United States District Court, Central District of California
POST-HEARING FINDINGS OF FACT AND CONCLUSIONS OF LAW AS TO VINCENT J. MESSINA AND INTERNATIONAL MARKET VENTURES
JOHN F. WALTER UNITED STATES DISTRICT JUDGE
I. PROCEDURAL BACKGROUND
In this enforcement action, Plaintiff Securities and Exchange Commission (“SEC”) alleges that Defendants Ming Xu, World Capital Market, Inc. (“WCM”), WCM777 Inc., and WCM777 Limited (collectively, “Defendants”), operating under the offering name WCM777, conducted a pyramid and Ponzi scheme and fraudulently misappropriated investor funds in excess of $80 million through an unregistered offering of securities. In the First Amended Complaint filed on May 7, 2014, the SEC named Vincent J. Messina and International Market Ventures (“IMV”) as “relief defendants” or nominal defendants and alleges that they hold proceeds of the fraud.
On June 2, 2014, Relief Defendants Vincent Messina and IMV filed a Motion to Dismiss Claims on the grounds that they were not proper relief or nominal defendants because they allegedly have a legitimate claim to the funds [Docket No. 80]. On July 10, 2014, the Court denied the Motion to Dismiss Claims, but concluded that there were disputed issues of fact related to the legitimacy of Vincent Messina’s and IMV’s claims to the funds, and that an evidentiary hearing was required to resolve those disputed issues of fact.
On September 5, 2014 and September 17, 2014, the Court conducted an evidentiary hearing to determine whether Vincent Messina and IMV have a legitimate claim to any portion of the 5.2 million dollars that Vincent Messina received from Defendants. The Court heard from six witnesses, and admitted into evidence 138 exhibits offered by the SEC and 25 exhibits offered by Vincent Messina and IMV.
On October 8, 2014, the parties filed their post-hearing proposed Findings of Fact and Conclusions of Law. After considering the evidence, and the parties’ proposed Findings of Fact and Conclusions of Law, the Court makes the following findings of fact and conclusions of law:
II. FINDINGS OF FACT
A. Relief Defendant Vincent Messina
On June 6, 2013, Vincent Messina became WCM’s in-house legal counsel. Vincent Messina was paid $5, 000 per month for his services as in-house legal counsel during the period from June 2013 through February 2014 and he received a total of $45, 000 for his services.
At all relevant times, Vincent Messina also served as general counsel for Relief Defendant IMV.
B. Relief Defendant IMV
IMV is a consulting firm based in Washington D.C., with correspondent offices in, among other places, Los Angeles, Hong Kong, and the United Arab Emirates. Gary Messina is 100% owner, CEO, and president of IMV. Gary Messina is the nephew of Relief Defendant Vincent Messina.
C. Vincent Messina becomes aware of the SEC investigation in the fall of 2013.
In the fall of 2013, Defendant Ming Xu, the chief executive officer of WCM (and chairman of Defendants WCM, WCM777 Inc., and WCM777 Ltd.), retained attorney Scott Warren, of the law firm Wellman & Warren, to represent Defendants in connection with investigations by the Commonwealth of Massachusetts and the State of California into an offering made under the name “WCM777.” In October 2013, Defendants became aware that the SEC was also investigating the WCM777 offering and WCM, WCM777 Inc., and WCM777 Limited.
In October 2013, shortly after being retained, Scott Warren advised Defendants to immediately stop all worldwide operations and cease raising money from investors. He informed Xu that, in his opinion, WCM777 was operating as a Ponzi scheme, illegal in every state, as well as every country in the world. He also advised Xu that WCM777 was an illegal pyramid scheme, and that it violated state and federal securities laws.
Vincent Messina admits that he became aware of Defendants’ problems with various securities regulators in the fall of 2013. In fact, Xu instructed one of Defendants’ employees, Edward King, to update Vincent Messina concerning the status of the SEC investigation so that Vincent Messina could help Xu protect his assets.
D. WCM transfers $200, 000 to Vincent Messina in December 2013.
On December 17, 2013, Defendant WCM disbursed $200, 000 from its account at Bank of America to Vincent Messina. Vincent Messina deposited that $200, 000 into an Interest on Lawyers Trust Account (“IOLTA”) that he held at Wells Fargo (account ending in 0382). Although there is no contract or writing that reflects the purpose of this transfer of funds, Vincent Messina claims that these funds represented fees for services related to the formation of a political action committee (“PAC”) requested by Xu. According to Vincent Messina, he performed services relating to the ...