SEC, accused fraudster near $460K settlement

Register now

WASHINGTON — Todd Barker, accused by the Securities and Exchange Commission of participating in a fraudulent senior housing bond scheme, would pay almost $460,000 under a settlement agreement awaiting court approval.

The SEC filed the proposed settlement with a federal court in New Jersey Tuesday, asking Judge Steven Mannion to order that Barker disgorge ill-gotten gains amounting to $217,488.44, plus interest of $24,755.23, and also pay a civil monetary penalty equal to the disgorgement. Barker would neither admit nor deny the SEC’s allegations under the agreement.

If approved, the settlement would move the SEC close to concluding the case it brought in January 2017 against Barker and Dwayne Edwards, who the commission said worked as partners in a multimillion-dollar scheme.

Edwards has indicated his intent to oppose the SEC’s motion for monetary relief, according to court filings.

According to the SEC’s complaint, the two men 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.

The court-appointed receiver has told the court that sales of the facilities recovered about $26.7 million, though well short of what investors are owed. An outside law firm is continuing to pursue further recovery, according to court documents.

In a letter to the court, SEC attorney Lee Greenwood told Mannion that the court should approve the proposed settlement because it is “fair and reasonable,” which is the legal standard for approval based on case law.

“Under the Final Barker Judgment, the SEC will hold any funds it collects from Barker and may propose a plan to distribute those funds to investors, subject to court approval, at a later date,” Greenwood wrote.

Courts have typically approved settlements negotiated between the SEC and a defendant, but a judge has the ability to reject a settlement if he or she feels it is not appropriate. In 2014, for example, a federal judge in Michigan ordered that settlements between the SEC and two former public officials in Allen Park, Mich., that he himself had approved the day before be vacated because he was not satisfied the case had been fully presented. The judge later approved the settlements.

Under the terms of the pending agreement, Barker would have to pay the SEC the full $459,732.11 within 14 days of the court’s order approving the settlement.

The SEC is likely to file a motion for monetary judgment against Edwards later this month, according to court documents, with Edwards then filing a response in early January. Edwards is precluded by a previous consent judgment against him from claiming that he did not violate the securities laws, but he can contest the amount the SEC seeks from him.

For reprint and licensing requests for this article, click here.
SEC enforcement Securities law Court cases Munis SEC Washington DC Georgia Alabama
MORE FROM BOND BUYER