Pomfret Plantation -- a Long Story
Pomfret Plantation was formed in Maryland on May 12, 2004. Pomfret Plantation is a real estate development company whose primary purpose was to acquire and develop approximately 527 acres of land in Marion Station, Somerset County, Maryland. Matthew "Matt" Gordon, through Gordon & Company, Ltd. and in partnership first with John Winans and then with Wills-Hatala Partners, formed Pomfret Plantation.
$1 Million in Promissory Notes
Pomfret Plantation relied upon the sale of promissory notes to help fund the preliminary development of the land, including expenses of engineering and land use planning; preparing a plat for county approval; interior design; and architectural design. Between October 2004 and November 2005, Pomfret Plantation issued eleven promissory notes for a total of $1,000,000.
On May 22, 2006, Pomfret Plantation filed for Chapter 11 bankruptcy. In re Pomfret Plantation, LLC, (Bankruptcy No. 06-12930-DK, United States Bankruptcy Court for the District of Maryland). When Pomfret Plantation was unable to reorganize, the bankruptcy case was dismissed.
Respondent Kathy Gordon's Role (Nine Promissory Notes)
Kathy Gordon was Vice President of Respondent Medallion Invesestment Services, Inc. from January 25, 1999 until October 31, 2008. She was licensed as a securities principal, and she was also a shareholder, President and Chairman of the Board of Directors of Medallion's holding company.Kathy Gordon served for one year as Secretary and/or Treasurer of Pomfret Ltd., firms in which her son, Matthew "Matt" Gordon, had a substantial ownership interest. Matt Gordon was sole owner of Gordon & Co. Ltd, through which he became President and managing director of Pomfret Plantation. Kathy Gordon introduced four of her brokerage and investment advisory clients to Pomfret Plantation for the purpose of the clients' purchasing Pomfret Plantation's promissory notes. She was, in fact, the primary person with whom some of the clients discussed the Pomfret Plantation investment before they invested. Between October 22, 2004 and November 21, 2005, Respondent's clients purchased nine promissory notes for a total investment of $800,000. Kathy Gordon received no compensation for her efforts with respect to Pomfret 5 Plantation's promissory notes.
Kathy Gordon described Pomfret Plantation to prospective investors as a good and safe investment project that would purchase and develop about 520 acres of land in Marion Station, Maryland by building residential and communal facilities. She also made oral representations to investors that the notes were secured by the land. These representations were both false and misleading. The notes were not recorded on the land records and are not secured by real property, although Kathy Gordon says that she was not aware of these facts.
Settlement with the State of Maryland
Without admitting or denying any findings of fact or conclusons of law, in 2008, Kathy Gordon entered into a Consent Order with the Securities Commissioner of Maryland, whereby she was ordered to permanently cease and desisit from selling unregistered securities and from engaging in fraud in connection with offering investment advice. See, In the Matter of Kathy Joy Gordon, Respondent (CONSENT ORDER, Administrative Proceeding Before the Securities Commissioner of Maryland, Case# 2006-0624, December 12, 2008) at http://www.oag.state.md.us/Securities/Actions/2008/GordonCO_12_08.pdf she was ordered to take continuing education courses pertaining to regulatory and ethical standards, outside business activities, and conflicts of interes. She was required to pay $100,000 towards a distribution for four clients who purchased Pomfret Plantation promissory notes (all but $50,000 was waived), and to pay $8,000 annualy starting April 2009 in quarterly installments. She will be subject for 3 years to special supervision by any broker-dealer with which she register and will be specifically prohibited from engaging in outside business activity with her son unless she obtains prior written approvel from her firm. She will not serve in a supervisory capacity.
By Statement of Claim filed in July 2009, Claimants asserted causes of action for:
The claims arose from Claimants' investment in Pomfret Plantation, LLC notes. Claimants Lewises sought $1 million in compensatory damages, interest, reasonable expenses including attorneys' fees and costs, and punitive damages of not less than $1 million. Respondents requested dismissal of the claims. Tammie L. Lewis, Tammie L. Lewis as Trustee of the Tammie L. Lewis Revocable Trust, William E. Lewis, Jr. as Trustee of the Tammie L. Lewis Revocable Trust, Claimants, versus Kathy J. Gordon, Gordon Financial Services, Inc., TMG Holding Co.,lnc. The Medallion Advisory Services, LLC , Medallion Investment Services, Inc., Respondents. (FINRA Arbitration #09-04519, August 10, 2010).
The FINRA Arbitration Panel found Respondents jointly and severally liable for
The Panel further found (note: the Decision says a "majority" of the panel found) Respondents jointly and severally liable for $25,000 in punitive damages because "Respondent Gordon's actions were willful and wanton as she withheld information she knew about the investment."