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STATE OF MAINE                                                                SUPERIOR COURT

CUMBERLAND, ss.                                                               CIVIL ACTION

                                                                                                DOCKET NO. CV-03-390

 

 

 

STATE OF MAINE and                                 )

SECURITIES ADMINISTRATOR,                )

                                                                        )

                        Plaintiffs,                                  )

                                                                        )

                        v.                                             )                       COMPLAINT

                                                                        )

CHARLES S. CLARK and CLARK &           )

STUART, INC.,                                              )

                                                                        )

                        Defendants.                              )

 

 

                                                        INTRODUCTION

 

            1.         The State of Maine and Securities Administrator (hereinafter collectively referred to as “the State”) bring this action against Charles S. Clark (“Clark”) and Clark & Stuart, Inc. (“C&S”) for violations of the Revised Maine Securities Act, 32 M.R.S.A. §§ 10101-10713 (1999 and Supp. 2002), in that they engaged in acts that operated as a fraud or a deceit upon their clients, Joan and Leonard Alley.

 

                                                          JURISDICTION

 

            2.         This Court has jurisdiction pursuant to 32 M.R.S.A. §§ 10602-10603 (1999 and Supp. 2002).

 

                                                                PARTIES

 

            3.         Plaintiff State of Maine is a sovereign state.  Plaintiff Securities Administrator, who has offices in Gardiner in Kennebec County, Maine, is responsible for enforcing the Act.  Plaintiffs bring this action by and through the Attorney General pursuant to 32 M.R.S.A. §§ 10602(1)(D), 10603 (1999) and the powers vested in him by 5 M.R.S.A. § 191 (Supp. 2002) and the common law as the State’s chief law enforcement officer.

            4.         Defendant Clark is an adult individual residing in Portland, Maine.  At all times relevant hereto, Clark was President of C&S.

            5.         Defendant C&S is a Maine corporation with its principal place of business in Portland, Maine.  At all times relevant hereto, C&S was registered as an investment adviser with the United States Securities and Exchange Commission and had filed the proper notice under 32 M.R.S.A. § 10305-A (1999) to transact business as an investment adviser in Maine.

 

                                                FACTUAL BACKGROUND

 

            6.         C&S served as the investment adviser for Joan and Leonard Alley from the summer of 1998 until early 2001.  In providing investment adviser services to the Alleys, C&S acted exclusively through Clark.  With respect to all conduct set forth in this Complaint, Clark acted as an officer, employee, and agent of C&S.

            7.         On or about February 11, 2000, Clark visited the Alleys’ home in Scarborough, Maine to provide investment adviser services.  During the course of this visit, Joan Alley disclosed to Clark that she had a large sum of cash that she had been saving at the house.

            8.         Clark advised the Alleys that they should invest the money, which totaled approximately $10,000, and represented that he would put it in a money market account earning 6% interest.  Clark further advised the Alleys that, for safety purposes, they should turn the money over to him by the end of the day.  After Clark left, the Alleys discussed the matter and decided to follow Clark’s advice.

            9.         During subsequent phone conversations, Clark arranged for the Alleys to bring the money to C&S’s office in Portland after business hours that evening.  At Clark’s instruction, the Alleys used the back entrance of the building when they arrived at C&S’s office.

            10.       The Alleys met with Clark, who appeared to be the only other person at the C&S office.  Pursuant to their earlier discussion at the Alleys’ home, the Alleys turned $10,000 in cash over to Clark.  When Joan Alley asked Clark for a receipt, Clark responded that he could not give her one because everything in the office was locked up.  Because the Alleys trusted Clark, they left the $10,000 in his possession without receiving a receipt.

            11.       When the $10,000 investment did not appear on the Alley’s monthly account statements, Joan Alley questioned Clark about the status of the investment.  Clark responded that investments sometimes take a long time to appear on statements, and that the Alleys’ $10,000 investment would eventually appear on their statement.  When the $10,000 investment still was not reflected on the Alleys’ June, 2000 statement, the Alleys again questioned Clark.  Much to their surprise, Clark denied having received the $10,000 from the Alleys.

            12.       To date, the $10,000 turned over by the Alleys to Clark in February of 2000 has not been invested for them as Clark had promised.  Despite demand, Clark has refused to return the $10,000 to the Alleys.

 


                                             Statutory Background

 

            13.       The Revised Maine Securities Act (“the Act”) regulates persons acting as investment advisers or investment adviser representatives in the State of Maine.

            14.       The Act prohibits investment advisers and their employees from engaging “in any act, practice, or course of business which operates . . . as a fraud or deceit upon any client.”  32 M.R.S.A. § 10203 (1999).

            15.       The Securities Administrator may refer violations of the Act to the Attorney General for enforcement, and the Attorney General may initiate a civil action in the Superior Court.  32 M.R.S.A. § 10602(1)(D) (1999).

            16.       In an enforcement action under the Act, the Court may grant a variety of legal and equitable remedies, including injunctions, civil penalties, restitution to investors and disgorgement.  32 M.R.S.A. § 10603 (1999).

 

                                                                COUNT I

           (Fraud or Deceit by an Investment Adviser or an Investment Adviser’s Employee)

 

            17.       The State repeats and realleges paragraphs 1 through 16 as if set forth fully herein.

            18.       By misrepresenting to the Alleys that Clark would invest the $10,000 on their behalf, and instead converting the money to Clark’s own use, Clark and C&S engaged in acts, practices, and a course of business that operated as a fraud or deceit upon the Alleys, all in violation of 32 M.R.S.A. § 10203 (1999).

 


                                                   REQUEST FOR RELIEF

 

            WHEREFORE, the State requests that this Honorable Court grant the following relief:

            1.         An order requiring Clark and C&S to make full restitution to the Alleys by returning all monies to them plus interest; and

            2.         Such other and further relief as this Court deems appropriate.

 

DATED:  July 7, 2003                     Respectfully submitted,

 

                                                                                    G. STEVEN ROWE

                                                                                    Attorney General

 

 

 

                                                                                    /s/ Michael J. Colleran 

                                                                                    MICHAEL J. COLLERAN

                                                                                    Assistant Attorney General

                                                                                    6 State House Station

                                                                                    Augusta, ME 04333-0006

                                                                                    Tel. (207) 626-8800

                                                                                    Bar. No. 9247

                                                                                    Attorney for Plaintiffs