JACKSON, Miss. (AP) — The Mississippi Supreme Court has upheld an order from the secretary of state's office that alleges a Pearl securities firm operated illegally.
The Supreme Court, in a 6-3 ruling Thursday, returned the case to a Hinds County judge to recalculate the penalties assessed to SteadiVest LLC and CEO Marshall Wolfe and President Jack Harrington.
Chancery Judge William Singletary dismissed an appeal from SteadiVest in April 2012. The secretary of state's office on Dec. 1, 2010, issued a final cease and desist order against Wolfe and Harrington; Wolfe was fined $850,000, and Harrington was fined $170,000.
Singletary found SteadiVest failed to place investment funds in an escrow account and did not maintain adequate records of the company's financial operating activities.
On appeal, SteadiVest and its officers argued the findings by the secretary of state's office and the chancellor were not supported by the evidence.
Justice Josiah D. Coleman, writing for the majority, said only evidence provided in the case was that submitted by the secretary of state.
"Both Wolfe and Harrington simply deny any wrongdoing and try to lay the blame elsewhere, but they fail to provide any evidence, witnesses or affidavits to support their positions," Coleman said. "The secretary of state's decision was supported by substantial evidence, was not arbitrary or capricious, did not go beyond the secretary of state's power and did not violate Wolfe's or Harrington's statutory or constitutional rights."
In a dissent, Presiding Justice Jess Dickinson and two other justices said the secretary of state's office should have been required to hold a formal hearing before issuing a judgment against Steadivest.
"All we have are briefs. No witnesses. No evidence. No testimony regarding the level of sophistication of the investors," Dickinson said. "The record is devoid of any findings by the secretary of state that Wolf and Harrington knowingly or intentionally misled investors. The record is also devoid of any proof that anyone relied on any false representation, or that any false representation induced anyone to do anything."
According to the secretary of state's office, SteadiVest was supposed to purchase houses and then rent them out. However, the secretary of state says the company and is officers "misled and deceived its investors in order to pay off mounting debt and keep its numerous subsidiaries afloat."
The secretary of state's report says money collected through the sale of memberships for the company allegedly was never set aside, a violation of the agreement between SteadiVest and its investors
SteadiVest filed for bankruptcy last March. Investors filed suit in August. The investors' lawsuit alleges about $6 million in losses.
Besides fraud, the investors' lawsuit alleges Wolfe and others sold promissory notes and used the funds generated to raise money for new investors and "pay themselves exorbitant salaries and benefits." The lawsuit said SteadiVest's parent company, MTW Investment Financing LLC, has lost millions.
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