The four partners named in the lawsuit are Stephen Bowman, of Omaha, Neb.; John and Marian Morgan, of Sarasota, Fla.; and Thomas Woodcock Jr., of Rockwell, Texas. They did not immediately respond to phone and e-mail messages Monday.
The SEC says investors were promised returns as high as 70 percent. Some received payments from newer investors' money, as in a Ponzi scheme. But many investors were never paid anything while the partners made excuses.
"Investors were given a vague assortment of excuses ranging from Patriot Act scrutiny to their lawyer's vacation schedule as reasons why payments of promised returns were delayed," said Donald Hoerl, director of the SEC's Denver office.
Government investigators say the business partners used some of the investors' money for Bowman's gambling expenses, the Morgans' mortgage payments and for Ponzi payments to other investors.
Investors were led to believe the investment program was successful and would deliver returns between 14 percent and 70 percent a month. The SEC describes the investment as a classic "prime bank" scheme.
Investors believed that their money would be lent to traders to help finance the loans between big banks and the Federal Reserve.
The money involved in the scheme was primarily raised in 2006 and 2007.
Woodcock raised nearly $8 million from at least 150 investors nationwide for the investment scheme. Most of that was transferred to Bowman, who raised roughly $6 million more.
The lawsuit, filed June 11 in Tampa, Fla., also names Nebraska-based Bowman Marketing Group, Inc., and Danish entity Morgan European Holdings ApS.
The lawsuit says Bowman transferred at least $4.5 million to the Danish company, which then sent most of that back to U.S. accounts controlled by the Morgans.
None of the investments involved was registered with the SEC, as the law requires, and none of the partners was ever registered to sell such investments as broker-dealers.
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