1

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

U.S. Securities and Exchange Commission, 

Plaintiff,

v.

Secure Capital Funding, et al.,

Defendants.

 

 Civ. No. 11-916

 OPINION

THOMPSON, U.S.D.J.

The matter before the Court concerns Plaintiff U.S. Securities and Exchange 

Commission’s, (“Plaintiff’s”), First Amended Complaint, (Doc. No. 29), against Defendants 

Secure Capital Funding Corporation, (“SCF”), ST Underwriters Corporation, (“STUC”), Alan 

Smith, (“Smith”), and Kiavanni Pringle, (“Pringle”). A default judgment as to liability and 

injunctive relief has previously been entered against these defendants, (collectively, 

“Defendants”). (Doc. Nos. 94 and 95).1 For the reasons set forth below, the Court supplements 

its June 28, 2013 Order and Opinion, (Doc. Nos. 94 and 95).

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BACKGROUND

Background for this matter, including the facts and law relating to the liability of SCF, 

STUC, Smith and Pringle, is set forth in its entirety in this Court’s Opinion dated June 28, 2013 

(Doc. 94). 

 1 Smith and Pringle failed to appear at the hearing or to have counsel enter an appearance on 

their behalf.

2 The Court has based its rulings on the evidence adduced at the hearing conducted before the 

Court on December 18, 2013, the evidentiary material submitted by Plaintiff, (Doc. No. 85), and 

the entire record in the case.
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DISCUSSION

The Court will address the following issues: (1) Smith’s obligation to disgorge ill-gotten 

gains; (2) Smith’s obligation to pay prejudgment interest; (3) Smith’s obligation to pay a civil 

penalty; and (4) Pringle’s obligation to pay a civil penalty.

1. Smith’s Obligation to Disgorge Ill-Gotten Gains 

“Disgorgement is an equitable remedy designed to deprive a wrongdoer of his unjust 

enrichment and to deter others from violating securities laws.” S.E.C. v. Hughes Capital Corp., 

124 F.3d 449, 455 (3d Cir. 1997). “Disgorgement of illegally derived funds is a remedy within 

the equitable powers conferred on this Court [. . .].” S.E.C. v. Hughes Capital Corp., 917 F. 

Supp. 1080, 1085 (D.N.J. 1996) aff'd, 124 F.3d 449 (3d Cir. 1997). “The district court has broad 

discretion in fashioning the equitable remedy of a disgorgement order.” Id. (citations omitted). 

The SEC has the initial burden of establishing that “its disgorgement figure reasonably 

approximates the amount of unjust enrichment.” Id.; S.E.C. v. Lazare Indus., Inc., 294 F. App'x 

711, 714 (3d Cir. 2008) (amount of disgorgement reviewed under “abuse of discretion”

standard); see SEC v. Graystone Nash, Inc., 820 F. Supp. 863, 875 (D.N.J. 1993). In meeting its 

burden, the “plaintiff is not required to trace every dollar of proceeds misappropriated by the 

defendants [. . .] nor is plaintiff required to identify monies which have been commingled by 

them.” Hughes Capital Corp., 917 F. Supp. at 1085; see also SEC v. Huff, 2012 WL 10862, at 

*1 (11th Cir. Jan. 3, 2012) (“The SEC’s burden for showing the amount of assets subject to 

disgorgement [. . .] is light: a reasonable approximation of a defendant’s ill-gotten gains.”).

Once the plaintiff has established that the disgorgement figure is a reasonable approximation 

of unlawful profits, the burden of proof shifts to the defendants, who must “demonstrate that the 

disgorgement figure is not a reasonable approximation.” Hughes Capital Corp., 917 F. Supp. at
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1085. “[A]ll doubts concerning the determination of disgorgements are to be resolved against 

the defrauding party.” Id.; S.E.C. v. Calvo, 378 F.3d 1211, 1217 (11th Cir. 2004) (“Exactitude is 

not a requirement; [s]o long as the measurement of disgorgement is reasonable, any risk of 

uncertainty should fall on the wrongdoer whose illegal conduct created that uncertainty.”).

[W]here a defendant’s record-keeping or lack thereof has so obscured 

matters that calculating the exact amount of illicit gains cannot be 

accomplished without incurring inordinate expense, it is well within 

the district court’s discretion to rule that the amount of disgorgement 

will be the more readily measurable proceeds received from the 

unlawful transactions. 

SEC v. Calvo, 378 F.3d at 1217-18. 

Smith’s ill-gotten gains were at least $3.4 million. Smith received most of his ill-gotten 

gains from investors who were directed to send money to a New Jersey bank account in SCF’s 

name. Smith used SCF, and co-defendant Bertram A. Hill, in his fraudulent securities offerings. 

A small portion of Smith’s ill-gotten gains came from investors who were told to send their 

money to a bank account in California in the name of Secure Capital Corporation (“SCC”), 

another company that Smith used to facilitate his fraudulent activities. In both cases, Smith’s 

share of the fraud proceeds was wired from bank accounts in the U.S. to a bank account in the 

Republic of Latvia. These facts are established by the testimony and documentary evidence 

adduced at the December 18, 2013 hearing, including the testimony of Donna K. Norman 

concerning Plaintiff’s investigation of the fraud; the testimony of Bertram A. Hill concerning the 

division of fraud proceeds as between Smith and SCF; the Declaration of Benjamin Johnson, Jr., 

(Plaintiff’s Hearing Ex. 3), concerning the division of fraud proceeds between Smith and SCC; 

banking records and other transaction records, (Plaintiff’s Hearing Ex. 1, 2, 4, 11-14); and 

Smith’s email instructions to Hill to wire fraud proceeds, (Plaintiff’s Hearing Ex. 15). 
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Approximately $2.95 million of Smith’s total $3.4 million of ill-gotten gains was routed 

through SCF’s bank accounts in New Jersey and then wired to the account in Latvia. A large 

percentage of this money came from Smith’s 80% share of the $3.8 million that was routed 

through SCF. Pursuant to instructions from Smith and/or Hill, investors sent their money to a 

bank account in SCF’s name in New Jersey. Evidence shows that Hill was the sole signatory 

authorized to make withdrawals from the bank account and the sole officer of SCF. The account 

at issue is identified as Account No. xxxxx6052 at JP Morgan Chase. Smith and Hill had agreed 

to split the proceeds, with 80% going to Smith and 20% going to SCF. Pursuant to that 

agreement, and on Smith’s instructions, Hill wired $2.84 million of the $3.7 million from SCF’s 

bank account in New Jersey to a bank account in the Republic of Latvia without investors’ 

knowledge or consent. The account is in the name of a Latvian corporation that purports to 

invest in real estate, “LV71xxxxxx-xxx-xxxxx at Regionala Investiciju Banka, J. Alunana 2, 

Riga, Latvia.” The Court finds that the $2.84 million that Hill wired to Latvia on Smith’s 

instructions represents the proceeds of fraud perpetrated in substantial part in the United States. 

Smith reaped additional ill-gotten gains of $450,000 as his share of monies that investors 

were instructed to send to a bank account in California in SCC’s name. Smith’s $450,000 share 

was part of a total of at least $500,000 that investors were told to send to SCC’s business 

checking account in a Riverside, California branch of JP Morgan Chase. (Id.). SCC wired 

$450,000 of the $500,000 total to the same account in Riga, Latvia to which SCF sent Smith’s 

proceeds from the New Jersey-based fraud. When added to Smith’s approximately $2.95 million 

share of fraud proceeds routed through SCF, Smith’s $450,000 share routed through SCC adds 

up to ill-gotten gains of approximately $3.4 million.
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Smith’s disgorgement obligation will be partially satisfied by applying available funds 

from SCF’s bank account at JP Morgan Chase in New Jersey. Fraud proceeds in the total 

amount of $130,700 were deposited into the JP Morgan Chase account after this Court issued a 

Temporary Restraining Order on February 18, 2012, freezing withdrawals from the account.

Smith’s 80% share of the $130,700 amounts to $104,500. The freeze prevented Hill from wiring 

Smith’s 80% share to the bank account in Latvia as he had done with Smith’s share of fraud 

proceeds deposited into the JP Morgan Chase account prior to the freeze order. JP Morgan 

Chase is ordered to pay that money to a bank account to be established by the Distribution Agent 

appointed by the Court to return fraud proceeds to investors pursuant to the Plan of Distribution,

(Doc. 90). After the $104,560 offset for funds that will be seized from the JP Morgan Chase 

account, Smith’s remaining disgorgement obligation will be $3,295,440. 

2. Smith’s Obligation to Pay Prejudgment Interest 

“Prejudgment interest on damages awarded pursuant to a violation of the federal securities 

laws is a matter of judicial discretion. In exercising its discretionary powers, a court must 

consider both compensation and fairness.” S.E.C. v. Hughes Capital Corp., 917 F. Supp. at 

1089-90; S.E.C. Comm'n v. Hasho, 784 F. Supp. 1059, 1112 (S.D.N.Y. 1992); see S.E.C. v. First 

Jersey Securities, Inc., 101 F.3d 1450, 1476 (2d Cir. 1996) (decision to award prejudgment 

interest, like the decision to grant disgorgement, is left to the district court’s “broad discretion”).

Proof of a defendant’s scienter justifies the award of prejudgment interest. S.E.C. v. Utsick, 2009 

WL 1404726at *15 (S.D. Fla. May 19, 2009) (“in the context of Section 10(b) and Rule 10b-5 

actions, a defendant’s scienter is sufficient to justify an award of prejudgment interest”). 

As for the amount of the prejudgment interest, most “courts have adopted the [IRS] 

underpayment rate without controversy.” S.E.C. v. Yun, 148 F. Supp. 2d 1287, 1292 (M.D. Fla. 
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2001); see S.E.C. v. Hughes Capital Corp., 917 F. Supp. at 1090 (adopting the underpayment 

rate method). “That rate reflects what it would have cost to borrow the money from the 

government and therefore reasonably approximates one of the benefits the defendant derived 

from [his] fraud.” S.E.C. v. Aleksey, 2007 WL 1789113, at *2 (M.D. Fla. June 19, 2007)

(quoting SEC v. First Jersey Securities, Inc., 101 F.3d at 1476). 

Here, the Court finds that Smith must pay $319,481.76 in prejudgment interest. This

prejudgment interest figure is calculated by applying the rate of interest used by the Internal 

Revenue Service for the underpayment of federal income tax as set forth in 26 U.S.C. § 6621 

(a)(2) to Smith’s ill-gotten gains of approximately $3.4 million. The starting date for the 

calculation is February 28, 2011, the date on which the last monies were received into the JP 

Morgan Chase account from investors. The ending date for the calculation is January 14, 2014. 

Smith is not entitled to deduct from the calculation of prejudgment interest the $104,560 that has 

been frozen in the JP Morgan Chase account because that is not an interest-bearing account, and 

thus, no interest is available to partially offset Smith’s obligation to pay prejudgment interest. 

3. Smith’s Obligation to Pay a Civil Penalty 

Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act set forth three 

tiers of civil money penalties. 15 U.S.C. §§ 77t(d), 78u(d)(3). A third tier penalty is appropriate 

when a defendant’s violation involved fraud or deceit and resulted in substantial loss to others or 

created a significant risk of substantial loss to others. 15 U.S.C. §§ 77t(d)(2), 78u(d)(3)(B). 

For violations occurring after March 3, 2009, a third tier penalty imposed upon an individual 

may not exceed the greater of the following: (1) $150,000 for each violation by a natural person 

and $725,000 for each violation by any other person; or (2) the gross amount of the defendant’s 

pecuniary gain. 17 C.F.R. § 201.1002, Table IV to Subpart E. 
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Courts consider the following factors in determining the amount of penalty to impose: 

(1) the egregiousness of the violations at issue, (2) defendant’s 

scienter, (3) the repeated nature of the violations, (4) defendant’s 

failure to admit to their wrongdoing, (5) whether defendant’s conduct 

created substantial losses or the risk of substantial losses to other 

persons, (6) defendant’s lack of cooperation and honesty with 

authorities, if any, and (7) whether the penalty that would otherwise

be appropriate should be reduced due to defendant’s demonstrated 

current and future financial condition. 

S.E.C. v. Bear Stearns, 626 F. Supp. 2d 402, 407 (S.D.N.Y. 2009). A defendant’s ability to pay 

is “at most” one factor the Court should consider when imposing a penalty; securities laws do not 

prohibit the imposition of a penalty in excess of a violator’s ability to pay. S.E.C. v. Warren, 534 

F.3d 1368, 1370 (11th Cir. 2008). 

Courts have applied “two general methods for assessing civil penalties in securities cases, 

a ‘per violation’ approach and a ‘proportional approach.’” S.E.C. v. Koenig, 532 F.Supp.2d 987, 

995 (N.D. Ill. 2007). Courts applying a “per violation” approach have imposed a penalty for 

each of the false filings made by a violator, see S.E.C. v. Huff, 758 F. Supp. 2d 1288, 1366 (S.D. 

Fla. 2010); SEC v. Coates, 137 F. Supp. 2d 413, 430 (S.D.N.Y. 2001), or for each of the 

securities laws violated by the defendant, see S.E.C. v. Henke, 275 F. Supp. 2d 1075, 1086 (N.D. 

Cal. 2003).

After considering the factors identified in Bear Stearns and the fact that a “per violation” 

approach would not result in a sanction sufficient to serve the interests of punishment or 

deterrence, the Court finds that the proportional approach and a civil penalty of $3.4 million is 

appropriate with respect to Smith. Bear Stearns, 626 F. Supp. 2d at 407. Smith masterminded a

significant fraud with a high degree of scienter, causing substantial loss to investors. Moreover, 

Smith has neither acknowledged his wrongdoing nor cooperated with Plaintiff or the Court.
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4. Pringle’s Obligation to Pay a Civil Penalty 

Pringle is assessed a single third tier penalty of $150,000 under the “per violation” approach. 

Pringle did not personally realize profits through his participation in the scheme; however, he did 

act with a high degree of scienter and caused a substantial loss to the four investors he brought to 

Smith. Pringle identified and induced at least four investors to send a total of $400,000 to SCC 

or SCF. See 2nd Supp. Norman Decl., ¶ 17; 4th Supp. Norman Decl., ¶ 16and Ex. 1 [Pringle 

Deposition], 81:11-83:14. This money would be leveraged for $35 million worth of credits in 

Swiss accounts and used to purchase securities. See 4th Supp. Norman Decl., ¶ 16 and Ex. 1 

[Pringle Deposition], 77:9-20; 99:5. Pringle falsely told his customers that each customer was

purchasing access to “non-depleting” accounts that offered “100 to one” leverage with no risk of 

loss. See 4th Supp. Norman Decl., ¶ 16 and Ex. 1 (Pringle Deposition), 87:12-89:23. 

Based on Pringle’s actions, one investor from Nevada wired $50,000 to SCC’s bank account 

in California as payment for purported “Swiss debentures” of Secure Trust. See Supp. Norman 

Decl., ¶¶ 11-16; 4th Supp. Norman Decl., ¶ 16 and Ex. 1 (Pringle Deposition)], 157:23-163:24; 

181:20-182:18. Pringle told this investor that the $50,000 payment bought him access to a $5 

million line of credit as to which PP&M Trade Star Partners (a trade name that Pringle used) 

would bear any risk and pay all fees. Id. Pringle also induced this investor to execute a power of 

attorney that gave Pringle sole authority over the purported Swiss account. Id. However, the 

investor never had access to his money or received any account statements after complying with 

Pringle’s instructions. Pringle induced this investor, along with others, to send payments that 

were ultimately funneled to Smith even though Pringle had never met Smith in person and had 

no justifiable reason to believe that Smith’s companies or the securities or the “100 to one” 
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leveraged lines of credit they were offering ever existed. See 4th Supp. Norman Decl., ¶ 16 and 

Ex. 1 [Pringle Deposition], 39:25-45:24; 101:13-21. 

Pringle has shown disregard for the judicial process and admitted to committing 

additional acts of securities fraud even after being preliminarily enjoined in this case. See

Plaintiff’s Hearing Ex. 5, 6 and 7.

CONCLUSION

For the reasons set forth above, the Court supplements its June 28, 2013 Order, (Doc. No. 

95). An appropriate order follows.

/s/ Anne E. Thompson

ANNE E. THOMPSON, U.S.D.J. 

Date: 3/10/14