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The Curious Case of Donald Howard
May 2, 2022
Taking a stroll down regulatory memory lane, we come upon this November 9, 2020, SEC Press Release: "SEC Charges Three Individuals with Unregistered Brokerage Activity in the Sale of Microcap Securities" https://www.sec.gov/litigation/litreleases/2020/lr24958.htm, which, in pertinent part stated:
The Securities and Exchange Commission charged Hughe Duwayne Graham, Donald Lee Howard, and Larry Louis Matyas, with acting as unregistered brokers in the sale of the securities of microcap issuer US Lighting Group, Inc.According to the SEC's complaint, from at least October 2017 through at least May 2019, Graham, Howard and Matyas solicited investments in US Lighting Group by cold calling and emailing prospective investors, sending the investors subscription agreements, and instructing investors as to how to make their investment. The complaint alleges that they received commission payments of approximately 40% of investor proceeds from sales of US Lighting Group securities. According to the complaint, none of the defendants were registered as a broker-deal or associated with a registered broker-dealer at the time.The SEC's complaint, filed in the federal district court for the Northern District of Ohio, charges Graham, Howard and Matyas with violating the broker-dealer registration provisions of Section 15(a)(1) of the Securities Exchange Act of 1934. Matyas has consented, on a neither-admit-nor-deny basis, to the entry of a judgment that imposes permanent injunctions, conduct-based injunctions from soliciting purchases or sales of securities, and a civil penalty of $367,916. The settlement is subject to court approval. . . .
2020 SEC SD Ohio Complaint
As set forth under the heading of "DEFENDANTS" in the SEC Complaint as filed on November 6. 2020, in the United States District Court for the Southern District of Ohio
https://www.sec.gov/litigation/complaints/2020/comp24958.pdf:
https://www.sec.gov/litigation/complaints/2020/comp24958.pdf:
11. Hughe Duwayne Graham (Sr.) (a/k/a John Morgan), age 62, resides in Riverside, California, and sometimes operates through HDG Global Marketing, LLC, an entity he is believed to own and control. Graham solicited investors to purchase securities issued by USLG. When called to appear for investigative testimony, Graham invoked his Fifth Amendment privilege against self-incrimination in response to several questions posed to him.12. Donald Lee Howard, age 65, is last known to reside in Las Vegas, Nevada. Howard solicited investors to purchase securities issued by USLG. In connection with its underlying investigation, the Commission issued subpoenas to Howard for documents and testimony, but process servers were unable to locate and serve him.13. Larry Louis Matyas (II) (a/k/a Gary Bennett), age 38, resides in Las Vegas, Nevada, and sometimes operates through Secured Consulting, a doing-business-as entity established in connection with the name of his fiancée. Matyas solicited investors to purchase securities issued by USLG. When called to appear for investigative testimony, Matyas invoked his Fifth Amendment privilege against self-incrimination in response to nearly all questions posed to him.
Although Defendants Graham and Matyas asserted their Fifth Amendment privileges, Defendant Howard seems to have side-stepped service and evaded the SEC's best efforts to secure his testimony. As the SEC Complaint states in part about Defendant Howard:
24. During or about late 2017, Howard was recruited and thereafter worked as an investor solicitor for USLG.25. As a solicitor, Howard called prospective investors, pitched them on an investment in USLG securities, provided investors with subscription agreements, and instructed investors as to how to purchase USLG securities.26. One investor who Howard solicited, J.I., is a resident of Florida and was first contacted by Howard during or about November 2017.27. Howard told J.I. that USLG manufactured LED lighting and had a contract with Home Depot. Howard also told J.I. that he could purchase USLG shares at a discount price of half the then-prevailing market price.28. Based on Howard's representations, J.I. purchased 40,000 shares of USLG at $0.25 per share and wired $10,000 to USLG on or about November 10, 2017.
2021 SEC OIP
About a year after the filing of the SEC Complaint, the federal regulator moved against Donald Howard via an administrative proceeding. In the Matter of Donald Howard, Respondent (Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (the "OIP") and Notice of Hearing, '34 Act Rel. No. 93599; Admin. Proc. File No. 3-20653 / November 17, 2021)
https://www.sec.gov/litigation/admin/2021/34-93599.pdf
As to Respondent Howard's pertinent background, this is what the OIP asserted:
1. Respondent, age 76, is last known to reside in North Las Vegas, Nevada. From at least October 2017 to May 2019, Respondent was engaged in the business of effecting transactions in, or inducing or attempting to induce the purchase and sale of, securities and received transaction based compensation. During the period relevant to this action, Respondent was neither registered with the Commission as either a broker or a dealer nor was he associated with a broker or dealer registered with the Commission.2. On November 12, 2021, a final judgment was entered against Respondent, permanently enjoining him from future violations of Section 15(a)(1) of the Exchange Act in the civil action entitled Securities and Exchange Commission v. Hughe Duwayne Graham, et al., Civil Action Number 1:20-CV-02505, in the United States District Court for the Northern District of Ohio.3. The Commission's complaint alleged that, from at least October 2017 to May 2019, Respondent, using the mails or other means or instrumentalities of interstate commerce, effected transactions in, or induced or attempted to induce the purchase and sale of, securities and received commissions while he was not registered with the Commission as a broker or dealer nor while he was associated with an entity registered with the Commission as a broker or dealer.
2022 SEC Order to Show Cause
So . . . given the allegations against Respondent Donald Howard, the SEC scheduled an administrative hearing to consider how best to protect the public interest. Accordingly, Respondent Howard had 20 days from the service of the OIP to file an Answer to the allegations. The SEC Division of Enforcement served the OIP on Respondent on February 14, 2022, and the 20 days came and went, and, lo and behold, on April 4, 2022, the SEC issued an Order to Show Cause by April 18, 2022, as to why Respondent should not be deemed in default for not filing his Answer. In the Matter of Donald Howard, Respondent (Order to Show Cause, '34 Act Rel. No. 94600; Admin. Proc. File No. 3-20653 / April 4, 2022)
https://www.sec.gov/litigation/opinions/2022/34-94600.pdf
2022 SEC Postponement Order
No . . . this one ain't gonna go the way you thought it was, you know, the easy, slam-dunk Default against Respondent Howard. On April 18, 2022, Enforcement filed a Motion to Stay. Why, you ask? Hey, good question -- consider this explanation in In the Matter of Donald Howard, Respondent (Postponement Order, '34 Act Rel. No. 94825; Admin. Proc. File No. 3-20653 / April 29, 2022)
https://www.sec.gov/litigation/opinions/2022/34-94825.pdf:
[O]n April 8, 2022, the Division learned that Howard may not be the real identity of the person who allegedly committed the conduct underlying the OIP. The Division has requested that the Commission stay the proceeding so that the Division can conduct additional research and seek to amend the OIP or take other action as appropriate.. . .
Who Are You?
Lemme see if I got this. The SEC filed a Complaint in federal court in November 2020 against Howard. Thereafter, the SEC filed an OIP in November 2021 against Howard. And it's only in April 2022, that the SEC is first learning that the 2020 named Defendant who was also the 2021 named Respondent may not have actually existed? Wow! And WOW!!
To be fair, this crap happens. It happens to prosecutors, to regulators, and to defense lawyers. You got a name. You think it's a real person. You reference the individual in your pleadings. Other folks claim to have dealt with and/or met the person. Then, out of the blue, it turns out that the person who everyone thought existed, well, geez, that person didn't exist.
Of course, the fact that Enforcement is unable to locate Donald Howard doesn't exactly mean that there wasn't a Donald Howard. Fact is, he could have been someone named Howard Donald, who, cleverly, pretended to be a "Donald Howard." Could be that there never was a Donald Howard but that someone, who really existed, pretended to be him. I remember a case that I was involved in where there was only one registered representative in a particular broker-dealer's branch office but eight guys (all unregistered) used that registered rep's name when they cold called potential clients. I remember working in the Legal Department of Smith Barney, Harris Upham & Co (yeah, I'm that old) and arguing with a court clerk, who insisted that there was no record of a document that I knew that I had filed the prior week in federal court. After about an hour of increasing testiness, it turned out that the paperwork was not filed under "Smith Barney" (as had always been the case) but misfiled under "Barney Smith." In hindsight, a funny story, but at the time, trust me, not so much.
How Old is Las Vegas Howard?
Here we are, in 2002, and a purported living, breathing individual -- Donald Howard -- who the SEC swore in its 2020 Complaint was "age 65, is last known to reside in Las Vegas, Nevada . . . " and in its 2021 OIP was "age 76, is last known to reside in North Las Vegas, Nevada," may now "not be the real identity" of the named Defendant/Respondent. Also perplexing is how the SEC alleged that Howard was 65 years old in 2020 and 76 years old in 2021 -- a human being doesn't age 11 years in one year. Did anyone in Enforcement notice that odd age discrepancy before April 2022? Sort of a Benjamin Button in reverse.
In any event, it's nice that the SEC granted Enforcement's requested stay. I can see how it might be advisable to figure out if the Respondent named in an SEC OIP actually exists. On the other hand, given that Howard aged 11 years from 2020 to 2021, by now, 2022, he may be 87 years. If Enforcement can avoid moving forward with the OIP until 2023, Howard could be 98 years of age and, who knows, maybe the SEC would decide to close the case out without any action.