Opinion
Case No. 99-cv-1786-T-30MSS
July 25, 2003
AMENDED FINAL JUDGMENT
(This Order amends the Final Judgment by adding the language found in paragraph 6 on pages 13 and 14 herein to clarify that this Final Judgment shall not impose liability or claim against the bankruptcy estate in the confirmed Chapter 11 case of In Re: Greater Ministries Internationals Inc. , Case No. 99-13967-8B1, filed in the United States Bankruptcy Court for the Middle District of Florida.)
This cause came on for bench trial against the individual defendants listed hereafter, on February 3, 2003. Oral testimony, submission of evidence and oral arguments were concluded on February 6, 2003, and the Court took the matter under submission at that time, subject to receiving supplemental data requested on February 6, 2003, of the Plaintiffs by the Court. The Court subsequently received written reports and requests for judgment from the Plaintiffs, and has considered those together with any responses from any Defendants.
The Court has considered the evidence presented and admitted at trial, together with the August 24, 1999, permanent injunction issued by this Court after hearing, and the authorities and arguments submitted by any of the parties. Based upon the foregoing, the Court finds and determines as follows:
I. Findings of Fact
1. This Court has personal jurisdiction of the Plaintiffs and of all of the following Defendants (collectively, "Defendants"), listed here generally in order of their alleged Elder number in the records of Greater Ministries International, Inc., Greater Ministries International Church and Greater Ministries International ("GMI"):
Jim Chambers
Henry E. Showalter
Tom Parker
Keith Roadarmer
Louie B. Strawder
Fay Fry
Gerald Payne
Betty Payne
David Whitfield
Scott Hughes
Patrick H. Talbert
John Krishak
Jim Mawdsley
Jim Biggerstaff
Paul Bennett
C.C. Carlman
Nova Miller
Norman Lower
Don Hall
Brenda Hall
J. Ed Strawder
Patsy Tharp
B.B. Burnett
Tom B. Sleep
Charles A. Eidson
Frank Huffman
Al Dayton
Sid Howell
Jack Coe
Jack C. Hudson
Greater Ministries International, Inc.
Greater Ministries International Church
Greater Ministries International
2. GMI, under the control of its Elders and Directors, which included the above Defendants, and through the participation and efforts of such Defendants, engaged in the creation, offer and sale, and caused others acting under their direction or control to offer and sell, investment contracts and programs which constitute "securities" within the meaning of the federal Securities Act of 1933 [ 15 U.S.C. § 77a, et seq.] (the "1933 Act"), the federal Securities Exchange Act of 1934 [ 15 U.S.C. § 78a, et seq.] (the "1934 Act"), the Alabama Securities Act [ Ala. Code § 8-6-1, et seq. 1975] (the "Alabama Act"), and the Ohio Securities Act, Chapter 1707 of the Ohio Revised Code (the "Ohio Act"). At the relevant times each of the Defendants was a controlling person, and a member of the controlling persons group, of GMI.
3. The Defendants, directly and through their agents and those acting in concert or conspiracy with them or under Defendants' direction and control, have offered and sold, and solicited purchases of, securities in Alabama, Ohio and other parts of the United States which were not registered for offer and sale under the 1933 Act, the Alabama Act and the Ohio Act.
4. The Defendants were paid commissions or compensation in connection with such securities sales which they referred to as "gas money." They were advised by persons on the Board of Elders not to reveal to offerees that they were receiving gas money.
5. The Defendants have not borne their burden of proving facts which establish that the securities which they have offered and sold were entitled to any exemption from registration under the 1933 Act, the Alabama Act and the Ohio Act.
6. The Defendants, directly and through their agents and those acting in concert or conspiracy with them or under Defendants' direction and control, have offered and sold, and solicited purchases of, securities in Alabama, Ohio and other parts of the United States through persons (including various of the individual defendants) who were not, and are not, licensed or registered as broker-dealers or as salesmen of securities under the 1934 Act, the Alabama Act or the Ohio Act.
7. The Defendants have not borne their burden of establishing facts proving that the agents and salesmen, or themselves, through which said securities were offered and sold, were entitled to any exemption from broker-dealer registration and securities salesman licensing under the 1934 Act, the Alabama Act and the Ohio Act
8. The Defendants, directly and through their agents and those acting in concert or conspiracy with them or under Defendants' direction and control, have knowingly and intentionally offered and sold, or caused to be offered and sold, and solicited purchases of, securities and investment contracts in Alabama, Ohio and other parts of the United States through the use of: (a) misstatements of material fact; and (b) omissions of material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading; in violation of the anti-fraud proscriptions of the 1993 Act, the 1934 Act, the Alabama Act, and the Ohio Act.
9. The Defendants, directly or through agents and representatives for whose actions they are responsible, have engaged in sales of securities that are not registered under the aforesaid federal and state securities laws, through the actions of unlicensed securities salesmen, by means of fraudulent representations and deceptive omissions to disclose material facts.
10. The Defendants, directly and through agents acting under their direction and control, have employed the United States Mails and means and instruments of communication and transportation in interstate commerce, in connection with the aforesaid securities transactions which are the subject of this action.
11. Investors in Alabama, Ohio and in many other states throughout the United States have suffered great hardship and financial injury as the direct result of Defendants' fraud, breach of fiduciary duty, misconduct and breaches of statutory provisions. This action is suitable for class certification on the claims brought herein under the 1933 Act, the 1934 Act, the Alabama Act and the Ohio Act, above cited.
12. It is appropriate that the class of victims of the Defendants' securities violations be the same as those persons whose proofs of claim have been filed and allowed in the GMI bankruptcy case in this Court, In Re Greater Ministries International, Inc., Debtor, No. 99-13967-8B1 (Ch. 11). The Court finds that the damages of the Class aggregate the sum of $49,806,483.08, which was the sum introduced at trial, plus an amount of recently-allowed claims of $576,000.00, as testified to by Kevin O'Halloran at trial, for a total of $50,382,483.08.
13. The Court has made the requisite evaluations of individual responsibility and joint and several liability determinations called for under the PSLRA amendments to the 1934 Act, and finds that on the basis of all the testimony and evidence, the following amounts of individual liability for class damages should be assessed against the defendants (the Court noting that nothing in this order and judgment shall be deemed to supersede the disgorgement and restitution orders entered in any defendant's criminal proceedings, but that any recovery m the criminal proceedings of a defendant will serve as a credit against the judgment amount herein):
Name of Defendant Defendant's Share of ¶ 12 Amount _________________ ____________________________________ Greater Ministries International, Inc. $50,382,483.08 (Joint and several for 100%) Greater Ministries International Church $50,382,483.08 (Joint and several for 100%) Greater Ministries International $50,382,483.08 (Joint and several for 100%) Jim Chambers $50,382,483.08 (Joint and several for 100%) Henry B. Showalter $50,382,483.08 (Joint and several for 100%) Tom Parker $670,087.02 (1.33%) Keith Roadarmer $50,382,483.08 (Joint and several for 100%) Louie B. Strawder $50,382,483.08 (Joint and several for 100%) Fay Fry $261,988.91 (0.52%) Gerald Payne $50,382,483.08 (Joint and several for 100%) Betty Payne $50,382,483.08 (Joint and several for 100%) David Whitfield $50,382,483.08 (Joint and several for 100%) Scott Hughes $5,038.25 (0.01%) Patrick H. Talbert $50,382,483.08 (Joint and several for 100%) John Krishak $50,382,483.08 (Joint and several for 100%) Jim Mawdsley $952,228.93 (1.89%) Jim Biggerstaff $1,274,676.82 (2.53%) Paul Bennett $146,109.20 (0.29%) C.C. Carlman $6,352.00 (his "gas money") Nova Miller $2,121,102.54 (4.21%) Norman Lower $11,828.00 (his "gas money") Don Hall $50,382,483.08 (Joint and several for 100%) Brenda Hall $50,382,483.08 (Joint and several for 100%) J. Ed Strawder $2,272,249.99 (4.51%) Patsy Tharp $665,048.78 (1.32%) B.B. Burnett $498,786.58 (0.99%) Tom B. Sleep $911,922.94 (1.81 %) Frank Huffman $2,252,096.99 (2.66% plus 1.81%, total 4.47%) Al Dayton $50,382,483.08 (Joint and several for 100%) Sid Howell $1,526.589.24 (3.03%) Jack Coe $136,032.70 (0.27%) Jack C. Hudson $50,382,483.08 (Joint and several for 100%)II. Conclusions of Law
1. This Court has subject matter jurisdiction of this action and the claims therein pursuant to the 1933 Act and the 1934 Act. The Court has, and exercises, supplemental jurisdiction over the claims asserted herein under the Alabama Act and the Ohio Act, pursuant to 28 U.S.C. § 1367.2. Venue is proper in this District pursuant to § 27 of the 1934 Act, § 22 of the 1933 Act, and 28 U.S.C. § 1391 (b).
3. The Defendants' Faith Promises program, and the units of participation therein, and any "regifts" made thereunder, constitute an investment contract and a "security" within the meaning of the 1933 Act. The redeemable certificates issued by or under the direction and authority of Defendants, copies of which are part of the Record of the Hearing, are also a "security" and evidence of a security, within the meaning of the 1933 Act. Defendants' double-your-money programs, however labeled by them, involving expectation of a return or any so-called "gift back" to the person originally delivering the money to the Defendants, constitute an investment contract and a "security" within the meaning of the 1933 Act.
4. The Defendants' Faith Promises program, and the units of participation therein, and any "regifts" made thereunder, constitute an investment contract and a "security" within the meaning of the 1934 Act. The redeemable certificates issued by or under the direction and authority of Defendants, copies of which are part of the Record of the Hearing, are also a "security" and evidence of a security, within the meaning of the 1934 Act. Defendants' double-your-money programs, however labeled by them, involving expectation of a return or any so-called "gift back" to the person originally delivering the money to the Defendants, constitute an investment contract and a "security" within the meaning of the 1934 Act.
5. The Defendants' Faith Promises program, and the units of participation therein, and any "regifts" made thereunder, constitute an investment contract and a "security" within the meaning of the Alabama Act. The redeemable certificates issued by or under the direction and authority of Defendants, copies of which are part of the Record of the Hearing, are also a "security" and evidence of a security, within the meaning of the Alabama Act. Defendants' double-your-money programs, however labeled by them, involving expectation of a return or any so-called "gift back" to the person originally delivering the money to the Defendants, constitute an investment contract and a "security" within the meaning of the Alabama Act.
6. The Defendants' Faith Promises program, and the units of participation therein, and any "regifts" made thereunder, constitute an investment contract and a "security" within the meaning of the Ohio Act. The redeemable certificates issued by or under the direction and authority of Defendants, copies of which are part of the Record of the Hearing, are also a "security" and evidence of a security, within the meaning of the Ohio Act. Defendants' double-your-money programs, however labeled by them, involving expectation of a return or any so-called "gift back" to the person originally delivering the money to the Defendants, constitute an investment contract and a "security" within the meaning of the Ohio Act.
7. The Defendants have failed to bear their burden of establishing the availability or applicability of any exemption under the 1933 Act, the Alabama Act and the Ohio Act from registration of the securities which are the subject of this action.
8. The Defendants have failed to bear their burden of establishing the availability or applicability of any exemption under the 1934 Act, the Alabama Act and the Ohio Act from broker-dealer registration and securities salesmen licensing of any of the Defendants and their agents, with respect to offers, sales and solicitation of investments or purchases of the securities which are the subject of this action.
9. The Agency Plaintiffs have parens patriae authority and statutory authority, and otherwise have standing, to bring each of the claims and seek the forms of relief set forth in the Complaint for themselves and for investors, as amended. The individual Class representatives have standing to represent and have adequately represented the Class.
10. The relief awarded and ordered herein is not intended to, and does not, affect or preclude any religious beliefs, religious tenets, or religious practices of any Defendants, within the meaning of Supreme Court and Eleventh Circuit case law construing the First Amendment.
11. The Defendants, directly and through agents acting under Defendants' direction and control, have, under the "cloak of religion," but not as a part of any constitutionally protected religious observation or belief, and instead as a course of conduct of a securities business and of offering and selling investment contracts and securities:
(A) committed fraud upon citizens of Alabama, Ohio and numerous other states;
(B) violated the anti-fraud provisions of the 1933 Act, the 1934 Act, the Alabama Act, and the Ohio Act;
(C) violated the securities registration requirements of the 1933 Act, the Alabama Act and the Ohio Act; and
(D) violated the securities broker-dealer and securities salesmen licensing and registration requirements of the 1934 Act, the Alabama Act and the Ohio Act.
12. By reason of their conduct, the Defendants were unjustly enriched (through the gas money and otherwise), and are, constructive trustees for their victims, the investors in the Class, of all monies, property and assets obtained or received by Defendants, their couriers, "contact persons," agents and confederates, from such investors, and owe fiduciary duties, which they have breached.
FINAL JUDGMENT
It is therefore the final order and judgment of this Court that the following defendants shall be liable to the Class, as a whole, in the following respective amounts:
Greater Ministries International, Inc. $50,382,483.08
Greater Ministries International Church $50,382,483.08
Greater Ministries International $50,382,483.08
Jim Chambers $50,382,483.08
Henry E. Showalter $50,382,483.08
Tom Parker $670,087.02
Keith Roadarmer $50,382,483.08
Louie E. Strawder $50,382,483.08
Fay Fry $261,988.91
Gerald Payne $50,382,483.08
Betty Payne $50,382,483.08
David Whitfield $50,382,483.08
Scott Hughes $5,038.25
Patrick H. Talbert $50,382,483.08
John Krishak $50,382,483.08
Jim Mawdsley $952,228.93
Jim Biggerstaff $1,274,676.82
Paul Bennett $146,109.20
C.C. Carlman $6,352.00
Nova Miller $2,121,102.54
Norman Lower $11,828.00
Don Hall $50,382,483.08
Brenda Hall $50,382,483.08
J. Ed Strawder $2,272,249.99
Patsy Tharp $665,048.78
B.B. Burnett $498,786.58
Tom B. Sleep $911,922.94
Frank Huffman $2,252,096.99
Al Dayton $50,382,483.08
Sid Howell $1,526.589.24
Jack Coe $136,032.70
Jack C. Hudson $50,382,483.08
1. Plaintiffs Motion for Class Certification (Dkt. #444) is GRANTED. The class of Plaintiffs shall be those persons whose proofs of claim have been filed and allowed in the GMI bankruptcy case in this Court, In Re Greater Ministries International, Inc., Debtor, No. 99-13967-8B1 (Ch. 11).
2. Plaintiffs Motion for Assignment of Liability (Dkt. # 500) is GRANTED. Liability is assigned as set forth herein.
3. Intervenor Defendant Talbert's Motion to Dismiss Patrick Henry Talbert (Dkt. #507) is DENIED.
4. The Clerk is directed to enter final judgment in favor of the Plaintiffs and against Defendants in the amounts set forth herein.
5. The Court will retain jurisdiction for post-judgment collection proceedings and disbursement of any recovery to the bankruptcy court for distribution, and for class notice.
6. Provided however and notwithstanding anything to the contrary, nothing contained herein shall constitute, operate or be construed to impose any liability or claim against the bankruptcy estate or estate assets of Greater Ministries International, Inc., Greater Ministries International Church, or Greater Ministries International in the confirmed Chapter 11 case of In Re: Greater Ministries International, Inc., Case No. 99-13967-8B1, which was filed in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, or otherwise affect the administration of the bankruptcy case, alter the terms of the Confirmed Plan of Liquidation, as amended or impose any liability, obligation or claim against Kevin O'Halloran, as Chapter 11 Trustee for Greater Ministries International, Inc.
7. The Clerk is directed to close this file and terminate all pending motions as moot.
The Court finds that Talbert appeared and submitted to the personal jurisdiction of this Court through then counsel Albert Cunningham by his Answer to the Complaint (Dkt. #36). Additionally, in its' Permanent Injunction Order of August 24, 1999, the Court found that personal jurisdiction existed over the Church's 26 elders, one of whom is Talbert.