SEC nears end of Brogdon-linked case

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WASHINGTON —The Securities and Exchange Commission is nearing a monetary settlement with one man the commission said engaged in a fraudulent senior housing bond scheme tied to convicted fraudster Christopher Brogdon. Another defendant has told the SEC he plans to fight its efforts to make him pay up.

SEC attorney Lee Greenwood wrote to a federal judge in New Jersey earlier this week to report that the SEC has reached a settlement-in-principle with Todd Barker, while Dwayne Edwards has indicated his intent to oppose the SEC’s motion for monetary relief.

The two men were business partners who set up companies and borrowed some $62 million through nine different conduit municipal bond offerings between July 2014 and September 2015, claiming that they would be used to purchase and renovate senior living facilities in Georgia and Alabama.

The SEC alleged that Edwards improperly commingled the funds, a charge the defendants disputed. Eight of the nine offerings cited in the case against Edwards involved facilities purchased from Christopher Brogdon, an Atlanta-based businessman who was forced to repay $86 million to investors after a judge found him guilty of SEC charges that he commingled investor funds in senior living projects.

Barker settled the charges with the SEC early in the case, and Edwards agreed in June 2017 to settle and be banned from the municipal market. Greenwood told the court in August that the SEC would negotiate monetary settlements with both defendants following the sale of the facilities by the court-appointed receiver.

Last month the court approved about $15.5 million of payments by the receiver to the trustee on those deals, but the SEC has said investors would still take a major hit. In total the receiver managed to recover about $26.7 million through the sales of the facilities, according to a report filed with the court. That report also said that the receiver has hired an outside law firm, Whiteford Taylor Preston, as a special counsel to pursue claims against third parties.

Greenwood had previously asked the court not to schedule motions for monetary relief until the SEC had a better idea of how badly investors were harmed in the scheme. He asked the court this week to set a schedule that would have the SEC file its motion for monetary relief by Dec. 18, with Edwards filing his opposition by Jan. 8, 2019.

Edwards, who is currently representing himself, Greenwood wrote, is precluded by the consent judgment against him from claiming that he did not violate the securities laws. The judgment against him included a stipulation that he would pay an as-yet undermined amount in fines and disgorgement of ill-gotten gains. It is not clear if Edwards will contest the proposed schedule.

“As of the date of this letter, Edwards has not responded to the SEC’s request as to whether or not he consents to the SEC’s proposed briefing schedule,” Greenwood told the court.

Barker’s proposed monetary settlement, the size of which is unknown, is subject to approval by the SEC and then by the court. If Barker’s settlement does gain approval from the commission, his final judgment could be presented to the court by Dec. 18, Greenwood wrote.

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SEC enforcement Enforcement actions Securities law Munis SEC Washington DC Georgia Alabama