SEC bars two Houston brokers involved in Ponzi scheme

The Securities and Exchange Commission (SEC) has barred Donald Mackenzie and Robert Davis from being associated with any registered financial broker. The case arose out of the collapse, in December 2017, of the Woodbridge Group of Florida in a $1.3 billion Ponzi scheme. Approximately 8,400 retail (mostly elderly) investors lost money.

Mackenzie owned Old Security Financial Group in Spring. Robert ‘Lute’ Davis was a Vice-President at the company. Old Security acted as an unregistered broker by selling securities of Woodbridge.

Mackenzie and Davis are two of 20 brokers around the country charged by the SEC as marketing the investments as ‘safe’ and ‘secure’. In fact, money from new investors was used to repay earlier ones.

The SEC alleges that Mackenzie and Davis sold investors two types of securities;

  • 12 to 18 month promissory notes bearing 5-8% interest that Woodbridge described as First Position Commercial Mortgages
  • 7 different private placement fund offerings with five-year terms.

Ads were placed in Texas Monthly and on KPRC AM 950 in Houston.

$2 million commissions

Between May 2014 and July 2015 Mackenzie and Davis received sales commissions of between 1-4% on the first type and 5% on the second type. However Woodbridge deliberately mischaracterized them as marketing bonuses. Mackenzie and Davis allegedly received $2 million in commissions earned as a result of raising $41 million through the sale of Woodbridge securities.

For now, without admitting or denying the findings of the SEC, Mackenzie and Davis have agreed to be barred from association with any broker, dealer or investment adviser. Also, they cannot participate in any offering of a penny stock.

The case is still ongoing in the District Court for the Central District of California. Mackenzie and Davis, if found guilty, may have to pay back the commissions as well as penalties.

Woodbridge CEO sentenced to 25 years

In October 2019, Robert Shapiro, the former CEO of Woodbridge, was sentenced to 25 years in prison. He pleaded guilty to tax evasion and running a $1.3 billion fraud. He admitted to taking between $25 million and $95 million of investors’ money. Shapiro used it to buy real estate in the Los Angeles area, global travel, jewelry and diamonds.

The SEC has settled with some of the other brokers involved in the scheme.

Run-ins with the regulators

Mackenzie and Old Security has had a number of run-ins over the years with courts and regulators.

  • 2001 – Old Security is sued by the SEC for commissions received for the sale of unregistered securities in Alpha Telecom. He was ordered to pay $79,000 in 2005.
  • 2005 – Sued for receiving commissions received for the sale of unregistered securities in Mobile Billboards. In 2008 a court in Atlanta ordered Mackenzie to pay $153,000.
  • 2012 – Texas Commissioner of Insurance ordered Mackenzie to pay a penalty of $20,000 for selling life insurance without a license.
  • 2016 – Mackenzie and Davis were fined $100,000 by the Texas State Securities Board for selling the Woodbridge securities in Texas even though they were not registered.

SEC Litigation – Mackenzie.pdf

SEC Litigation – Davis.pdf

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