DOB: Gibson, Herman-Orion Capital-CD-NOIF

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IN THE MATTER OF:

ORION CAPITAL LLC
   ("ORION")

HERMAN WAYNE GIBSON
   ("GIBSON")

   CRD No. 1274821

(Collectively "Respondents")





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ORDER TO CEASE AND DESIST

NOTICE OF INTENT TO FINE

AND

NOTICE OF RIGHT TO HEARING

DOCKET NO. CF-14-8080-S

I. PRELIMINARY STATEMENT

1. 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.
2. Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if Respondents have violated, are violating or are about to violate provisions of the Act or Regulations (“Investigation”).
3.
As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act.
4. As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the Act.
5.
As a result of the Investigation, the Commissioner has the authority to impose a fine upon Respondents pursuant to Section 36b-27(d) of the Act.

II.  RESPONDENTS

6. Orion is a Connecticut limited liability company with its principal place of business last known to the Commissioner at 1297 Main Street, Watertown, Connecticut 06795.
7. Gibson is an individual whose address last known to the Commissioner is 11 Fleming Street, Waterbury, Connecticut 06710.

III.  STATEMENT OF FACTS

8. From at least September 20, 2009 to the present, Orion has been an issuer of securities in the form of promissory notes (“Orion Notes”).
9. From September 20, 2009 to the present, Gibson offered and sold Orion Notes on behalf of Orion in or from Connecticut to at least one investor (“Investors”).
10. For all relevant periods, Gibson was the sole member and control person of Orion.  Gibson created Orion in order to process conventional loans for Pegasus Investment Group, LLC (“Pegasus”).  Pegasus was a mortgage broker licensed by the Department of Banking.  Gibson is the sole member and control person of Pegasus.
11. On September 20, 2009, Gibson offered and sold a Connecticut investor (“Investor 1”) a promissory note (“Orion Note 1”) for $150,000.  Under the terms of Orion Note 1, Investor 1 expected to receive the principal amount of $150,000 plus a guaranteed annual rate of interest of 9.5 percent.  Orion Note 1 was for a two-year term with the entire balance, including accrued interest, due and payable in full on or before September 11, 2011.
12. Investor 1, at Gibson’s direction, paid $150,000 for Orion Note 1, which payment was deposited into a bank account controlled by Gibson.  Gibson withdrew some of the funds provided by Investor 1 from the bank account controlled by Gibson and used the money for his personal use.
13. The Orion Notes offered and sold by Respondents were never registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status.
14. At no time was Orion registered in any capacity under the Act.
15. Gibson has never been registered as an agent of issuer of Orion under the Act.  Gibson was registered as a broker-dealer agent under the Act at various times from July 23, 1985 through April 26, 1996.
16. In connection with the offer and sale of the Orion Notes, Respondents failed to disclose, inter alia, any financial information about Respondents, the registration status of the securities, that Gibson was acting as an unregistered agent of issuer of Orion in Connecticut, any specific risk factors related to the investment, or that Gibson would use a significant part of the Investors’ money for his personal use.  Each of these omitted items was material to the Investors and prospective investors of the Orion Notes.
17. On September 18, 2013, pursuant to the Investigation, the Division interviewed Gibson on the record regarding certain aspects of the Investigation, including the bank accounts utilized by Monarch Funding, LLC (“Monarch”), an entity controlled by Gibson.  When asked how Monarch was funded, Gibson responded “just with $10 opening the account.”  In fact, Gibson deposited over $50,000 in the Monarch bank account, some of which Gibson used for personal expenses.  Furthermore, Gibson knew that his statement about the account was false because he, himself, had deposited the money and withdrew the money from Monarch’s bank account.

IV.  STATUTORY BASIS FOR ORDER TO CEASE AND DESIST 
AND ORDER IMPOSING FINE

a.  Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities

18. Paragraphs 1 through 17, inclusive, are incorporated and made a part hereof as if more fully set forth herein.
19.
Respondents offered and sold unregistered securities in or from Connecticut to at least one investor, as more fully described in paragraphs 8 through 12, inclusive, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 13.  The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act.

b.  Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security

20. Paragraphs 1 through 18 [sic] inclusive, are incorporated and made a part hereof as if more fully set forth herein.
21.
The conduct of Respondents, as more fully described in paragraphs 8 through 16, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person.  Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act.

c.  Violation of Section 36b-6 of the Act –
Unregistered Agent Activity

22. Paragraphs 1 through 21, inclusive, are incorporated and made a part hereof as if more fully set forth herein.
23.
Gibson transacted business as an agent of issuer in this state absent registration, as more fully described in paragraphs 8 through 15, inclusive.  Such conduct constitutes a violation of Section 36b-6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Gibson under Section 36b-27(a) of the Act, and for the imposition of a fine upon Gibson under Section 36b-27(d) of the Act.
24. Orion employed Gibson as an unregistered agent of issuer in this state, as more fully described in paragraphs 8 through 15, inclusive.  Such conduct constitutes a violation of Section 36b-6(b) of the Act, which forms a basis for an order to cease and desist to be issued against Orion under Section 36b-27(a) of the Act, and for the imposition of a fine upon Orion under Section 36b-27(d) of the Act.

d.  Violation of Section 36b-23 of the Act by Gibson –
Making a Statement in an Investigation that is
False or Misleading in a Material Respect

25. Paragraphs 1 through 24, inclusive, are incorporated and made a part hereof as if more fully set forth herein.
26.
Gibson’s statements to the Division, as more fully described in paragraphs 17, were, at the time and in light of the circumstances under which they were made, false or misleading in a material respect, which constitutes a violation of Section 36b-23 of the Act.  Such violation forms a basis for an order to cease and desist to be issued against Gibson under Section 36b-27(a) of the Act and for the imposition of a fine upon Gibson under Section 36b-27(d) of the Act.

V.  ORDER TO CEASE AND DESIST, NOTICE OF INTENT TO FINE
AND NOTICE OF RIGHT TO HEARING

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Orion has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(b) of the Act;

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Gibson has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, at least one violation of Section 36b-6(a) of the Act, and at least one violation of Section 36b-23 of the Act;

WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist against Respondents and the imposition of a fine upon Respondents is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;

WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation upon Respondents;

WHEREAS, the Commissioner ORDERS that Orion Capital LLC CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation:  (1) offering and selling unregistered securities; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) employing agents of issuer in this state absent registration;

WHEREAS, the Commissioner ORDERS that Herman Wayne Gibson CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation:  (1) offering and selling unregistered securities; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; (3) acting as an agent of issuer in this state absent registration and (4) making statements to the Division which are, at the time and in light of the circumstances under which they are made, false or misleading in a material respect;

THE COMMISSIONER FURTHER ORDERS THAT, pursuant to subsections (a) and (d) of Section 36b 27 of the Act, each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order.  The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address.  If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”.  Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations of Connecticut State Agencies.  If a hearing is requested, the hearing will be held on July 1, 2014, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.

The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut.  At such hearing, each Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.

This Order to Cease and Desist shall remain in effect and become permanent against any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.

The Commissioner may order that the maximum fine be imposed upon any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
    
    

Dated at Hartford, Connecticut,       ______/s/__________ 
this 8th day of May 2014.   Howard F. Pitkin 
    Banking Commissioner 



CERTIFICATION

I hereby certify that on this 8th day of May 2014, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Orion Capital LLC at 1297 Main Street, Watertown, Connecticut 06795, certified mail no. 7012 3050 0002 1692 6460; and 850 Straits Turnpike, Suite 101, Middlebury, Connecticut 06762, certified mail no. 7012 3050 0002 1692 6477; and Herman Wayne Gibson, 11 Fleming Street, Waterbury, Connecticut 06710, certified mail no. 7012 3050 0002 1692 6484.



      
  ____/s/___________ 
  Paul A. Bobruff
  Prosecuting Attorney 
                            
 


Administrative Orders and Settlements