SEC sues Las Vegas man alleging securities fraud

Tuesday, Nov. 14, 2000 | 10:25 a.m.

SUN STAFF AND WIRE REPORTS

A Las Vegas man defrauded investors by selling $19 million in unregistered securities -- spending some of the money on a honeymoon and a divorce settlement, federal regulators alleged Monday.

The Securities and Exchange Commission filed a civil complaint against Jerry A. Womack in a California federal court, alleging that Womack duped about 400 investors nationwide.

The SEC said Womack, 51, sold partnership interests in two Nevada companies -- Iris Limited Partnership and Jerry Womack LLC. He promised large returns through his investment strategy called the "Womack Dow Principle," the SEC said.

With investors' funds, Womack paid for a honeymoon with his wife, her cosmetic surgery and then their divorce settlement, the SEC said. Womack also used the money to buy a home, jewelry and artwork -- and to establish a recording studio, the SEC said.

Womack's lawyer, Patrick Maginnis of Santa Monica, Calif., could not be reached for comment.

"Investors should be very wary in turning over funds to just anyone to invest for them," said Kelly Bowers, assistant regional director of the SEC office in Los Angeles. "They should be making sure investors are registered with the proper authorities -- at the minimum."

When Womack was arrested by the FBI in October 1999, he pleaded innocent in federal court to a charge of wire fraud tied to the alleged stock fraud.

Womack also has pleaded innocent to money laundering, Bowers said. Womack was indicted in October 1999 and was free on bail, Bowers added.

According to the SEC complaint, Womack sold interests in his companies for $2,200 to $2,500 per share from August 1997 to June 1999. He allegedly told investors that his "Womack Dow Principle" reaped "substantial profits" on day trading in response to short-term market trends.

The SEC alleged that Womack provided some investors with the "Dow Principle Prospectus," which stated that Womack "has never failed to produce a return on capital in excess of 100 percent over any recorded six-month period of time."

The SEC contended Womack used only about one-fourth of investors' money for stock-market trading and suffered a net loss, the SEC said. Womack also operated a "Ponzi scheme," the SEC alleged, in which one-third of investors funds were distributed as purported profits to other investors.

The SEC is seeking an injunction prohibiting Womack from future violations of securities regulations as well as restitution and civil penalties, although Bowers said an exact amount has not been determined.