DOB: Magic Plunger et al - Withdrawal Order

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IN THE MATTER OF:

THE MAGIC PLUNGER, LLC

JEROLD L. JOHN
("John")

DALE N. THORP
("Thorp")


(Collectively "Respondents")

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ORDER WITHDRAWING
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

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act;

WHEREAS, on July 14, 2011, the Commissioner, acting pursuant to Section 36b-27 of the General Statutes of Connecticut, issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Notice”) against Respondents, which Notice is incorporated herein by reference;

WHEREAS, the Notice alleged that Respondents violated Sections 36b-16 and 36b-4(a) of the Act in connection with the sale of senior subordinated convertible debentures, promissory notes and certificates of “limited membership interest”;

WHEREAS, Respondents received the Notice and on July 29, 2011, Respondents requested a hearing on the Notice, which hearing is currently subject to an open-ended continuance;

WHEREAS, on September 25, 2012, the Commissioner filed a Verified Complaint against Respondents in Connecticut Superior Court for the Judicial District of Hartford (Pitkin v. The Magic Plunger, LLC, Jerold L. John and Dale N. Thorp (Docket No. HHD-CV-12-6035700-S));

WHEREAS, like the Notice, the Verified Complaint was based on violations of Sections 36b-16 and 36b-4 of the Act.  The Verified Complaint alleged that, commencing in December 2005, the defendants violated Section 36b-16 of the Act by offering and selling unregistered debentures, notes and certificates of “limited membership interests” issued by The Magic Plunger, LLC 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) the 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, The Magic Plunger LLC’s directors, officers and/or principals, including remuneration paid to them; (6) payments made or owed to affiliates of The Magic Plunger, LLC; (7) the estimated cash proceeds of the securities offering and how the offering proceeds would be used; (8) The Magic Plunger LLC’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;

WHEREAS, on October 23, 2012, the Superior Court for the Judicial District of Hartford entered an Order (“Stipulated Judgment”) approving a September 25, 2012 Stipulated Order for Injunctive Relief and Appointment of Receiver (“Stipulated Order”) in the matter of Pitkin v. The Magic Plunger, LLC, Jerold L. John and Dale N. Thorp (Docket No. HHD-CV-12-6035700-S);

WHEREAS, the Stipulated Judgment:  (1) permanently enjoined the defendants, inter alia, from violating the Act and its Regulations, offering or selling securities issued by The Magic Plunger, LLC and communicating with investors or customers of The Magic Plunger, LLC 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;

WHEREAS, pursuant to the Stipulated Order, defendants John and Thorp each deposited $100,000 into an escrow account to be controlled by the Receiver in full satisfaction of all liability in relation to the claims in the Verified Complaint.  The $200,000 so deposited was for the benefit of The Magic Plunger, LLC investors and to reimburse the Receiver for such reasonable expenses as might be approved by the court;

WHEREAS, Section 36a-1-55(b) of the Regulations of Connecticut State Agencies permits the Commissioner to withdraw an order at any time before a final decision is issued;

WHEREAS, Section 36b-31(b) of the Act 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-34, inclusive”;

AND WHEREAS, the Commissioner now finds that withdrawing the Notice is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;

NOW THEREFORE, the Commissioner ORDERS that:

       

The Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing in the Matter of:  The Magic Plunger, LLC, Jerold L. John and Dale N. Thorp, (Docket No. CRF-11-7667-S) issued by the Commissioner on July 14, 2011, and the Notification of Hearing and Designation of Hearing Officer issued by the Commissioner on August 1, 2011, be and are hereby withdrawn effective October 23, 2012.

So ordered at Hartford, Connecticut,       ______/s/__________ 
this 6th day of November 2012.   Howard F. Pitkin 
    Banking Commissioner 



CERTIFICATION

I hereby certify that on this 6th day of November 2012, the foregoing Order Withdrawing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Richard W. Barry, receiver of The Magic Plunger, LLC, 1009 Philadelphia Avenue, Point Pleasant, New Jersey 08742, certified mail no. 7011 0470 0002 2573 4513; Thomas Rechen, Esq., of McCartyer [sic] & English, LLP, counsel for Jerold L. John, CityPlace 1, 185 Asylum Street, Hartford, Connecticut 06103-3495, certified mail no. 7011 0470 0002 2573 4520; and Craig A. Raabe, of Robinson & Cole LLP, counsel for Dale N. Thorpe, 280 Trumbull Street, Hartford, Connecticut 06103-3597, certified mail no. 7011 0470 0002 2573 4537.


                                                    _______/s/_________
                                                    Paul A. Bobruff
                                                    Prosecuting Attorney 


Administrative Orders and Settlements