Hearing slated in decades-old fraud case

Man may face charge of contempt over debt

3/12/2012

For three decades, James L. Douglas owed money as part of a court order to repay Toledo-area investors whom authorities said he fleeced out of millions of dollars — money the Securities and Exchange Commission says is way past due.

Mr. Douglas is scheduled to appear Tuesday in U.S. District Court in Toledo for a hearing on whether he should be held in contempt of court.

The request was brought forward by the SEC, which alleges that Mr. Douglas failed to fulfill his 1983 court-ordered obligation to pay $200,000. Although he paid $121,975.29 of the total in four payments between 1984 and 1986, Mr. Douglas owes a total of $78,024.71 as well as interest, the commission says.

Although the SEC says Mr. Douglas has evaded authorities for 26 years, Mr. Douglas has filed court documents saying he has been in plain sight and easily reached if necessary. He further stated he already has paid what he owes.

“The evidence will show that Douglas has offered to pay the SEC the principal amount due under the judgment, despite believing that the amount was already paid. Of course, Douglas does not have copies of the twenty-something-year-old checks to prove payment,” Mr. Douglas’ attorneys wrote in a response filed in court. “The SEC has rejected this offer and seeks to have Mr. Douglas put in jail after decades of letting the disgorgement order lie dormant if he does not immediately pay $2 million in interest.”

According to court documents filed in federal court, the SEC first filed a complaint against Mr. Douglas, also known as James L. Cooper, in January, 1982, alleging he had raised more than $7.5 million by selling unregistered securities to more than 300 people. A California resident at the time, Mr. Douglas sold half of these partnerships to clients of an investment adviser in Toledo.

On the same day the complaint was filed, the court signed an order that prevented Mr. Douglas from “future violations of the anti-fraud and registration provision of the federal securities laws.”

A year later, the court entered an “order for the disgorgement of ill-gotten gains.”

It was in this order that the court directed Mr. Douglas to pay $200,000 within three years, court records show. The commission says he never fulfilled that obligation.

Decades later, on Jan. 23, the SEC filed a motion requesting the last of the payments and post-judgment interest.

In its motion, the SEC contends that Mr. Douglas had evaded the law but returned to the radar screen after he, himself, won a $5 million judgment against a tobacco company in the aftermath of his wife’s death.

“On January 11, 2011, after learning about the $5 million judgment, the Commission sent Douglas a letter demanding that he pay the remaining amount due under the order, together with post-judgment interest,” the complaint said. “In response, Douglas unveiled a new position, arguing for the first time that he had, in fact, paid the judgment in full.”

In its motion, the SEC noted that Mr. Douglas has since made two claims as to why he should not have to pay the balance of the judgment.

“First, Douglas claims that he did, in fact, pay the full judgment by 1985 by sending funds to his lawyer — an attorney who passed away in the 1990s. Second, Douglas contends that the judgment has lost its potency through the passage of time,” the motion states. “Both arguments fall wide of the mark.”

In his response filed Feb. 24, Mr. Douglas disputes that he has skirted his obligations or that he has hidden from authorities.

He notes that he has lived and worked in both California and Florida over the past two decades and has filed tax returns and even received refunds.

“Clearly the SEC never tried to find Douglas through any other branches of the federal government, including the most obvious place, the IRS,” the response stated, noting his numerous jobs with public companies. “ …Douglas was doing a lot of things in the late 1980s and 1990s, but he certainly was not hiding.”

The response further alleged that the SEC was recently spurred into action because of the “tobacco companies’ revenge” and clarified that the estate of Mr. Douglas’ wife was awarded $2.5 million — not $5 million — which is under appeal.

“While Douglas and/or his children may be entitled to a portion of their deceased wife and mother’s estate at some point in the future, as of the date of this filing, he has not received one penny,” the response stated.

A call to Mr. Douglas’ attorney, Aubrey Dicus, Jr., of St. Petersburg, Fla., was not returned. Mr. Douglas could not be located for comment.

Judge Jack Zouhary will preside over the hearing.

Contact Erica Blake at: eblake@theblade.com or 419-213-2134.