DOB: Bulletin 2473 - July 15, 2011

The Department of Banking News Bulletin 

Bulletin # 2473
Week Ending July 15,  2011

This bulletin constitutes the only official notification you will receive from this office concerning any of the following applications. Any observations you may have are solicited. Any comments should be in writing to Howard F. Pitkin, Banking Commissioner, at the Connecticut Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800 or via E-mail. Written comments will be considered only if they are received within ten days from the date of this bulletin.


 
Petition for Declaratory Ruling
 
On July 15, 2011, a petition for a declaratory ruling was filed pursuant to Section 4-176 of the Connecticut General Statutes and Section 36a-1-84 of the Regulations of Connecticut State Agencies on behalf of Bay View Law Group, P.C. (“Bay View”).  The petition seeks a declaratory ruling that the Department of Banking, through its Commissioner, is not permitted to regulate the practice of law and the services offered by Bay View because, under the Connecticut Constitution, the Connecticut Supreme Court has exclusive jurisdiction over the practice of law and services provided in furtherance thereof.  In addition, Bay View is also seeking a ruling that it is specifically exempt from the provisions regulating debt adjustment and negotiation.  Such petition was filed in connection with the Commissioner’s May 23, 2011, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing issued against Bay View.
 
SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
Order to Cease and Desist, Order to Make Restitution,
Notice of Intent to Fine and Notice of Right to Hearing Issued
 
On July 14, 2011, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing against The Magic Plunger, LLC and Jerold L. John, both of 12 Beaverbrook Road, West Simsbury, Connecticut, and Dale N. Thorp of 12 Morgan Place, Unionville, Connecticut.  The business of The Magic Plunger, LLC is or was the manufacturing and marketing of toilet plungers.  Respondent John was The Magic Plunger, LLC’s managing member, and Respondent Thorp was its chief executive officer.
 
The action alleged that from at least December 2005 through March 2008, the respondents sold unregistered securities consisting of senior subordinated convertible debentures, promissory notes and certificates of “limited membership interest.”  Approximately $2 million of debentures were purportedly sold to investors.  The action also alleged that the respondents violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act by failing to disclose to investors that :  1) respondents John and Thorp would receive $400,000 from investor funds for developing the Magic Plunger product idea; and 2) investors might lose their entire investment.
 
In addition, the respondents allegedly failed to apprise investors concerning risks related to the investment; any financial or background information on The Magic Plunger, LLC’s officers, directors and principals, including their compensation; financial information concerning The Magic Plunger, LLC; material litigation involving the officers, directors and principals of The Magic Plunger, LLC; payments made to affiliated companies; the estimated cash proceeds of the securities offering and how the proceeds would be used; information substantiating how the represented rates of return could be achieved; and information concerning the respondents’ ability to meet their obligations under the debentures and promissory notes.
 
The action directed the respondents to cease and desist from regulatory violations and to make restitution of those sums obtained in violation of Section 36b-4(a) of the Act.  The respondents were afforded an opportunity to request a hearing on the Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine.
 
       Dated:  Tuesday, July 19, 2011
 
       Howard F. Pitkin
       Banking Commissioner