., Ex. 49, First Suprseding Indictment ¶¶ 9-11. Count two charged the

defendants with securities fraud. Counts three through sixteen charged John Bravata with wire fraud

in connection with fourteen specific BBC investors. Trabulsy also was charged in Count three, and

Antonio Bravata was charged in Counts eight and ten. Richard Trabulsy pleaded guilty to Count

three of the superseding indictment on October 7, 2011, and the Bravatas proceeded to trial, which

began on February 26, 2013 and concluded on March 27, 2013. The jury found John Bravata guilty

of one count of conspiracy to commit wire and mail fraud, and fourteen counts of wire fraud. The

jury found Antonio Bravata guilty of conspiracy to commit wire and mail fraud, not guilty of one

count of wire fraud, and was unable to reach a decision on another count of wire fraud. 

In finding John and Antonio Bravata guilty of conspiracy to commit wire fraud, the jury in

the criminal case necessarily determined that both defendants “did participate in a scheme to defraud

investors of BBC, and to obtain money and property by means of false and fraudulent material

pretenses, representations and promises.” Pl.’s Mot. for Summ. J., Ex. 50, Jury Instructions at 16. 

With respect to Antonio Bravata, the jury determined that he “willfully agreed to participate and did

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participate in the aforementioned scheme beginning in 2007 and continuing up to and including July

2009.” Ibid. And the court specifically instructed the jurors that in order to convict either defendant

on the conspiracy charge, they must find that the government had proved beyond a reasonable doubt

that (1) “two or more persons conspired, or agreed, to commit a federal crime, here, Mail Fraud or

Wire Fraud”; (2) “each of the defendants joined the conspiracy knowingly and voluntarily”; and (3)

“that [each] defendant knew the conspiracy’s main purpose, and that he voluntarily joined it

intending to help advance or achieve its goals.” Id. at 17, 19.

On December 11, 2013, the Court sentenced John Bravata to 240 months on each count to

be served concurrently. Judgment [dkt. #353]. The Court found that Bravata’s conduct caused a

total loss to investors of $44,533,437.86 and ordered him to pay restitution in that amount. Antonio

Bravata was sentenced to 60 months in prison on the conspiracy count. The Court found that

Antonio Bravata’s conduct caused a total loss to investors of $44,533,437.86 and ordered him to pay

restitution of $7 million. 

C. Shari Bravata

At the evidentiary hearing on the motion for preliminary injunction, Shari Bravata testified

that she was not employed from 2006 through 2009 and that her only source of income during that

period was from her husband. During that period, BBC Equities spent more than $936,000 to make

mortgage payments on a house in Bonita Springs, Florida, which Shari Bravata and her family used

as a personal vacation home. The company also spent more than $762,000 to build a personal

residence for the Bravatas in Brighton, Michigan. Pl.’s Mot. for Summ. J., Ex. 48, Aguilar decl. ¶

48. Ms. Bravata charged more than $28,883 for personal items including vacations, clothing, and

dining out to credit cards held by BBC Equities, and she testified that “nothing I charged on [the

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cards] was [related to] BBC Equities business.” Hr’g Tr. at 100. BBC Equities never was

reimbursed for those charges. 

John Bravata bought his wife a Maserati automobile, for which he paid $84,902. Shari

Bravata testified that the Maserati was “my car,” and was titled in her name. Aguilar decl. ¶ 10;

Hr’g Tr. at 89-91. Bravata also spent at least $59,000 on jewelry for his wife. Aguilar decl. ¶ 10;

Hr’g Tr. at 91-92. The SEC asserts that the Receiver recovered $34,000 from the sale of the

Maserati, and that any offset for the value of the car therefore should not exceed that amount. The

SEC contends that the Receiver has not recovered and does not possess any other assets of value that

could be imputed as part of any offset against recovery from Shari Bravata.

D. Procedural history

The SEC filed its complaint in this case on July 26, 2009. In its 80 substantive paragraphs,

the complaint raised claims under various federal securities laws and regulations, contending that

the defendants: violated 15 U.S.C. §§ 77e(a) and (c) by selling unregistered securities (Count I);

violated 15 U.S.C. § 77q(a)(1) by employing a scheme to defraud to sell securities (Count II);

violated 15 U.S.C. §§ 77q(a)(2) and 77q(a)(3) by obtaining money or property through the use of

false and fraudulent statements (Count III); violated 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5

by employing a fraudulent scheme to sell securities (Count IV); and violated 15 U.S.C. § 77o(a) by

selling securities without registering as broker dealers (Count V). The complaint also asserted a

“demand for equitable relief” in Count VI.

On August 4, 2009, the Court granted the plaintiff’s motion for a preliminary injunction and

continued its order freezing assets of the corporate and individual defendants. On September 2,

2009, the Court appointed Earle I. Erman as Receiver of the corporate entities BBC Equities, LLC

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and Bravata Financial Group, LLC. On August 31, 2009, defendants John J. Bravata, Antonio M.

Bravata, and Shari A. Bravata, then represented by counsel, filed their answer to the original

complaint with affirmative defenses and jury demand.

The Court held an evidentiary hearing on the plaintiff’s request for a preliminary injunction

on October 21, 22, and 30, 2009, and January 14, 2010. Ten witnesses testified at the hearing,

including each of the Bravata defendants, and the parties offered a number of documents as exhibits,

along with several video recordings. Thereafter, the case was stayed for a period of time after the

defendants’ attorney of record was indicted in an unrelated securities fraud case. On January 31,

2011, after the stay was lifted, the Court filed its opinion and order setting forth its factual findings

based on the evidentiary hearing testimony

On March 9, 2011, the SEC filed its motion to amend the complaint, which the Court

granted. The modestly extended 90-paragraph amended complaint asserted the same counts under

the same cited statutes as the original complaint, and it contained substantially the same factual

allegations with a few additions. Defendant John Bravata filed a response to the motion to amend,

which mainly addressed his factual disputes with the SEC’s claims.

On June 14, 2011, the Court entered an order granting the SEC’s motion to amend the

complaint, deeming the amended complaint filed, and staying the case pending the outcome of

Bravata’s criminal trial. On April 2, 2013, after the conclusion of the criminal trial, the Court

entered an order dissolving the stay and ordered the defendants to answer the amended complaint. 

Because none of the defendants (all of whom by then proceeding pro se) filed any formal answer

to the complaint, the SEC filed a motion for default judgment on June 21, 2013. The Court denied

the plaintiff’s motion on September 10, 2013 and ordered the parties to file dispositive motions by

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November 15, 2013. The SEC filed its motion on that date, and each of the individual defendants

has filed a response.

In the meantime, the SEC resolved its case against defendant Richard Trabulsy and moved

for the entry of a partial consent judgment against him alone. The Court denied that motion because

the parties did not provide adequate grounds for entry of a judgment against less than all the

defendants. See Fed. R. Civ. P. 54(b). With the adjudication of this summary judgment motion,

however, the claims against all the defendants are resolved. 

II. Liability

In its motion for summary judgment, the SEC argues first that John and Antonio Bravata’s

convictions for wire fraud and conspiracy to commit wire fraud are sufficient to justify judgment

in its favor in this civil securities fraud action based on the same factual circumstances, because the

jury necessarily determined each essential element of the securities fraud claims when it rendered

a verdict on the criminal wire fraud and conspiracy charges. The SEC relies on the doctrine of

collateral estoppel and requests judgment as a matter of law on Counts II, III, and IV of the

complaint. The SEC also argues that the undisputed evidence presented at the preliminary

injunction hearing and the criminal trial provides a separate and adequate basis for finding that there

is no genuine material dispute that the defendants intentionally made fraudulent representations to

investors in the course of selling shares in BBC.

Second, the SEC argues that it is undisputed that the defendants never were registered as

broker dealers and that the investments in BBC Equities never were the subject of any registration

statement. The SEC contends that there is no question that the investments meet the Supreme

Court’s definition of “securities.” The SEC states that the defendants have offered no evidence that

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they were entitled to any of the statutory exemptions that would permit them to operate as broker

dealers without a registration.

Third, the SEC argues that permanent injunctive relief is warranted because (1) the

defendants’ violations were repeated and occurred over the course of three years; (2) the losses were

substantial and the violations egregious; (3) the defendants have offered no assurances that they will

comply with securities laws in the future, and continue to contest their liability and guilt in the

criminal matter; and (4) John Bravata has a history of disobeying orders of the Court and previously

has been held in contempt for his incorrigible actions. The SEC also points out that the defendants

are relatively young and will have the opportunity to commit future violations after they are released

from prison, if their conduct is not enjoined.

Fourth, the SEC argues that disgorgement is warranted against all of the defendants,

including Shari Bravata, because it is undisputed that each of them received the proceeds from the

fraudulent enterprise. The SEC contends that joint and several liability is warranted where multiple

defendants have received fraudulent funds, and that the testimony supplied by its forensic accountant

Luz Aguilar is sufficient to establish that its figure of $5,201,494.89 is a reasonable approximation

of the amount collectively received by the defendants. The SEC also asks that prejudgment interest

in the amount of $1,251,074.02 also be added to the amount adjudged against the defendants.

Finally, the SEC argues that the maximum “tier three” civil penalties of $130,000 per

violation are warranted against John and Antonio Bravata because, as the judgment in the criminal

case establishes, their conduct involved “fraud, deceit, or manipulation,” and it caused substantial

losses in excess of $44 million to investors.

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The defendants argue that summary judgment is not appropriate. Their arguments will be

addressed in more detail below.

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 

As the Sixth Circuit has explained:

Both claimants and parties defending against a claim may move for summary

judgment “with or without supporting affidavits.” Fed. R. Civ. P. 56(a), (b). Such

a motion presumes the absence of a genuine issue of material fact for trial. The court

must view the evidence and draw all reasonable inferences in favor of the

non-moving party, and determine “whether the evidence presents a sufficient

disagreement to require submission to a jury or whether it is so one-sided that one

party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 251-52 (1986).

Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009).

“The party bringing the summary judgment motion has the initial burden of informing the

district court of the basis for its motion and identifying portions of the record that demonstrate the

absence of a genuine dispute over material facts.” 576 F.3d at 558 (citing Mt. Lebanon Personal

Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002)). “Once that occurs,

the party opposing the motion then may not ‘rely on the hope that the trier of fact will disbelieve the

movant’s denial of a disputed fact’ but must make an affirmative showing with proper evidence in

order to defeat the motion.” Id. (quoting Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th

Cir. 1989)).

“[T]he party opposing the summary judgment motion must do more than simply show that

there is some ‘metaphysical doubt as to the material facts.’” Highland Capital, Inc. v. Franklin

Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 586 (1986)) (internal quotation marks omitted). A party opposing a motion

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for summary judgment must designate specific facts in affidavits, depositions, or other factual

material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson,

477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to

meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp. v. Catrett, 477

U.S. 317, 322-23 (1986). “Thus, [t]he mere existence of a scintilla of evidence in support of the

[opposing party]’s position will be insufficient; there must be evidence on which the jury could

reasonably find for the [opposing party].” 350 F.3d at 546 (quoting 477 U.S. at 252) (quotations

marks omitted).

Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St.

Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). A fact is “material” if

its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d

574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v.

Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could

return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d

1143, 1148 (6th Cir. 1994) (quoting 477 U.S. at 248).

When the moving party also bears the ultimate burden of persuasion, the movant’s affidavits

and other evidence not only must show the absence of a material fact issue, they also must carry that

burden. Vance v. Latimer, 648 F. Supp. 2d 914, 919 (E.D. Mich. 2009); see also Resolution Trust

Corp. v. Gill, 960 F.2d 336, 340 (3d Cir. 1992); Stat-Tech Liquidating Trust v. Fenster, 981 F. Supp.

1325, 1335 (D. Colo. 1997) (stating that where “the crucial issue is one on which the movant will

bear the ultimate burden of proof at trial, summary judgment can be entered only if the movant

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submits evidentiary materials to establish all of the elements of the claim or defense”). In his

commentary on affirmative motions for summary judgment, Judge William Schwarzer explains:

When the moving party bears the burden of persuasion on the issue at trial, its

showing must sustain that burden as well as demonstrate the absence of a genuine

dispute. Thus, it must satisfy both the initial burden of production on the summary

judgment motion — by showing that no genuine dispute exists as to any material fact

— and the ultimate burden of persuasion on the claim — by showing that it would

be entitled to a directed verdict at trial. 

William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, 139 F.R.D.

441, 477-78 (1992) (footnotes omitted).

A. Fraud claims

John Bravata reargues at considerable length his previously asserted position that the claims

of fraud are negated by the fact that investors received a private placement memorandum in which

certain disclosures and warnings were included. He cites various authorities on the law of contracts,

the statute of frauds, warranties, and the parol evidence rule for the proposition that oral promises,

warranties, and representations are unenforceable in the face of a written contract between the

parties. However, this is not a contract dispute, and the government is not seeking to enforce any

promise allegedly made by Bravata, oral or otherwise. Instead, the government seeks to enforce

federal civil securities laws and recover against Bravata on behalf of investors for the now

undisputedly false representations that he and his co-defendant made in the course of selling

investment interests in the BBC Equities enterprise. 

Antonio Bravata argues (1) that he never was employed by BBC Equities and that everything

he did in the course of selling investments in the company was “done under the instruction of my

superiors at Bravata Financial Group”; (2) he “never knowingly made false statements” in relation

to the sales of interests in BBC; (3) he was found not guilty on the individual fraud counts; (4) the

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judge in the criminal case had not (at the time of the filing of the response) entered an order of

restitution; (5) he has filed an appeal of his criminal conviction; and (6) the testimony at the criminal

trial did not establish that he had knowledge of any scheme to defraud.

Neither defendant cites portions of the record in support of their arguments, except for

references to the PPMs and general references to Richard Trabusy’s testimony at the criminal trial. 

The fact issues they attempt to generate are foiled, however, by their criminal convictions.

The doctrine of collateral estoppel provides that “once a court has decided an issue of fact

or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a

different cause of action involving a party to the first case.” Allen v. McCurry, 449 U.S. 90, 94

(1980). Where the judgment that a party looks to for preclusion is a federal court judgment, the

Court must “look to federal law to determine its preclusive effect.” Hamilton’s Bogarts v. Michigan,

501 F.3d 644, 650 (6th Cir. 2007); see also EB-Bran Productions v. Warner, 242 F. App’x 311, 312

(6th Cir. 2007) (“[A] federal court applies federal law in determining the preclusive effect of a prior

federal judgement . . . at least where jurisdiction in the prior litigation was based on a federal

question.”). The Sixth Circuit has listed four requirements for the application of collateral estoppel:

(1) the precise issue raised in the present case must have been raised and actually

litigated in the prior proceeding; (2) determination of the issue must have been

necessary to the outcome of the prior proceeding; (3) the prior proceeding must have

resulted in a final judgment on the merits; and (4) the party against whom estoppel

is sought must have had a full and fair opportunity to litigate the issue in the prior

proceeding.

Hamilton’s Bogarts, 501 F.3d at 650 (quoting NAACP, Detroit Branch v. Detroit Police Officers

Ass’n (DPOA), 821 F.2d 328, 330 (6th Cir. 1987)). All of those requirements have been satisfied

here. 

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“[P]rior criminal convictions may work an estoppel in favor of the government in subsequent

civil proceedings,” Emich Motors Corp. V. General Motors Corp., 340 U.S. 558, 568-69, 71 (1951),

and federal courts in this circuit and others routinely grant summary judgment in civil securities

fraud actions where the defendant has been convicted on criminal fraud or conspiracy charges based

on the same factual circumstances. E.g., SEC v. C.J.’s Fin., No. 10-13083, 2012 WL 3600239 (E.D.

Mich. July 30, 2012) (wire fraud), report and recommendation adopted, 2012 WL 3597644 (E.D.

Mich. Aug. 21, 2012); SEC v. Fisher, No. 07-12552, 2011 WL 3652195 (E.D. Mich. Aug. 19, 2011)

(conspiracy); SEC v. Quinlan, No. 02-60082, 2008 WL 4852904 (E.D. Mich. Nov. 7, 2008)

(conspiracy to commit wire fraud), aff’d, 373 F. App’x 581 (6th Cir. 2010); SEC v. Blackwell, 477

F. Supp. 2d 891 (S.D. Ohio 2007) (insider trading).

The elements of the civil fraud claims in this case and the criminal fraud claims alleged in

the superseding indictment overlap. Section 17(a) of the Securities Act of 1933 makes it unlawful

for any person, directly or indirectly in the offer or sale of any securities:

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a material fact

or any omission to state a material fact necessary in order to make the statements

made, in light of the circumstances under which they were made, not misleading; or

(3) to engage in any transaction, practice, or course of business which operates or

would operate as a fraud or deceit upon the purchaser.

15 U.S.C. § 77q(a). Section 10(b) of the Exchange Act of 1934 makes it unlawful for any person,

directly or indirectly:

To use or employ, in connection with the purchase or sale of any security registered

on a national securities exchange or any security not so registered, or any

securities-based swap agreement . . ., any manipulative or deceptive device or

contrivance in contravention of such rules and regulations as the Commission may

prescribe as necessary or appropriate in the public interest or for the protection of

investors.

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15 U.S.C. § 78j(b). Rule 10b–5, promulgated under the authority of this statutory provision, makes

it unlawful for any person, directly or indirectly:

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact

necessary in order to make the statements made, in the light of the circumstances

under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would

operate as a fraud or deceit upon any person, in connection with the purchase or sale

of any security.

17 C.F.R. § 240.10b–5.

“To establish violations of these anti-fraud provisions, the SEC must show that the

defendants engaged in (1) misrepresentations or omissions of material facts (2) made in connection

with the offer, sale or purchase of securities (3) with scienter on the part of the defendants.” SEC

v. George, 426 F.3d 786, 792 (6th Cir. 2005) (citing Ernst & Ernst v. Hochfelder, 425 U.S. 185

(1976)). “A fact is material if a substantial likelihood exists that (1) a reasonable shareholder would

consider the fact important in making his investment decision and (2) a reasonable shareholder

would view the information as having significantly altered the total mix of information.” Ibid. 

(citing Basic, Inc. v. Levinson, 485 U.S. 224, 231–32 (1988)). “Scienter may be established by proof

of recklessness—‘highly unreasonable conduct which is an extreme departure from the standards

of ordinary care.’” Ibid. (citing Mansbach v. Prescott, Ball & Turben, 598 F.2d 1017, 1025 (6th Cir.

1979)). “Unlike [in] a private securities fraud action, attribution and reliance are not required

elements in SEC enforcement actions.” SEC v. Conaway, 698 F. Supp. 2d 771, 876 n.83 (E.D.

Mich. 2010) (citing Wright v. Ernst & Young LLP, 152 F.3d 169, 175 (2d Cir. 1998); SEC v. First

Jersey Securities, 101 F.3d 1450, 1471 (2nd Cir. 1996)).

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“The elements of wire fraud, as prescribed under 18 U.S.C. § 1343 are as follows: (1) a

scheme or artifice to defraud; (2) use of interstate wire communications in furtherance of the

scheme; and (3) intent to deprive a victim of money or property.” United States v. Prince, 214 F.3d

740, 747-48 (6th Cir. 2000) (footnotes omitted).

“A conviction for conspiracy to commit [wire] fraud [under 18 U.S.C. § 1349] requires proof

beyond a reasonable doubt that the defendant knowingly and willfully joined in an agreement with

at least one other person to commit an act of . . . fraud and that there was at least one overt act in

furtherance of the agreement.” United States v. Warshak, 631 F.3d 266, 308 (6th Cir. 2010).

Summary judgment is justified on Counts II, III, and IV of the amended complaint on the

basis of collateral estoppel, because the defendants were convicted of conspiracy to commit wire

and mail fraud and wire fraud involving the same factual circumstances involved in this case. There

can be no dispute that their criminal trial resulted in a final judgment and that the defendants had a

full and fair opportunity to litigate each element of the charges against them in that proceeding. 

There also is no dispute that the factual premises of both proceedings are identical.

There can be no genuine issues of material fact on these counts, because the jury’s verdicts

in the criminal action establish, at a minimum, that each defendant willfully participated in a scheme

to defraud BBC Equities investors, and did so knowingly. Moreover, as to John Bravata, the verdict

also establishes that he committed fourteen other specific violations by making false statements to

the investors named in the indictment.

Antonio Bravata argues that he was found not guilty on one of the substantive fraud counts

and the jury did not reach a decision on the other. However, the acquittal and hung jury on the two

individual fraud charges are irrelevant and not preclusive of summary judgment in this case, because

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the criminal charges required a higher standard of proof. SEC v. Ridenour, 913 F.2d 515, 518 (8th

Cir. 1990). Moreover, the two individual counts only addressed misrepresentations allegedly made

to two named investors, and the SEC still is entitled to summary judgment if Antonio Bravata

participated in even one other instance of conduct involving a scheme to defraud, which the verdict

on the conspiracy charge necessarily required for a finding of guilt.

Convictions for mail fraud, wire fraud, securities fraud, and conspiracy to commit securities

fraud suffice to establish claims for securities fraud based on the same facts in a related civil action. 

SEC v. Zandford, 535 U.S. 813 (2002) (wire fraud based a “course of business” involving repeated

undisclosed sales of securities held in client accounts); SEC v. Farkas, No. 13-1757, --- F.3d ---,

2014 WL 522805 (4th Cir. Feb. 11, 2014) (wire fraud, bank fraud, and conspiracy to commit fraud);

SEC v. Quinlan, 373 F. App’x 581 (6th Cir. 2010) (filing false statements and conspiracy to commit

fraud); SEC v. Palmisano, 135 F.3d 860 (2d Cir. 1998) (mail fraud, wire fraud, money laundering,

and securities fraud — Ponzi scheme); SEC v. Gruenberg, 989 F.2d 977 (8th Cir. 1993) (wire fraud

and securities fraud); see also SEC v. C.J.’s Fin., No. 10-13083, 2012 WL 3600239 (E.D. Mich. July

30, 2012) (wire fraud), report and recommendation adopted, 2012 WL 3597644 (E.D. Mich. Aug.

21, 2012); SEC v. Fisher, No. 07-12552, 2011 WL 3652195 (E.D. Mich. Aug. 19, 2011) (conspiracy

to commit wire fraud and wire fraud); SEC v. Quinlan, No. 02-60082, 2008 WL 4852904 (E.D.

Mich. Nov. 7, 2008) (conspiracy and making false statements), aff’d, 373 F. App’x 581 (6th Cir.

2010); SEC v. Blackwell, 477 F. Supp. 2d 891 (S.D. Ohio 2007) (insider trading).

The defendants have repeated the same two basic contentions in this case, which are that (1)

certain disclosures made in the PPM materials vitiate all the charges of fraud; and (2) the jury’s

verdict established fraud only as to the fourteen specific investors named, and not any of the other

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investors in the company. The criminal jury, the sentencing court, and this Court already have

considered and decisively rejected both arguments.

As the government points out, the criminal jury considered all of the evidence that John

Bravata has submitted in support of his response to the government’s motion, and it squarely

rejected his defense by finding him guilty of conspiracy to commit fraud and fourteen specific

instances of fraud. This Court also held, in its opinion granting the government’s motion for

preliminary injunction, that the PPM materials were “no cover” against the allegations of fraud. The

sentencing court likewise rejected this argument. On August 22, 2013, the judge in the criminal case

denied a motion for judgment of acquittal filed by John Bravata and joined in by Antonio Bravata. 

That judge specifically rejected the defendants’ argument that certain disclosures and warnings

included in the “private placement memorandum” that some investors had received vitiated the fraud

charges based on oral statements made by the defendants when soliciting investments:

The fact that a victim received a document — a Subscription Agreement — that

contained cautions or warnings, did not give the Defendants a license to defraud, and

does not undercut or eviscerate the overwhelming evidence of Defendant’s and his

co-conspirator’s intentionally fraudulent oral representations to the victim/investors

named in the indictment.

Order Denying Def.’s Mot for Judgment of Acquittal [dkt. #274], United States v. Bravata, No. 11-

20314 (E.D. Mich. Aug. 22, 2013).

As to the extent of the fraud involved in the BBC enterprise, the judge in the criminal case

rejected the defendants’ argument that the harm was limited to only those specific investors named

in the indictment, when he assessed a loss amount of more than $44 million — nearly the entire

amount raised from all investors by BBC — in the judgments of sentence against each of them.

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John Bravata contends that “the heart of this case is based also on Webb v. First of Michigan

Corp., 195 Mich. App. 470, 491 N.W.2d 851 (1992).” However, Webb was a state court case in

which the plaintiff alleged common law fraud, and therefore is irrelevant to an action for

enforcement of federal securities law and not binding on this Court. Moreover, Webb is

distinguishable because there the purveyors of the private placement investments made only general

promises that investors could expect 32% returns and that the investment was “risk free”; assurances

which the court found to be either mere puffery or contradicted by the disclosures of risk in the

prospectus offered to investors. Here, the defendants made far more specific and undisputedly false

representations, such as that investments by BBC Equities were secured by certificates of deposit

held by Bank of America, that the investment strategy sought to maximize return without putting

principal at risk, and that the defendants received no compensation unless the firm made a profit for

investors. Webb also evidently involved an enterprise that simply did not work out as hoped due to

adverse market conditions; not, as here, a Ponzi scheme where most funds raised from new investors

were used to pay dividends to prior investors, in order to solicit an ever-growing pool of

contributions from more and more investors — an “investment strategy” which, it is undisputed, the

defendants never disclosed to their investors in any way.

The SEC is entitled to a judgment as a matter of law on Counts II, III, and IV of the amended

complaint.

B. Sale of unregistered securities

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John Bravata argues that there are genuine issues of material fact regarding whether interests

in BBC Equities were “securities.” “The federal securities laws define ‘security’ as including an

‘investment contract.’” SEC v. Merklinger, 489 F. App’x 937, 940 (6th Cir. 2012) (quoting 15

U.S.C. §§ 77b(a)(1), 78c(a)(10)). In SEC v. W.J. Howey Co., 328 U.S. 293 (1946), the Supreme

Court set forth the factors relevant to deciding whether a transaction qualifies as an “investment

contract.” Under the Howey test, “[a]n investment contract involves (1) an investment of money (2)

in a common enterprise (3) with a reasonable expectation of profits to be derived solely from the

efforts of others.” SEC v. Prof’l Associates, 731 F.2d 349, 352-53 (6th Cir. 1984). The certificates

BBC Equities sold to its investors neatly fits this definition. The record does not allow a factual

dispute on this point. 

“The Securities Act and the required filing of registration statements under Section 5 exist

to protect investors by requiring they receive sufficient information to make informed investment

decisions.” SEC v. Sierra Brokerage Servs., Inc., 712 F.3d 321 (6th Cir. 2013) (citing SEC v.

Ralston Purina Co., 346 U.S. 119 (1953)). “Sections 5(a) and 5(c) of the Securities Act together

require that securities be registered before they can be sold or offered for sale.” Ibid. (citing 15

U.S.C. § 77e(a), (c); SEC v. Holschuh, 694 F.2d 130, 137 (7th Cir. 1982)). “A party can violate the

registration requirements of Sections 5(a) and (c) of the Securities Act through even indirect

involvement in the public sale of unregistered securities.” Ibid. Section 5(a) of the Securities Act

provides that:

Unless a registration statement is in effect as to a security, it shall be unlawful for

any person, directly or indirectly (1) to make use of any means or instruments of

transportation or communication in interstate commerce or of the mails to sell such

security through the use or medium of any prospectus or otherwise; or (2) to carry

or cause to be carried through the mails or in interstate commerce, by any means or

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instruments of transportation, any such security for the purpose of sale or for delivery

after sale.

15 U.S.C. § 77e(a). A parallel provision in section 5(c) prohibits “offer[s] to sell or offer to buy

through the use or medium of any prospectus or otherwise any security, unless a registration

statement has been filed as to such security.” 15 U.S.C § 77e(c).

“To establish a prima facie violation of § 5, the SEC must prove the following: ‘(1) [that]

no registration statement was in effect for the securities; (2) that the defendant directly or indirectly

sold or offered to sell the securities; and (3) that means of interstate transportation or communication

were used in connection with the offer or sale.’” SEC v. AIC, Inc., No. 11-176, 2013 WL 5134411,

at *9 (E.D. Tenn. Sept. 12, 2013) (citing Eur. & Overseas Commodity Traders, S.A. v. Banque

Paribas London, 147 F.3d 118, 124 n.4 (2d Cir. 1998), abrogated on other grounds by Morrison v.

Nat’l Australia Bank Ltd., 130 S. Ct. 2869 (2010). “Scienter is not an element of a § 5 violation

because that section imposes strict liability on sellers of securities.” Ibid. (citing SEC v. Sierra

Brokerage Servs., 608 F. Supp. 2d 923, 939 (S.D. Ohio 2009)). Once the SEC establishes a prima

facie case, the defendant bears the burden of showing that the challenged securities transactions fall

within one of the enumerated exemptions from registration. Ibid. (citing Ralston Purina, 346 U.S.

at 126; Sierra Brokerage, 608 F. Supp. 2d at 939)).

There can be no reasonable dispute that the investments in BBC Equities were “securities”

under the Howey standard, because they unquestionably were “(1) an investment of money (2) in

a common enterprise (3) with a reasonable expectation of profits to be derived solely from the

efforts of others.” SEC v. Prof’l Associates, 731 F.2d 349, 352-53 (6th Cir. 1984). Moreover, as the

government points out, the PPM materials specifically referred to the investments as securities,

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which belies the defendants’ claims to the contrary. The SEC is entitled to judgment as a matter of

law on Count I of the amended complaint.

C. Sale by unregistered broker dealer

“Section 15(a)(1) of the Exchange Act, 15 U.S.C. § 78o(a)(1), makes it ‘unlawful for any

broker or dealer . . . to make use of the mails or any means or instrumentality of interstate commerce

to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security

. . . unless such broker or dealer is registered [with the Commission].’” SEC v. George, 426 F.3d

786, 792 (6th Cir. 2005) (quoting 15 U.S.C. § 78o(a)(1)). “A ‘broker’ . . . is defined as ‘any person

engaged in the business of effecting transactions in securities for the accounts of others.’” Id. at 797

(quoting 15 U.S.C. § 78c(a)(4)(A)). “[F]actors that may qualify an individual as a broker [include]

regular participation in securities transactions, employment with the issuer of the securities, payment

by commission as opposed to salary, history of selling the securities of other issuers, involvement

in advice to investors and active recruitment of investors.” Ibid.

Under certain circumstances an “associated person of an issuer of securities,” may be

exempted from the registration requirements under section 15(a), but that exemption does not apply

where the person was “compensated in connection with his participation by the payment of

commissions or other remuneration based either directly or indirectly on transactions in securities.” 

17 C.F.R. § 240.3a4-1(a)(2); see also SEC v. Rabinovich & Associates, LP, No. 07-10547, 2008 WL

4937360 (S.D.N.Y. Nov. 18, 2008) (“Although [defendant] was associated with . . . the issuer of the

securities in question, he does not qualify for this exception, because he received compensation for

selling the securities.”)

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The defendants make no attempt to refute these claims, and the Court already has found that

it is undisputed that neither of the defendants ever was registered as a securities dealer. The SEC

is entitled to judgment as a matter of law on Count V of the amended complaint.

III. Remedies

The SEC has requested that if liability is determined in its favor, the Court should enjoin

permanently defendants John and Antonio Bravata and their entities from violating the securities

laws, impose civil penalties against them, and order all the defendants, including Shari Bravata, to

disgorge their ill-gotten gains. Defendants John and Antonio Bravata have not addressed the

government’s requests for specific remedies. “Relief defendant” Shari Bravata argues that she is

entitled to a trial on the issue of disgorgement, because (1) no court ever has decided whether her

use of company credit cards or any of her other acts violated federal securities laws; (2) the SEC

“[c]laims that $28,000 was used by [the] relief defendant, but wants [a] $1,000,000 judgment”; (3)

there is a material dispute over the start date of the investment enterprise; (4) Shari Bravata never

was employed by BBC Equities and there never was any proof that she directly participated in the

scheme to defraud; and (5) the criminal trial only established that fourteen specific investors were

victims of the fraud, and there was “no proof” that the balance of contributions by investors were

secured by fraud. Shari Bravata also contends that some of the assets seized by the government

were received by inheritance or bought by her with funds unrelated to BBC Equities, but she

included no documents or other proofs in her response to support this claim. Shari Bravata also

argues that she does not have access to transcripts of the prior proceedings in order to prepare a more

complete response, and that she should not be subject to any judgment because all her assets already

have been seized by the government.

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A. Disgorgement

Disgorgement is an appropriate remedy in this case against all defendants, including Shari

Bravata. Shari Bravata is not entitled to a jury trial on this remedy, nor is it necessary to find that

she personally violated the securities laws. Disgorgement is an equitable remedy, SEC v. Blavin,

760 F.2d 706, 713 (6th Cir. 1985), and where this is the only relief sought against a relief defendant,

there is no right to a jury trial on the amount of disgorgement to be awarded, SEC v. Commonwealth

Chem. Sec., Inc., 574 F.2d 90, 95-97 (2d Cir. 1978); SEC v. Rind, 991 F.2d 1486, 1493 (9th Cir.

1993). 

“A relief defendant (sometimes referred to as a nominal defendant) may ‘be joined to aid the

recovery of relief’ and ‘has no ownership interest in the property which is the subject of litigation.’” 

SEC v. George, 426 F.3d 786, 798 (6th Cir. 2005) (citing SEC v. Cherif, 933 F.2d 403, 414 (7th

Cir.1991)). “‘Federal courts may order equitable relief against . . . a person who is not accused of

wrongdoing in a securities enforcement action where that person: (1) has received ill-gotten funds;

and (2) does not have a legitimate claim to those funds.’” Ibid. (quoting SEC v. Cavanagh, 155

F.3d 129, 136 (2d Cir. 1998)).

This Court has the equitable power to order disgorgement of funds received by the

defendants as a result of the fraudulent scheme. “The purpose of disgorgement is to force ‘a

defendant to give up the amount by which he was unjustly enriched’ rather than to compensate the

victims of fraud.” SEC v. Blavin, 760 F.2d 706, 713 (6th Cir. 1985) (citing SEC v. Commonwealth

Chemical Securities, Inc., 574 F.2d 90, 102 (2d Cir. 1978)). “Once the Commission has established

that a defendant has violated the securities laws, the district court possesses the equitable power to

grant disgorgement without inquiring whether, or to what extent, identifiable private parties have

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been damaged by [the defendant’s] fraud.” Ibid. (citing SEC v. Washington County Utility District,

676 F.2d 218, 227 (6th Cir. 1982)). “Calculation of the defendant’s economic gain need not be

exact, and determination of the appropriate amount is left to the sound discretion of the trial court.” 

SEC v. Conaway, 697 F. Supp. 2d 733, 747 (E.D. Mich. 2010). The amount of “disgorgement need

only be a reasonable approximation of profits causally connected to the violation,” and once the

government has offered sufficient evidence to establish that reasonable approximation, the defendant

is “then obliged clearly to demonstrate that the disgorgement figure was not a reasonable

approximation.” SEC v. First City Fin. Corp., Ltd., 890 F.2d 1215, 1231-32 (D.C. Cir. 1989).

Where multiple defendants have benefitted from the same ill-gotten gains, joint and several

liability is appropriate. SEC v. Berger, 11-10403, 2011 WL 528843, at *3 (E.D. Mich. Feb. 8,

2011). The district court “may add prejudgment interest to the disgorgement amount to avoid a

defendant benefitting for the use of his ill-gotten gains interest free.” SEC v. Conaway, 697 F. Supp.

2d 733, 747 (E.D. Mich. 2010) (citing SEC v. Blatt, 583 F.2d 1325, 1335 (5th Cir. 1978)). The rate

will be calculated based on interest rate the IRS imposes for underpayment of taxes, see, e.g., SEC

Rules & Regulations, 60 Fed. Reg. 32738, 32788 (June 23, 1995). See SEC v. First Jersey

Securities, Inc., 101 F.3d 1450, 1476-77 (2d Cir. 1996).

The Court will order John Bravata and Shari Bravata, jointly and severally, to disgorge the

$5,201,494.89 that they received as proceeds of the BBC Equities scheme, plus $1,251,074.02 in

prejudgment interest. The unrebutted testimony of the government’s forensic accountant, Luz

Aguilar, establishes that this is a reasonable approximation of the amounts received. Pl.’s Mot. for

Summ. J., Ex. 48, Aguilar decl. ¶¶ 12, 14. Neither defendant has submitted any evidence to suggest

that these figures are not a reasonable approximation of the proceeds they received. The Court

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likewise will order Antonio Bravata to disgorge the $444,384 that he received as proceeds of the

BBC Equities enterprise, plus prejudgment interest of $98,474.14. Aguilar decl. ¶¶ 13, 15.

B. Permanent injunction

The Securities Act authorizes the district court to impose a permanent injunction against

future violations of the Act where the government has established that past violations occurred. 15

U.S.C. § 77t(b), 78u(d). To establish the need for injunctive relief, the SEC must show “a

reasonable and substantial likelihood that [the defendant], if not enjoined, [will] violate the securities

laws in the future.” SEC v. Youmans, 729 F.2d 413, 415 (6th Cir. 1984) (citing SEC v. Washington

County Utility District, 676 F.2d 218, 227 (6th Cir.1982)). The Sixth Circuit has held that the

factors relevant in determining the likelihood of future violations are: (1) the egregiousness of the

violations; (2) the isolated or repeated nature of the violations; (3) the degree of scienter involved;

(4) the sincerity of the defendant’s assurances, if any, against future violations; (5) the defendant’s

recognition of the wrongful nature of his conduct; (6) the likelihood that the defendant’s occupation

will present opportunities for future violations; and (7) the defendant’s age and health. Ibid.

All of the relevant factors suggest that an injunction is warranted to prevent future securities

law violations by defendants John and Antonio Bravata, because (1) the conduct of the defendants

was egregious and resulted in a loss of more than $44 million to investors, as assessed by the

sentencing court; (2) the violations were repeated and extended, taking place over a period of three

years and involving hundreds of investors; (3) the defendants have not offered any acknowledgment

of their guilt or any assurances that they will not commit future violations, and they continue to

contest their guilt on appeal of the criminal verdict against them; and (4) the defendants are

reasonably young and likely will have a chance to commit future violations when released from

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prison. When the SEC filed its complaint in this case, BBC Equities, operated by the individual

defendants, was attempting to engage in a further pyramid scheme to solicit funds from investors

through Phoenix Venture Capital, LLC. Those funds would have been used to perpetuate the

defendants’ illegal scheme, as the funds generated by that offering were to be used to pay dividends

to earlier BBC investors. Since this case has been pending, the defendants have not indicated any

intention of changing course. 

C. Civil penalties

“Congress incorporated penalties into the securities laws when it enacted the Securities Law

Enforcement Remedies Act of 1990 (the ‘Remedies Act’). The Remedies Act is now codified at

Section 21(d)(3)(A) of the Exchange Act (15 U.S.C. § 78u(d)(3)(A)).” SEC v. Conaway, 697 F.

Supp. 2d 733, 747 (E.D. Mich. 2010). The Remedies Act provides for three penalty tiers:

In the absence of fraud, a first tier penalty applies. 748 15 U.S.C. § 78u(d)(3)(B)(i). 

A second tier penalty applies where the violation involved “fraud, deceit,

manipulation, or deliberate or reckless disregard of a regulatory requirement.” 15

U.S.C. § 78u(d)(3)(B)(ii). A third tier penalty applies where the violation involved

“fraud, deceit, manipulation . . .” and “directly or indirectly resulted in substantial

losses or created a significant risk of substantial losses to other persons.” 15 U.S.C.

§ 78u(d)(3)(B)(iii).

Conaway, 697 F. Supp. 2d at 747-48. For the time period of the alleged violations, the maximum

third tier penalty is “the greater of (I) $[130,000] . . . or (II) the gross amount of pecuniary gain to

[the] defendant as a result of the violation.” 15 U.S.C. § 78u(d)(3)(B)(iii); 17 C.F.R. § 201.1003. 

Federal courts variously have evaluated the calculation of fines “per violation” by reference to mean

(1) per claim brought against the defendant, SEC v. Shehyn, 04-2003, 2010 WL 3290977, at *8

(S.D.N.Y. Aug. 9, 2010); (2) per misrepresentation made by the defendant, SEC v. Coates, 137 F.

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Supp. 2d 413, 430 (S.D.N.Y. 2001); and (3) per investor defrauded by the defendant, SEC v. Kenton

Capital, Ltd., 69 F. Supp. 2d 1, 17 n.15 (D.D.C. 1998).

The record leaves no doubt about the defendants’ fraudulent and intentional conduct, and the

appropriate response is assessment of the maximum “tier three” penalties against defendants John

and Antonio Bravata. The SEC does not express any apparent preference among the three methods

for calculating the penalty (per claim, per misrepresentation, or per investor). Two out of the three

methods result in a total fine of $1,820,000 against defendant John Bravata, based on the fourteen

specific misrepresentations to individual investors of which he was found guilty by the jury in the

criminal case. Although there were no individual fraud counts sustained against Antonio Bravata,

his conviction for conspiracy and the claims for civil fraud in the present matter suggest that he

should be assessed a fine of $130,000 representing at least one “violation” or “claim.”

The Court finds this calculation sensible and supported by the undisputed facts in the record. 

Although there were 440 individual investors, proving discrete misrepresentations by these

defendants to each investor would be time-consuming, and the SEC has not sought that approach. 

The criminal convictions establish conclusively the fourteen misrepresentations upon which this

Court’s judgment will be based. 

IV. Conclusion

There are no material fact disputes on any of the elements of the plaintiff’s claims against

the defendants, and the plaintiff has established those elements by a preponderance of evidence. The

plaintiff therefore is entitled to a judgment in its favor as a matter of law finding defendants John

J. Bravata, Antonio M. Bravata, BBC Equities, LLC, and Bravata Financial Group, LLC liable on

Counts I through V of the amended complaint. Defendants John J. Bravata and Antonio M. Bravata

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also are liable for civil penalties. The plaintiff also has established that defendant Shari Bravata has

received ill gotten gains from the fraudulent activity, and no material fact dispute exists on that

point. Therefore, a judgment of disgorgement will enter against the defendants, including defendant

Shari Bravata.

Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment [dkt. #612]

is GRANTED.

It is further ORDERED that judgment will be entered determining liability and ordering a

permanent injunction against defendants, John J. Bravata, Antonio M. Bravata, BBC Equities, LLC,

and Bravata Financial Group, LLC, civil penalties will be assessed against defendants John J.

Bravata, Antonio M. Bravata, and disgorgement ordered against all defendants. 

s/David M. Lawson 

DAVID M. LAWSON

United States District Judge

Dated: March 6, 2014

PROOF OF SERVICE

The undersigned certifies that a copy of the foregoing order was served

upon each attorney or party of record herein by electronic means or first

class U.S. mail on March 6, 2014.

s/Shawntel Jackson 

SHAWNTEL JACKSON

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