Initial Decision Release No. 1340

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Administrative Proceeding

File No. 3-17650

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Initial Decision of Default

December 21, 2018

Joe Lawler

Appearance:

Polly Atkinson for the Division of Enforcement,

Securities and Exchange Commission

Before:

James E. Grimes, Administrative Law Judge

Summary

I grant the Division of Enforcement’s motion for default and sanctions.

Respondent Joe Lawler is barred from associating with a broker, dealer,

investment adviser, municipal securities dealer, municipal advisor, transfer

agent, or nationally recognized statistical rating organization, and from

participating in an offering of penny stock.

Procedural Background

The Securities and Exchange Commission initiated this proceeding in

October 2016, when it issued an order instituting proceedings (OIP) under

Section 15(b) of the Securities Exchange Act of 1934.1 This is a follow-on

proceeding based on a final judgment entered in May 2016 by the United

States District Court for the District of New Mexico.2 The Division alleges

that from May 2008 through August 2012 Lawler offered and sold the

OIP at 1; see 15 U.S.C. § 78o(b).

See SEC v. Projaris Mgmt., LLC, No. 1:13-cv-849 (D.N.M.).

securities of a pooled investment vehicle, and received compensation for each

transaction in which investors bought the securities.3 During that time

period, he was neither registered with the Commission nor associated with

any person or entity registered with the Commission.4 The Division alleges

that the district court enjoined Lawler in a consent judgment from violating

the registration and antifraud provisions of the Securities Act of 1933 and the

Exchange Act.5 And the OIP paraphrases the Commission’s allegations from

its complaint in the district court.6

A different administrative law judge originally presided over this

proceeding and issued an initial decision of default.7 But the Commission

vacated that decision following the Supreme Court’s decision in Lucia v.

SEC,8 and the matter was reassigned to me to provide Lawler with the

opportunity for a new hearing.9 Lawler was directed to propose how further

proceedings should be conducted,10 but he never submitted a proposal or filed

an answer.11 Only the Division of Enforcement participated in the telephonic

prehearing conference that I held on October 25, 2018.12 Thereafter, I ordered

Lawler to show cause why the proceeding should not be determined against

him due to his failure to answer the OIP or otherwise defend the

OIP at 1.

Id. at 1.

Id. at 1; see 15 U.S.C. §§ 77e(a), 77e(c), 77q(a), 78j(b), 78o(a); 17 C.F.R.

§ 240.10b-5.

OIP at 1–2.

Joe Lawler, Initial Decision Release No. 1117, 2017 SEC LEXIS 887

(ALJ Mar. 21, 2017).

138 S. Ct. 2044 (2018); see Pending Admin. Proc., Securities Act of 1933

Release No. 10536, 2018 SEC LEXIS 2058, at *2–3 (Aug. 22, 2018).

Pending Admin. Proc., Admin. Proc. Rulings Release No. 5955, 2018 SEC

LEXIS 2264, at *2–3 (ALJ Sept. 12, 2018).

Joe Lawler, Admin. Proc. Rulings Release No. 6088, 2018 SEC LEXIS

2600, at *1 (ALJ Sept. 26, 2018).

Joe Lawler, Admin. Proc. Rulings Release No. 6275, 2018 SEC LEXIS

3037, at *1 (ALJ Nov. 1, 2018).

Id. at 1.

proceeding.13 The Division then filed a motion for default and sanctions,

supported by a declaration and six exhibits.14 Lawler did not file an

opposition to the Division’s motion. In conducting this proceeding and

considering the Division’s motion, I gave no weight to the opinions, orders, or

rulings issued by the prior administrative law judge.15

Findings of Fact

The findings and conclusions in this initial decision are based on the

record and on facts officially noticed.16 Because Lawler is in default, I have

deemed true the allegations in the OIP and, consistent with Commission

precedent, will rely on those allegations in conjunction with other evidence in

the record developed since the proceeding was reassigned to me.17 That other

evidence includes the factual allegations admitted when Lawler pleaded

guilty to twelve counts of wire fraud in a criminal action in the United States

District Court for the District of New Mexico,18 and the factual allegations in

the civil complaint, which Lawler agreed that he could neither “contest” nor

Id.

The exhibits are cited as “Div. Ex. _” using the documents’ internal

pagination.

See Pending Admin. Proc., 2018 SEC LEXIS 2058, at *4.

17 C.F.R. § 201.323.

See Pending Admin. Proc., 2018 SEC LEXIS 2058, at *4; see also 17

C.F.R. § 201.155(a); David E. Lynch, Exchange Act Release No. 46439, 2002

WL 1997953, at *1 & n.12 (Aug. 30, 2002) (instructing that, “if additional

evidence is adduced in a proceeding against a respondent” who is in default,

“the decisionmaker properly should consider that evidence in the

determination of the proceeding”).

Lawler did not enter a plea stipulating to only certain allegations, and

nothing indicates that he objected to certain allegations. See, e.g., United

States v. White, 408 F.3d 399, 402–03 (8th Cir. 2005) (finding that a

defendant’s guilty plea did not constitute an admission to facts that the

defendant disavowed during his plea hearing); Valansi v. Ashcroft, 278 F.3d

203, 216 n.10 (3d Cir. 2002) (recognizing that a defendant “may . . . plead

guilty to only one of the allegations required to prove an element of her

crime”). Rather, he pleaded guilty to all twelve counts of a superseding

indictment. See Div. Exs. 1–3. In that circumstance, he “admitted all the

well-pleaded facts in the indictment by pleading guilty.” United States v. Hill,

53 F.3d 1151, 1155 (10th Cir. 1995) (en banc).

claim that he has not admitted.19 In making the findings below, I have

applied preponderance of the evidence as the standard of proof.20

In 2008, Joe Lawler opened Victory Partners Financial, which offered

and sold securities in the form of investments in a trust, which in turn

claimed to invest in metals, commodities, and a fund focused on overseas

investments.21

By the end of 2010, Lawler had ceased operating Victory and transferred

all investment accounts to Projaris Management, LLC, which he created in

September 2010.22 Although Lawler’s name does not appear on Projaris’s

Articles of Organization, Lawler exercised sole control over Projaris’s

operation.23 Between October 2010 and April 2012, Lawler caused his sons to

open multiple bank accounts for Projaris—accounts that he similarly

exercised sole control over, despite not being named on them.24

Lawler represented to prospective investors in Projaris that he would

invest their funds in metals, real estate, or a REIT (Real Estate Investment

Trust).25 Lawler further represented that the trust would grow at a rate of

twelve to fifteen percent annually, that risk was “limited,” that principal

return was guaranteed, that there were no tax consequences, that there were

Div. Ex. 4 at 4; see Div. Exs. 4–6; Siris v. SEC, 773 F.3d 89, 96 (D.C. Cir.

2014) (“Whether or not issues established in the consent judgment were

‘actually litigated’ for purposes of [collateral] estoppel, the Commission’s

application of factual preclusion in the follow-on proceeding was appropriate

because the judgment unambiguously barred Siris from making any future

challenge to the allegations in the [civil] complaint.”); Marshall E. Melton,

Investment Advisers Act of 1940 Release No. 2151, 2003 WL 21729839, at *9

(July 25, 2003); 17 C.F.R. § 202.5(e).

See John Francis D’Acquisto, Advisers Act Release No. 1696, 1998 WL

34300389, at *2 (Jan. 21, 1998).

Div. Ex. 5 at 6–7.

Id. at 7–8.

Div. Ex. 2 at 1; see Div. Ex. 5 at 5, 8.

Div. Ex. 2 at 1–2.

Id. at 3; Div. Ex. 5 at 8.

no fees apart from a set-up fee, and that a portion of investors’ funds would

be donated to a charity of investors’ choice.26

These representations were knowingly or recklessly false. Lawler never

created a REIT, nor did he invest funds in real estate.27 Indeed, of the $1.4

million Victory and Projaris received for investment, only about $600,000 was

invested as represented.28 The approximately $835,000 in remaining funds

were used to perpetuate the scheme or were misappropriated by Lawler and

his codefendants in the civil case.29 Approximately $429,000 of the remaining

funds were used by Lawler and his family for daily living expenses and to

support their lifestyle.30 Lawler and his family also spent approximately

$172,000 on unapproved business ventures and undisclosed trading.31

Approximately $199,000 was used to make Ponzi-style payments to

withdrawing investors.32 If an investor complained of the investment’s lack of

performance and threatened to report him, Lawler would use funds from

another Projaris investor to pay off the concerned investor. 33 After various

investors complained, Lawler conducted a conference call in July 2014, with

the complaining investors and falsely said he could not return their

Div. Ex. 2 at 2–3; Div. Ex. 5 at 8–9, 13–14.

Div. Ex. 2 at 3.

Div. Ex. 5 at 15; see Div. Ex. 2 at 2. Lawler and Projaris are not even

able to account for all of the $600,000 that was purportedly invested. Div.

Ex. 5 at 15.

Div. Ex. 5 at 16.

Id. These expenses included auto purchases, personal rent and utilities,

travel, restaurants and bars, groceries, department stores, and expenses

related to a defaulted mortgage. Id. at 16–17.

Id. at 16. The unapproved trading accounted for $129,000 of lost investor

money. Id. The trades included unsuccessful margin trading for metals and

unsuccessful equities trading. Id. Another $43,000 was spent on real estate

training seminars, unbeknownst to investors. Id.

Id.

Id. at 15–16.

investments because the assets were tied up in real estate.34 Finally,

approximately $35,000 was used to pay commissions for soliciting investors.35

Lawler therefore knew that the representations regarding returns, lack

of fees, and charitable donations were false because he was knowingly

operating a Ponzi scheme and had access to the bank statements while

directing how the money in the bank accounts should be spent.36 He

comingled investors’ funds without regard to each investor’s investment

objectives or risk tolerance.37 In addition, Lawler either knew or was reckless

in not knowing that Projaris was not able to legitimately accept IRA rollovers

under IRS rules but he nevertheless successfully targeted investors’

retirement accounts.38

Once investors were pulled into the scheme, Lawler created inflated

account statements that misrepresented the allocation of each investor’s

assets in the trust, how many “units” the investor owned in each category,

the current value of the investment, and the interest accrued.39 The

manufactured account statements caused some investors to make additional

investments in the trust.40

In June 2015, Lawler pleaded guilty to the superseding indictment in the

criminal prosecution against him.41 He was sentenced in November 2015 to

thirty-six months in prison and restitution of $478,511.37 to five identified

victims.42

Div. Ex. 2 at 3.

Pamela Hass received commissions as the National Sales Director of

Projaris for soliciting investors and inviting them to participate in calls with

Joe Lawler, among other duties. Div. Ex. 5 at 17.

Div. Ex. 2 at 3; Div. Ex. 5 at 14–15.

Div. Ex. 5 at 9–10.

Div. Ex. 2 at 3; Div. Ex. 5 at 8–9, 14–15.

Div. Ex. 5 at 13.

Id.

Div. Ex. 1.

Div. Ex. 3 at 3, 6.

In January 2016, Lawler consented to the entry of injunctions against

him in the civil case.43 And in May 2016, the district court enjoined Lawler

from violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Sections

10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.44 The court

also found that Lawler profited from his scheme in the amount of $835,000.45

It thus found him jointly and severally liable to disgorge that amount, plus

$85,146 in interest.46 The court further ordered him to pay a civil monetary

penalty of $150,000.47

Conclusions of Law

The Exchange Act gives the Commission authority to impose collateral

and penny stock bars48 against Lawler if, as is relevant here, (1) he was

associated with or seeking to become associated with a broker or dealer at the

time of his misconduct; (2) he was enjoined “from engaging in or continuing

any conduct or practice . . . in connection with the purchase or sale of any

security”; and (3) imposing a bar is in the public interest.49

As to the first element, Lawler acted as an unregistered broker-dealer

throughout the time of his misconduct. A broker is a “person engaged in the

Div. Ex. 4.

Div. Ex. 6.

Id. at 4.

Id.

A collateral bar, also referred to as an industry bar, is a bar that

prevents an individual from participating in the securities industry in

capacities in addition to those in which the person was participating at the

time of his or her misconduct. See Toby G. Scammell, Advisers Act Release

No. 3961, 2014 WL 5493265, at *1 & n.1 (Oct. 29, 2014).

15 U.S.C. § 78o(b)(4)(C), (6)(A)(iii). Although Lawler’s misconduct began

before Congress conferred the authority to impose a collateral bar in the

Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No.

111-203, 124 Stat. 1376 (2010), Lawler’s operation of Projaris as part of his

ongoing fraudulent scheme occurred after collateral bars were authorized.

See Bartko v. SEC, 845 F.3d 1217, 1220–21, 1224 (D.C. Cir. 2017) (holding

that a collateral bar cannot be imposed for wrongdoing committed before July

22, 2010, the effective date of Dodd-Frank).

business of effecting transactions in securities for the account of others,”

while a dealer trades on his own account.50 Lawler did the former for over

four years, throughout the period of his misconduct.51 He held himself out as

a broker to his investors, and he offered and sold—that is, effected

transactions in—securities to investors around the United States.52 In

addition, Lawler was compensated each time investors bought the securities,

which is “one of the hallmarks of being a broker-dealer.”53

As to the second element, when the district court permanently enjoined

Lawler from violating the registration and antifraud provisions of the federal

securities laws, it necessarily enjoined him from “engaging in . . . conduct . . .

in connection with the purchase or sale of any security.”54

That leaves the third element. To determine whether to impose a bar, I

must consider the public-interest factors discussed in Steadman v. SEC.55

The public interest factors include:

the egregiousness of the respondent’s actions, the

isolated or recurrent nature of the infraction, the degree

of scienter involved, the sincerity of the respondent’s

assurances against future violations, the respondent’s

recognition of the wrongful nature of his conduct, and

15 U.S.C. § 78c(a)(4)(A), (5).

See OIP at 1; Div. Ex. 2 at 1; Div. Ex. 5 at 1.

OIP at 1; Div. Ex. 5 at 18; see Anthony Fields, CPA, Securities Act

Release No. 9727, 2015 WL 728005, at *18 (Feb. 20, 2015) (discussing

“[a]ctivities that are indicative of being a broker”); see also Erik W. Chan,

Securities Act Release No. 8078, 2002 WL 507022, at *7 n.42 (Apr. 4, 2002)

(“A person effects transactions if he or she participates in . . . helping an

issuer to identify potential purchasers of securities, soliciting securities

transactions, and participating in the order-taking or order-routing process

(for example, by taking transaction orders from customers).”).

James S. Tagliaferri, Securities Act Release No. 10308, 2017 WL 632134,

at *4 & nn. 27–28 (Feb. 15, 2017) (quoting SEC v. Helms, No. A-13-CV-1036,

2015 WL 6438872, at *3 (W.D. Tex. Oct. 20, 2015)); see Div. Ex. 5 at 18.

15 U.S.C. §§ 78o(b)(4)(C); see Div. Ex. 6.

603 F.2d 1126, 1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91

(1981); see Scammell, 2014 WL 5493265, at *5.

the likelihood that the respondent’s occupation will

present opportunities for future violations.56

The Commission also considers the deterrent effect of administrative

sanctions.57 This public interest inquiry is “flexible, and no one factor is

dispositive.”58 Before imposing a bar, an administrative law judge must

specifically determine why the Commission’s interests in protecting the

investing public would be served by imposing an industry bar.59

In considering the public interest, I am mindful that “in most” cases

involving fraud, the public-interest analysis will weigh in favor of a “severe

sanction.”60 And because “[t]he securities industry presents continual

opportunities for dishonesty and abuse,” it “depends heavily on the integrity

of its participants and on investors’ confidence.”61

Turning to the Steadman factors, it is evident that the public interest

and the Commission’s interest in protecting the public weigh in favor of an

David R. Wulf, Exchange Act Release No. 77411, 2016 WL 1085661, at

*4 (Mar. 21, 2016) (citing Vladimir Boris Bugarski, Exchange Act Release

No. 66842, 2012 WL 1377357, at *4 & n.18 (Apr. 20, 2012)).

Peter Siris, Exchange Act Release No. 71068, 2013 WL 6528874, at *11

n.72 (Dec. 12, 2013), pet. denied, 773 F.3d 89 (D.C. Cir. 2014). Although

relevant, general deterrence is not determinative in assessing whether the

public interest weighs in favor of imposing a bar. PAZ Sec., Inc. v. SEC, 494

F.3d 1059, 1066 (D.C. Cir. 2007).

Gary M. Kornman, Exchange Act Release No. 59403, 2009 WL 367635,

at *6 (Feb. 13, 2009) (quoting David Henry Disraeli, Securities Act Release

No. 8880, 2007 WL 4481515, at *15 (Dec. 21, 2007), pet. denied, 334 F. App’x

334 (D.C. Cir. 2009)), pet. denied, 592 F.3d 173 (D.C. Cir. 2010).

Mark Feathers, Exchange Act Release No. 73634, 2014 WL 6449870, at

*1 (Nov. 18, 2014); see Ross Mandell, Exchange Act Release No. 71668, 2014

WL 907416, at *2 (Mar. 7, 2014), vacated in part on other grounds, Exchange

Act Release No. 77935, 2016 WL 3030883 (May 26, 2016).

Siris, 2013 WL 6528874, at *11 n.71 (quoting Jeffrey L. Gibson,

Exchange Act Release No. 57266, 2008 WL 294717, at *7 (Feb. 4, 2008), pet.

denied, 561 F.3d 548 (6th Cir. 2009)).

Feathers, 2014 WL 6449870, at *3 (alteration in original) (quoting

Tzemach David Netzer Korem, Exchange Act Release No. 70044, 2013 WL

3864511, at *6 & n.53 (July 26, 2013)).

industry bar. For starters, Lawler operated his business as a Ponzi scheme,

using later investors’ funds to pay earlier investors who complained about the

nonperformance of their investment.62

Lawler also deceived investors as to the nature of the trust they were

investing in. He represented that the trust would grow at a rate of twelve to

fifteen percent annually, that the trust was an IRA eligible investment, and

that there were no fees other than a set-up fee.63 None of these assertions

was remotely accurate.64

Instead, Lawler used investor funds to benefit himself and his family. He

used investor funds to pay off a mortgage.65 He also used investor funds to

support his and his family’s lifestyle, paying for auto purchases, personal

rent and utilities, travel, restaurants and bars, groceries, department stores,

and credit card bills.66 When investors attempted to withdraw their money,

he paid them off with other investors’ funds.67 Lying to investors while using

their funds to support one’s lifestyle and run a Ponzi scheme is highly

egregious conduct. The egregious nature of his conduct is underscored by the

$478,511.37 in restitution and $835,000 in disgorgement for which he is

liable.68

Lawler’s conduct was recurrent. By its nature, a Ponzi scheme involves

recurrent fraud; attracting ever more investors is necessary in order to keep

the scheme operating. Lawler sold securities to over twenty investors over the

course of at least four years.69

Lawler’s conduct showed a high degree of scienter. It was no accident

that he used investor funds to fund his lifestyle or pay off a mortgage. Lawler

did not mistakenly mishandle investor money; he had access to the Victory’s

Div. Ex. 2 at 3; Div. Ex. 5 at 16.

Div. Ex. 5 at 13–14.

Id.

Id. at 16–17.

Id.

Id. at 16.

Div. Ex. 3 at 6; Div. Ex. 6 at 4.

Div. Ex. 2 at 1; Div. Ex. 5 at 1, 17.

and Projaris’s bank statements and directed how the money in the bank

accounts should be spent.70 Therefore, he knew that he was sending out

fraudulent account statements to investors.71 Lawler affirmatively and

intentionally lied to investors and stole their money for his benefit.

Furthermore, the wire fraud offense to which he pleaded guilty necessarily

involved intent to defraud,72 and the antifraud violations of Securities Act

17(a)(1) and Exchange Act Section 10(b) and Rule 10b-5 necessarily involved

scienter.73

Given Lawler’s violations, the egregiousness of those violations, the level

of scienter shown by his conduct, his relatively short period of incarceration,74

and that Lawler has also failed to make any assurances against future

violations or show that he recognizes the wrongfulness of his conduct, I

determine that if Lawler remains in the securities industry, he is likely to

engage in future misconduct.75

Finally, imposing a bar will serve the Commission’s interest in deterring

others from engaging in similar misconduct.

In sum, Lawler’s egregious conduct harmed investors and if he were able

to remain in the industry, he would have the opportunity to cause additional

Div. Ex. 2 at 1–2; Div. Ex. 5 at 16.

See Div. Ex. 5 at 13.

See 18 U.S.C. § 1343; United States v. Caldwell, 560 F.3d 1202, 1207

(10th Cir. 2009); Div. Exs. 1–3.

See 15 U.S.C. §§ 77q(a)(1), 78j(b); 17 C.F.R. § 240.10b-5; Aaron v. SEC,

446 U.S. 680, 701–02 (1980); Div. Exs. 4–6.

Div. Ex. 3 at 3. Lawler was sentenced to imprisonment for a term of

thirty-six months followed by thirty-six months of supervised release. Id. at

3–4.

See Korem, 2013 WL 3864511, at *6 n.50 (“[T]he existence of a violation

raises an inference that it will be repeated.” (alteration in original) (quoting

Geiger v. SEC, 363 F.3d 481, 489 (D.C. Cir. 2004))); cf. John A. Carley,

Securities Act Release No. 8888, 2008 WL 268598, at *22 (Jan. 31, 2008)

(determining whether to impose a cease-and-desist order and holding that

“[o]ur finding that a violation is egregious ‘raises an inference that [the

misconduct] will be repeated’” (quoting Geiger v. SEC, 363 F.3d at 489)),

remanded on other grounds sub nom. Zacharias v. SEC, 569 F.3d 458 (D.C.

Cir. 2009).

harm. The Commission’s interest in protecting the investing public would be

served by imposing an industry and penny stock bar.

Order

The Division of Enforcement’s motion for default and sanctions is

GRANTED.

Under Section 15(b) of the Securities Exchange Act of 1934, Joe Lawler

is BARRED from associating with a broker, dealer, investment adviser,

municipal securities dealer, municipal advisor, transfer agent, or nationally

recognized statistical rating organization, and from participating in an

offering of penny stock.

This initial decision will become effective in accordance with and subject

to the provisions of Rule 360.76 Under that rule, a party may file a petition for

review of this initial decision within twenty-one days after service of the

initial decision. A party may also file a motion to correct a manifest error of

fact within ten days of the initial decision, pursuant to Rule 111.77 If a motion

to correct a manifest error of fact is filed by a party, then a party shall have

twenty-one days to file a petition for review from the date of the

undersigned’s order resolving such motion to correct a manifest error of fact.

The initial decision will not become final until the Commission enters an

order of finality. The Commission will enter an order of finality unless a

party files a petition for review or motion to correct a manifest error of fact or

the Commission determines on its own initiative to review the initial decision

as to a party. If any of these events occurs, the initial decision shall not

become final as to that party.

Lawler may move to set aside a default. Rule 155(b) permits the

Commission, at any time, to set aside a default for good cause, in order to

prevent injustice and on such conditions as may be appropriate.78 A motion to

set aside a default shall be made within a reasonable time, state the reasons

for the failure to appear or defend, and specify the nature of the proposed

defense in the proceeding. Such motion, if filed, should be directed to the

See 17 C.F.R. § 201.360.

See 17 C.F.R. § 201.111.

17 C.F.R. § 201.155(b).

Commission, as the hearing officer may only set aside a default “prior to the

filing of the initial decision.”79

_______________________________

James E. Grimes

Administrative Law Judge

Id.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.