DOB: Bulletin 2542 - November 9, 2012

The Department of Banking News Bulletin 

Bulletin # 2542
Week Ending November 9, 2012

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.



STATE BANK ACTIVITY
Merger and Acquisition

On November 8, 2012, pursuant to Section 36a-411 of the Connecticut General Statutes, the Commissioner approved the acquisition by United Financial Bancorp, Inc., a bank holding company with its principal place of business in Massachusetts, for the acquisition of 100 percent of the issued and outstanding voting securities of New England Bancshares, Inc., a bank holding company with its principal place of business in Enfield, Connecticut, and its wholly-owned subsidiary New England Bank, a Connecticut bank, and, pursuant to Section 36a-185 of the Connecticut General Statutes, issued a notice of intent not to disapprove such acquisition. Also on November 8, 2012, the Commissioner, pursuant to Section 36a-412(a)(1) of the Connecticut General Statutes, approved the merger of New England Bank, with and into United Bank, a federal savings bank and a wholly-owned subsidiary of United Financial Bancorp, Inc.
 
 
CREDIT UNION ACTIVITY
Branch Activity
 
Date Credit Union Location Activity
11/16/12
Mutual Security Credit Union, Inc.
Shelton
855 Main Street
Bridgeport, CT  06604
Closing
Date
 
 
SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
West Simsbury Firm and its Principals Agree to Entry of Permanent Injunction,
Asset Freeze and Appointment of Receiver
 
On October 23, 2012, the Superior Court for the Judicial District of Hartford entered an Order Regarding Stipulation in the matter of Pitkin v. The Magic Plunger, LLC, Jerold L. John and Dale N. Thorp (Docket No. HHD-CV-12-6035700-S).  The related September 25, 2012 Stipulated Order for Injunctive Relief and Appointment of Receiver 1) permanently enjoined the defendants, inter alia, from violating the Connecticut Uniform Securities Act and its Regulations, offering or selling securities issued by The Magic Plunger, LLC and communicating with investors or customers of Magic Plunger absent prior written approval from the receiver; 2) froze the assets of The Magic Plunger, LLC; and 3) appointed a Receiver to take control of and liquidate The Magic Plunger, LLC’s assets and provide each investor with an opportunity to file a claim to share in any distribution of proceeds made by the Receiver.  The Stipulated Order for Injunctive Relief and Appointment of Receiver also required defendants John and Thorp to deposit $100,000 into an escrow account to be controlled by the Receiver.  The $200,000 so deposited would benefit Magic Plunger investors and reimburse the Receiver for such reasonable expenses as might be approved by the court.
 
The court’s action had been preceded by a September 25, 2012 Verified Complaint against The Magic Plunger, LLC of West Simsbury, Connecticut; Jerold L. John, its managing member and executive vice president; and Dale N. Thorn, its chief executive officer.  The Magic Plunger, LLC was in the business of manufacturing and marketing toilet plungers.  The Verified Complaint alleged that, commencing in December 2005, the defendants violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered Magic Plunger debentures, notes and certificates of “limited membership interests” to at least 77 investors who invested approximately $1.9 million.  The Verified Complaint also alleged that the defendants violated the antifraud provisions in Section 36b-4(a)(2) of the Act by not telling investors about 1) defendants’ inability to make interest payments to debenture holders; 2) an arrangement by which defendants John and Thorp would receive $400,000 of investor funds for coming up with the Magic Plunger idea and bringing the final product to market; 3) the registration status of the securities; 4) the risks associated with the investments; 5) the background of, or financial information concerning, Magic Plunger’s directors, officers and/or principals, including remuneration paid to them; 6) payments made or owed to affiliates of Magic Plunger; 7) the estimated cash proceeds of the securities offering and how the offering proceeds would be used; 8) Magic Plunger’s financial statements; and 9) material litigation involving Magic Plunger’s directors, officers and/or principals.  In addition, the Verified Complaint alleged that the defendants violated the antifraud provisions in Section 36b-4(a)(3) of the Act by not applying investor funds to product development and marketing but rather to personally benefit defendants John and Thorp, resulting in investor monies being dissipated.
 
The Magic Plunger, LLC, Jerold L. John and Dale N. Thorp had been the subject of a July 14, 2011 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-11-7667-S) issued by the Commissioner based on similar violations of Sections 36b-16 and 36b-4 of the Connecticut Uniform Securities Act.  In light of the entry of the permanent injunction and the appointment of a receiver, the July 14, 2011 action was withdrawn effective October 23, 2012.
 

Order to Cease and Desist, Order to Make Restitution, Notice of Intent to
Revoke Registration as an Investment Adviser and Notice of Intent to Fine Issued
 
On November 6, 2012, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke Registration as an Investment Adviser and Notice of Intent to Fine (Docket No. CRF-12-8048-S) against DFS Capital Management, LP, an investment adviser located in Darien, Connecticut; John Vincent Greco, president of the firm; and DFS Fund, Limited Partnership (the “Fund”), an investment fund sharing the same address as DFS Capital Management, LP.  Although DFS Capital Management, LP’s investment adviser registration had expired, Connecticut law authorizes the Commissioner to initiate revocation proceedings within one year following the registration expiration.  DFS Capital Management, LP was the Fund’s general partner and investment adviser, and respondent Greco was responsible for the day-to-day management and operation of the Fund.
 
The action alleged that respondent Greco violated Section 36b-6(c)(2) of the Connecticut Uniform Securities Act by transacting business as an unregistered investment adviser agent, and that DFS Capital Management, LP violated Section 36b-6(c)(3) of the Act by employing Greco as an unregistered investment adviser agent.
 
The action also alleged that the respondents violated the antifraud provisions in Section 36b-4(a) of the Act in connection with an offering of interests in the Fund.  In addition, respondents Greco and DFS Capital Management, LP allegedly violated Section 36b-4(b) of the Act by engaging in dishonest and unethical practices.  Specifically, respondents Greco and DFS Capital Management, LP recommended that at least two investors liquidate their brokerage and retirement accounts at other firms to invest in the Fund which they variously characterized as a “no-lose” investment and one that would generate a return of approximately 20%.  The action alleged that respondents Greco and DFS Capital Management, LP did not disclose to the affected investors, one of whom was 75 years old, any risks associated with the investment or that the Fund’s investment strategy was almost exclusively speculative options trading.  The two investors incurred $584,222 in trading losses due to their investment in the Fund.  The action alleged that in or about December, 2011, respondent Greco closed the Fund due to the Fund’s trading losses.
 
In addition, the action alleged that respondents Greco and DFS Capital Management, LP violated Section 36b-23 of the Act by making a materially false or misleading statement during a 2011 examination of DFS Capital Management, LP’s books and records.  Specifically, respondent Greco allegedly denied that he or DFS Capital Management, LP had issued any promissory notes.  The action alleged that, in reality, respondent Greco had induced an individual to invest in the Fund by agreeing to reimburse her for the deferred sales/surrender charge associated with her liquidating annuities held at another firm.  Subsequently, respondent Greco allegedly memorialized that agreement in a promissory note in favor of the investor.
 
The action also alleged that DFS Capital Management, LP, the Fund’s general partner and investment adviser, violated Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations by repeatedly failing to provide the Division with requested books and records.  Respondent Greco had been previously sanctioned by the Commissioner in a December 21, 2011 Consent Order for failing to cooperate with the agency’s Consumer Credit Division in conjunction with a rate lock investigation.
 
The respondents were afforded an opportunity to request a hearing on the allegations in the Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke Registration as an Investment Adviser and Notice of Intent to Fine.
 
CONSUMER CREDIT DIVISION ACTIVITY
Order to Cease and Desist, Order of Repayment of Fees
and Order Imposing Civil Penalty
 
On October 24, 2012, the Commissioner issued an Order to Cease and Desist, Order of Repayment of Fees and Order Imposing Civil Penalty against Law Offices of Herbert Davis, A Professional Law Corporation d/b/a Performance Debt Resolution (“Herbert Davis”), of Los Angeles and Tarzana, California (“Order”) In the Matter of:  Creative Media Consulting, Inc. d/b/a Debt Resolution Bailout / Plan B Consulting Group / Creative Media Consulting Inc. (“Creative Media Consulting”) and Herbert Davis.  The basis of the Order was that Herbert Davis offered to engage in debt negotiation in this state without obtaining the required license, in violation of Section 36a-671(b) of the Connecticut General Statutes, in effect prior to October 1, 2011.  Herbert Davis was ordered to cease and desist from violating Section 36a-671(b) of the Connecticut General Statutes, in effect prior to October 1, 2011, to pay a civil penalty in the amount of $100,000 and to repay fees to identified Connecticut residents.  Creative Media Consulting requested a hearing on the allegation against it.
 
On October 24, 2012, the Commissioner issued an Order to Cease and Desist, Order of Repayment of Fees and Order Imposing Civil Penalty (“Order”) In the Matter of:  US National Legal Solutions a/k/a USNLS, Inc (“Respondent”), Irvine, California.  The basis of the Order was that Respondent engaged in debt negotiation in this state without obtaining the required license, in violation of Section 36a-671(b) of the Connecticut General Statutes, in effect prior to October 1, 2011, and that the fees charged by Respondent for debt negotiation services were excessive.  Respondent was ordered to cease and desist from violating Section 36a-671(b) of the Connecticut General Statutes, in effect prior to October 1, 2011, to pay a civil penalty in the amount of $100,000 and to repay $3,960 to an identified Connecticut resident.
 
 
 
     Dated:  Wednesday, November 14, 2012
 
 
       Howard F. Pitkin
       Banking Commissioner