# UNITED STATES OF AMERICA

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URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3Ac89244c5eae6189b

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
ADMINISTRATIVE PROCEEDING
File No. 3-14641

In the Matter of
CHARLES L. RIZZO and
GINA M. HORNBOGEN
Respondents.

PROPOSED PLAN OF DISTRIBUTION
1.
Purpose and Background. This Proposed Plan of Distribution (the “Plan”) has
been developed pursuant to the Commission’s Order Making Findings and Imposing Remedial
Sanctions Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Section
15(b)(6) of the Securities Exchange Act of 1934 against Charles L. Rizzo (“Rizzo”) and Gina M.
Hornbogen (“Hornbogen”) (collectively, “Respondents”), dated July 20, 2012 (the “Order”)
(Exchange Act Rel. No. 67479 (July 20, 2012)). The Plan provides for the distribution of the
disgorgement, prejudgment interest, and civil monetary penalties provided for in the Order to
clients of investment adviser Results One Financial, LLC (“Results One”) who had funds
misappropriated from their accounts.
The Order found, among other things, that Rizzo was a co-founder, director, and 35%
equity owner of Results One, an investment adviser based in Elmhurst, Illinois. The Order also
found that Hornbogen was the Chief Compliance Officer of Results One, in addition to being a
director and 2.5% equity partner of Results One. The Order further found that Rizzo and
Hornbogen failed reasonably to supervise Steven Salutric (“Salutric”), who, while acting as an
investment adviser for Results One, misappropriated approximately $7 million from fifteen of
his advisory clients. 1
The Order bars Rizzo and Hornbogen from associating in a supervisory capacity with any
broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent,
or nationally recognized statistical rating organization. Rizzo was ordered to pay disgorgement
of $35,079, prejudgment interest of $7,731, and civil penalties of $130,000. Hornbogen was
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Results One client funds and securities were held by Charles Schwab, which served as custodian of the client
funds. Pursuant to investment advisory agreements with clients, Results One personnel had authority to trade in
clients’ accounts without prior approval.

ordered to pay disgorgement of $15,592, prejudgment interest of $3,467, and civil penalties of
$25,000.
In accordance with the Order, Rizzo paid a total of $172,810 in disgorgement,
prejudgment interest, and civil monetary penalties to the Commission. Hornbogen paid
$21,680.82 in disgorgement, prejudgment interest, and civil monetary penalties to the
Commission. The remainder of Hornbogen’s payments in the amount of $22,378.18, plus postorder interest, is to be paid in installments through July 2015. Any remaining payments
received after the effective date of the Plan will be added to the Fund, and it is anticipated that
there will be two disbursements to the Eligible Clients, the latter of which is anticipated to occur
after all scheduled payments have been received.
Pursuant to the Order, a Fair Fund was created under Section 308(a) of the SarbanesOxley Act of 2002, as amended, for the funds paid and to be paid by the Respondents (the “Fair
Fund”). The Fair Fund is subject to the continuing jurisdiction and control of the Commission
and the Fair Fund is currently on deposit in a Commission designated non-interest bearing
account at the United States Department of Treasury (“U.S. Treasury”). This Plan is subject to
approval by the Commission, and the Commission retains jurisdiction over the implementation
of the Plan.
Under the Plan, the Fair Fund, less any reserve for taxes, fees or other expenses of
administering the Plan (the “Net Fair Fund”), will be distributed to Eligible Clients as defined in
paragraph 4 of the Plan.
2.
Fund Administrator. Nancy Chase Burton, Supervisory Assistant Chief Litigation
Counsel in the Commission’s Division of Enforcement’s Office of Distributions, is proposed to
act as the administrator of the Fair Fund (the “Fund Administrator”). As a Commission
employee, the Fund Administrator shall receive no compensation from the Fair Fund for her
services in administering the Fair Fund. In accordance with Rule 1105(c) of the Commission’s
Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. §§ 201.1100 through 201.1106
(“Rules”), no bond is required since the Fund Administrator is a Commission employee. In
carrying out her duties, the Fund Administrator may be assisted by other Commission staff
acting under her supervision.
The Fund Administrator will, among other things: oversee the administration of the Fair
Fund, obtain mailing information for eligible Results One clients, distribute money from the
assets of the Fair Fund in accordance with this Plan, resolve disputes, distribute the Fair Fund to
Eligible Clients as defined in paragraph 4 of the Plan, prepare a final accounting with assistance
from the Tax Administrator, and provide the Tax Administrator with funds to pay tax liabilities
and tax compliance fees and costs, pursuant to the Omnibus Order Directing the Appointment of
Tax Administrator in Administrative Proceedings that Establish Distribution Funds (Exchange
Act Rel. No. 68683 (January 17, 2013)).
3.
Tax Administrator. The Commission has appointed Damasco and Associates,
LLP as the Tax Administrator (“Tax Administrator”) of the Fair Fund (Exchange Act Rel. No.
68264 (November 19, 2012)). The Fund Administrator will cooperate with the Tax
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Administrator in providing information necessary to accomplish the income tax compliance and
any other work ordered to the Tax Administrator by the Commission. The Tax Administrator
shall be compensated for reasonable costs and expenses from the Fair Fund in accordance with
its 2013-2015 Engagement Letter Agreement with the Commission, and tax obligations will be
paid out of the Fair Fund.
4.
Specification of Eligible Fair Fund Recipients. The Fund Administrator shall
distribute the Net Fair Fund to those Results One clients that have been harmed by the conduct
described in the Order (individually, each an “Eligible Client”, and collectively, the “Eligible
Clients”). A client will be deemed harmed only if that client suffered a net loss of funds by
virtue of the conduct described in the Order.
5.
No claims-made process. This Fair Fund is not being distributed according to a
claims-made process, so the procedures for providing notice and for making and approving
claims are not applicable.
6.
Qualified Settlement Fund. The Fair Fund constitutes a Qualified Settlement
Fund (“QSF”) under Section 468B(g) of the Internal Revenue Code, 26 U.S.C. §468B(g), and
related regulations, 26 C.F.R. §§1.468B-1 through 1.468B-5.
7.
Methodology for Determining Distribution Amounts. The Fund Administrator
will determine the amount to be distributed to each Eligible Client in the following manner.
First, the Fund Administrator will determine, with reference to the information collected by the
Commission staff regarding Eligible Clients’ losses, the net amount that each Eligible Client lost
by virtue of the conduct described in the Order (“Net Loss Amount”). Net Loss Amount is
defined as the amount of actual monies misappropriated by Salutric, less any monies received by
Eligible Clients as settlements, insurance, or other payments in connection with this matter from
Salutric, Results One, Rizzo, Hornbogen, or any other third party. Second, the Fund
Administrator will determine what percentage of the total pooled Net Loss Amounts of all
Eligible Clients is represented by each individual Eligible Client’s Net Loss Amount (“Pro Rata
Share”). Finally, for each Eligible Client, the Fund Administrator will multiply the Pro Rata
Share by the Net Fair Fund to determine each Eligible Client’s gross distribution amount (“Gross
Distribution Amount”).
In the view of the Fund Administrator, this methodology constitutes a fair and reasonable
allocation of the Fair Fund. Based on this methodology, it is anticipated that there will be two
distributions to the Eligible Clients, which will take place as outlined in paragraph 9.

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Based on this methodology, the individual net loss amounts and percentages of pooled net loss
for Eligible Clients are as follows:
Eligible Client

Total Loss Third Party
Settlement/
Reimbursement
Received

Net Loss

Eligible Client #1
Eligible Client #2
Eligible Client #3
Eligible Client #4
Eligible Client #5
Eligible Client #6
Eligible Client #7
Eligible Client #8
Eligible Client #9
Eligible Client #10
Eligible Client #11
Eligible Client #12
Eligible Client #13
Eligible Client #14
Eligible Client #15
Eligible Client #16
Eligible Client #17
Eligible Client #18
Eligible Client #19
Eligible Client #20

$75,000
$50,000
$75,000
$160,000
$100,000
$95,000
$75,000
$55,000
$590,000
$100,000
$325,000
$230,000
$190,000
$100,000
$100,000
$406,000
$562,909
$85,000
$338,618
$1,524,353

$75,000
$50,000
$75,000
$160,000
$100,000
$65,000
$75,000
$55,000
$200,000
$100,000
$325,000
$230,000
$190,000
$100,000
$100,000
$291,000
$477,909
$10,000
$338,618
$671,585

None
None
None
None
None
$30,000
None
None
$390,000
None
None
None
None
None
None
$115,000
$85,000
$75,000
None
$852,768

% of
Pooled Net
Loss of All
Eligible
Clients
2.03%
1.36%
2.03%
4.34%
2.71%
1.76%
2.03%
1.49%
5.42%
2.71%
8.81%
6.23%
5.15%
2.71%
2.71%
7.89%
12.95%
0.27%
9.18%
18.20%

TOTAL NET LOSS $3,689,112

8.
Procedures for Locating and Notifying Eligible Clients. On the basis of
information obtained by the Commission staff based on review and analysis of applicable
records, the Fund Administrator will identify the Eligible Clients as defined in paragraph 4.
Within thirty (30) days of the Commission’s approval of this Plan, the Fund Administrator will
send each Eligible Client a notice by United States Postal Service regarding the Commission’s
approval of the Plan, including as appropriate, a statement characterizing the distribution, a link
to the Plan posted on the Commission’s website and instructions for requesting a copy of the
Plan, a Net Loss Amount calculation and a preliminary Gross Distribution Amount, a description
of the tax information reporting and other related tax matters, the procedure for the distribution
as set forth in the Plan, and the name of the Fund Administrator to contact with questions
regarding the distribution (the “Plan Notice”). The Fund Administrator will coordinate with the
Tax Administrator to request information from each Eligible Client that is needed to accomplish
the distribution in accordance with applicable tax requirements relating to the Fair Fund.
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If an Eligible Client fails to respond within thirty (30) days from the mailing of the Plan
Notice, the Fund Administrator shall then make no fewer than two (2) attempts to contact the
Eligible Client telephonically or by email. The second attempt shall in no event take place more
than forty-five days (45) days from the mailing of the Plan Notice. If an Eligible Client fails to
respond to the Fund Administrator’s contact attempts as described in this paragraph, such
Eligible Client will be removed from the distribution and the allocated distribution amount shall
be added to the Net Fair Fund and may, if ordered by the Commission, be distributed to the
remaining Eligible Clients.
If a Plan Notice is returned as undeliverable, the Fund Administrator will make all
reasonable efforts to ascertain an Eligible Client’s correct address. The Fund Administrator will
then resend the Plan Notice to the Eligible Client’s new address within thirty days of receipt of
the returned Plan Notice. If the Plan Notice is returned again, and the Fund Administrator,
despite all reasonable efforts, is unable to find an Eligible Client’s correct address, the Eligible
Client will be removed from the distribution and the allocated distribution amount shall be added
to the Net Fair Fund and may, if ordered by the Commission, be distributed to the remaining
Eligible Clients.
9.
Distribution Timing. The Fund Administrator will use her best efforts to start the
first distribution within one hundred and twenty (120) days of the Plan’s approval, and to start
the second distribution within sixty (60) days of the final payment from Hornbogen.
10.
Financial Management Service; Validation and Approval of Disbursement of the
Fair Fund. The Fair Fund disbursement to Eligible Clients will be implemented by the
Commission and disbursed through the United States Department of the Treasury’s Financial
Management Service (“FMS”), which will mail checks or electronically transfer funds to each
payee as instructed by the Fund Administrator. The Fund Administrator will compile the payee
information and prepare a payment file in a Commission-approved format for submission to
make the disbursements through FMS. Pursuant to Rule 1101(b)(6), the Fund Administrator will
obtain an order from the Commission to disburse the Fair Fund.
The Fund Administrator will work with FMS to obtain information about uncashed
checks, any returned items due to non-delivery, insufficient addresses, and/or other deficiencies.
The Fund Administrator is responsible for researching and reconciling errors and reissuing
payments when possible. The Fund Administrator also is responsible for accounting for all
payments. Checks issued by FMS will state on their face that they are valid for one year. If any
checks issued are not cashed within the one year time period, the Fund Administrator will work
with FMS to identify all uncashed checks. The amount of all uncashed checks will be credited to
the Fair Fund account and may, if ordered by the Commission, be distributed to other Eligible
Clients.
11.
Accountings. When all funds have been disbursed except for the residual
described in paragraph 17 of this Plan, the Fund Administrator will submit a final accounting for
the approval of the Commission prior to termination of the Fair Fund and discharge of the Fund
Administrator. Since the funds are being held in a Commission designated non-interest bearing
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account at the U.S. Treasury, and a Fund Administrator has been appointed, no interim
accountings shall be required.
12.
Expenses of Administration. Fees and other expenses of administering the Plan
shall be paid from the Fair Fund.
13.
Amendments and Procedural Deadline Extensions. The Fund Administrator shall
take reasonable and appropriate steps to distribute the Net Fair Fund according to the Plan. The
Fund Administrator will inform the Assistant Director of Logistics and Services for the Division
of Enforcement (AD) of any changes in the Plan. If a change is determined to be material,
Commission approval is required prior to implementation by amending the Plan, which may be
done upon the motion of any party, the Fund Administrator, or upon the Commission’s own
motion. Immaterial changes may be made by the Fund Administrator with approval of the AD.
For good cause shown, the Fund Administrator may extend any of the procedural dates set forth
in this Plan.
14.
Procedures for the Receipt of Additional Funds. It is anticipated that the Fair
Fund will receive at least $28,383 in additional funds when Hornbogen pays the remaining
installments owed pursuant to the Order, plus applicable post-order interest, which are due on the
following dates: January 11, 2014; July 10, 2014; January 6, 2015; and July 20, 2015. It is
anticipated that there will be two disbursements to the Eligible Clients, the latter of which is
anticipated to occur after all scheduled payments have been received. 2
15.
Procedures to Request Plan Notice. A person that does not receive a Plan Notice
and believes that he or she should have received a Plan Notice after becoming aware of the Plan
(e.g., through other Eligible Clients or on www.sec.gov), must submit documentation to the Fund
Administrator to establish that the individual is in fact eligible to receive a Plan Notice within
forty-five days after the last Plan Notices are sent to Eligible Clients by the Fund Administrator.
The Fund Administrator will send the individual a Plan Notice within twenty-one days of
receiving the individual’s documentation if the Fund Administrator determines that the
individual should have received a Plan Notice.
16.
Procedures for Disputing Amounts Received. Disputes will be limited to
calculations of disbursement amounts to Eligible Clients. Within thirty days of the date that an
Eligible Client’s disbursement is made, the Fund Administrator must receive a written
communication detailing the dispute along with any supporting documentation. The Fund
Administrator will investigate the dispute, and such investigation will include a review of the
written dispute as well as any supporting documentation. Within thirty days of receipt of the
written dispute, the Fund Administrator will notify the Eligible Client of her resolution of the
dispute, which shall be final. This procedure will be set forth in the Plan Notice.

2

Should any additional funds be received as a result of the U.S. District Court action captioned SEC v. Salutric, 10cv-1115 (N.D. Ill.) (J. Dow), such funds will be distributed pursuant to court order in that district court action, and
will not be added to nor distributed as part of the Fair Fund that is the subject of this Plan.

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17.
Disposition of Undistributed Funds. A residual account within the Fair Fund is
established for any amounts remaining after final distribution of the Net Fair Fund to Eligible
Clients has occurred. The residual account may include funds reserved for future taxes and
related expenses, distributions from checks that have not been cashed, from checks that were not
delivered or from funds returned to the Commission, tax refunds for overpayment or for waiver
of IRS penalties. All funds remaining in the residual account will be transferred to the U.S.
Treasury after the final accounting is approved by the Commission.
18.
Termination of the Fair Fund. Upon final distribution of the Net Fair Fund to
Eligible Clients, the Fund Administrator shall make arrangement for the final payment of taxes
and Tax Administrator fees and shall submit a final accounting to the Commission. The Fair
Fund shall be eligible for termination after all of the following have occurred: (1) a final
accounting, in the Division’s standard accounting form, has been submitted by the Fund
Administrator, and has been approved by the Commission; and (2) all taxes, fees, and expenses
have been paid. When the Commission has approved the final accounting, staff shall seek an
order from the Commission to approve: (1) sending the remaining residual amounts to the U.S.
Treasury; (2) termination of the Fair Fund; and (3) discharge of the Fund Administrator.
19.
Notice of Proposed Plan and Opportunity for Comment. The Notice of the
Proposed Plan of Distribution and Opportunity for Comment (the “Notice”) shall be published in
the SEC Docket and on the Commission’s website http://www.sec.gov. Any person or entity
wishing to comment on the Plan must do so in writing by submitting their comments within
thirty (30) days of the date of the Notice (i) to the Office of the Secretary, United States
Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090; (ii) by
using the Commission’s Internet comment form (www.sec.gov/litigation/admin.shtml); or (iii)
by sending an e-mail to rule-comments@sec.gov. Comments submitted by e-mail or via the
Commission’s website should include “Administrative Proceeding File Number 3-14641” in the
subject line. Comments received will be available to the public. Thus, persons should only
submit information that they wish to make publicly available.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Ac89244c5eae6189b. Public record. Not legal advice.