DOB: Charter One Capital Holding - FINE

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IN THE MATTER OF:

CHARTER ONE CAPITAL HOLDING, INC.

    ("Respondent")

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ORDER IMPOSING FINE

DOCKET NO. RF-2006-7155-S


WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2, et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);

WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an investigation pursuant to Section 36b-26(a) of the 2006 Supplement to the General Statutes (“Supplement”), into the activities of Respondent, to determine whether Respondent had violated, was violating or was about to violate any provisions of the Act or Regulations;

WHEREAS, on April 27, 2006, the Commissioner, acting pursuant to Section 36b-27(a) and Section 36b-27(d) of the Supplement, issued an Order to Cease and Desist, Notice of Intent to Fine (“Fine Notice”) and Notice of Right to Hearing against Respondent (collectively “Notice”), which Notice is incorporated by reference herein;

WHEREAS, the Fine Notice stated that the Commissioner intended to impose a fine against Respondent, that a hearing would be held on July 11, 2006 on the matters alleged in the Fine Notice, and that if the Respondent failed to appear at the hearing, the Commissioner may order a maximum fine of Two Hundred Thousand Dollars ($200,000) on Respondent;

WHEREAS, on April 28, 2006, the Notice was sent by registered mail, return receipt requested to Respondent;

WHEREAS, the Notice sent to Respondent was returned to the Department marked “Returned To Sender-Attempted/Unknown”;

WHEREAS, on May 12, 2006, the Notice was served on the Commissioner, and on May 17, 2006, in accordance with Section 36b-33(h) of the Supplement, Notice of Service on the Banking Commissioner, dated May 17, 2006, was sent by registered mail, return receipt requested, to Respondent;

WHEREAS, on July 11, 2006, Respondent failed to appear at the Hearing;

WHEREAS, in the Notice the Commissioner alleged that from at least January 2003 to October 2005, Respondent was an issuer of securities in the form of promissory notes (“Notes”);

WHEREAS, in the Notice the Commissioner alleged that Respondent, through its agents, offered and sold the Notes to at least 50 investors, including a Connecticut investor, raising an aggregate of over $1 million from such investors;

WHEREAS, in the Notice the Commissioner alleged that the Notes were never registered in Connecticut as required by Section 36b-16 of the Act nor were they exempt from registration under Section 36b-21 of the Act, nor were they covered securities;

WHEREAS, in the Notice the Commissioner alleged that Respondent failed to pay the investors interest or principal in accordance with the terms of the Notes;

WHEREAS, in the Notice the Commissioner alleged that Respondent failed to inform the Connecticut customer of any risks associated with investing in the Notes, even though Respondent had not paid earlier investors the monies owed on the Notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which according to the Report of Independent Auditor raised substantial doubt about its ability to continue as a going concern;

WHEREAS, in the Notice the Commissioner alleged that in connection with the sale of the Notes, Respondent, through its agents, provided some potential investors with a document containing biographies and profiles of individuals purportedly associated with Respondent when at least three of those individuals had declined Respondent’s request to become an officer/director of Respondent;

WHEREAS, Section 36a-1-31(b) of the Regulations provides, in relevant part, that “[w]hen a party fails to appear at a scheduled hearing, the allegations against the party may be deemed admitted”;

WHEREAS, Section 36b-27(d)(2) of the Supplement, provides, in relevant part, that “[i]f such person . . . fail[s] to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person”;

WHEREAS, Section 36b-15(f) of the Supplement provides, in pertinent part, that “[n]o order may be entered under this section except as provided in subsection (c) of this section without (1) appropriate prior notice to the applicant or registrant . . . , (2) opportunity for hearing, and (3) written findings of fact and conclusions of law”;

WHEREAS, the facts as set forth in paragraphs 7 through 12, inclusive, of the Notice shall constitute findings of fact, and the statutory and regulatory basis for the imposition of a fine set forth in paragraphs 13 through 16, inclusive, of the Notice shall constitute conclusions of law;

WHEREAS, the Commissioner has complied with the requirements of Section 36b-15(f) of the Supplement;

WHEREAS, the Commissioner finds that Respondent committed one violation of Section 36b-16 of the Act and one violation of Section 36b-4 of the Act;

WHEREAS, the Commissioner finds that Respondent’s failure to register the securities prior to effecting the sale of the Notes to the Connecticut investor, in violation of Section 36b-16 of the Act, constitutes a basis for the imposition of a fine against Respondent under Section 36b-27(d) of the Supplement;

WHEREAS, the Commissioner finds that Respondent, in connection with the offer and sale of the Notes, employed a device, scheme or artifice to defraud; omitted to state a material fact necessary in order to make statements made in light of the circumstances under which they were made, not misleading; and, engaged in a practice or course of business that operated as a fraud or deceit upon investors including a Connecticut investor, in violation of Section 36b-4 of the Act, which constitute a basis for the imposition of a fine against Respondent under Section 36b-27(d) of the Supplement;

WHEREAS, the Commissioner finds that the facts require the imposition of a fine against Respondent;

WHEREAS, Section 36b-31(a) of the Supplement provides, in pertinent part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive”;

WHEREAS, Section 36b-31(b) of the Supplement provides, in pertinent part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive”;

AND WHEREAS, the Commissioner finds that this order is necessary, appropriate in the public interest, for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive.

ORDER

Having read the record, I HEREBY ORDER, pursuant to Section 36b-27(d)(2) of the 2006 Supplement to the Connecticut General Statutes, that:

1.
A fine of Two Hundred Thousand Dollars ($200,000) is hereby imposed against Charter One Capital Holding, Inc., to be remitted to the Department of Banking by certified check, made payable to “Treasurer, State of Connecticut”, no later than 21 days from the date this order is mailed; and
 
2.
This Order shall become final when mailed.
 

                                                     
Dated at Hartford, Connecticut
this 14th day of August 2006.               ________/s/_________
                                                       John P. Burke
                                                       Banking Commissioner

 

This Order was mailed by registered
mail, return receipt requested, to
the Respondent on August 14th, 2006.

Charter One Capital Holding, Inc.           Registered Mail No. RB 028 033 088 US
11 Broadway, Suite 1015
New York, NY 10004


Administrative Orders and Settlements