Enforcement orders

              OF
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
GINAL
LI
2098 J)J 15 12: $9
BEFORE THE ARIZONA CQ MISSION
t *
COMMISSIONERS
MIKE GLEASON, Chairman
WILLIAM A. MUNDELL
KRISTIN K. MAYES
GARY PIERCE
JEFF HATCH-MILLER
JAN 15 2008
- 1 DOCKETED BY
In the matter of: ) DOCKET NO. S-20574A-08-0023
)
Lingerie Nights DVD Magazine, L.L.C., an )
Arizona limited liability company, ) TEMPORARY ORDER TO CEASE AND
) DESIST AND NOTICE OF
Raymond Javier Duran and ) OPPORTUNITY FOR HEARING
Jane Doe Duran, husband and wife, 1
1
Richard B. Cuen and 1
Jane Doe Cuen, husband and wife, 1
1
Respondents. 1
NOTICE: THIS ORDER IS EFFECTIVE IMMEDIATELY
EACH RESPONDENT HAS 20 DAYS TO REQUEST A HEARING
EACH RESPONDENT HAS 30 DAYS TO FILE AN ANSWER
The Securities Division (“Division”) of the Arizona Corporation Commission
(“Commission”) alleges that respondents Lingerie Nights DVD Magazine, L.L.C., Raymond
Javier Duran, Jane Doe Duran, Richard B. Cuen and Jane Doe Cuen are engaging in or are about
to engage in acts and practices that constitute violations of A.R.S. 0 44-1801, et seq., the Arizona
Securities Act (“Securities Act”), and that the public welfare requires immediate action.
I.
JURISDICTION
1. The Commission has jurisdiction over this matter pursuant to Article XV of the
Arizona Constitution and the Securities Act.
. I
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
24
25
26
Docket No. 3-20574A-08-0023
11.
RESPONDENTS
2. Lingerie Nights DVD Magazine, L.L.C. (“LINGERIE NIGHTS,’) is an Arizona
limited liability company with a principal place of business located in Avondale, Arizona.
3. Raymond Javier Duran (“DURA”’) is an individual residing in Avondale,
Arizona. According to public records, DURAN is a member of LINGERIE NIGHTS. According
to LINGERIE NIGHTS’ offering materials, DURAN is the president of LINGERIE NIGHTS.
4. Richard B. Cuen (“CUEN”) is an individual residing in Avondale, Arizona.
According to public records, CUEN is the statutory agent for, and a member of, LINGERIE
NIGHTS. According to LINGERIE NIGHTS’ offering materials, CUEN is the owner and chief
executive officer of LINGERIE NIGHTS.
5. Jane Doe Duran has been at all relevant times the spouse of Respondent DURAN.
Jane Doe Cuen has been at all relevant times the spouse of Respondent CUEN. Jane Doe Duran and
Jane Doe Cuen may be referred to collectively as “RESPONDENT SPOUSES.” RESPONDENT
SPOUSES are joined in this action under A.R S. 0 44-2031(C) solely for purposes of determining
the liability of the marital communities.
6. At all times relevant, Respondents DURAN and CUEN have been acting for their
own benefit and for the benefit or in fixtherance of their marital communities.
7. Respondents LINGERIE NIGHTS, DURAN and CUEN may be referred to
collectively as “RESPONDENTS.”
111.
FACTS
8. Since at least September 2007, RESPONDENTS have been offering an investment
opportunity to the general public by advertising on an Internet website known as Craig’s
ListIPhoenix (“Craig’s List”).
2
i
i ’ ..
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Docket No. S-20574A-08-0023
9. At all times relevant, RESPONDENTS represent to offerees and investors that their
business is based on the creation and distribution of a “monthly lifestyle” magazine on DVD called
Lingerie Nights DVD Magazine (the “Magazine”). RESPONDENTS represent that they will visit
a different city each month to host a lingerie-themed club event and model casting.
RESPONDENTS’ written solicitation materials state that the Magazine’s monthly content will
include 7 (seven) new aspiring models from a different city each month, and non-nude video shoots
and audio interviews of the models. Information regarding RESPONDENTS’ Magazine venture is
identified on their internet website, www.LingerieNightsDVD.com (“Website”).
10. RESPONDENTS represented to a potential investor that they were seeking four
“silent investors” to invest $2,500 each, or one investor to invest $10,000 to h d th eir business
enterprise. RESPONDENTS further represented that the investment was passive, and would not
require any work on the part of the investor.
1 1. RESPONDENTS provided to at least one potential investor solicitation materials
that stated they were seeking investor capital of $20,000 (i.e., “two $10,000 investments or one
$20,000 investment”).
12. RESPONDENTS represented to a potential investor that the profit from their
investment would be based on: (1) lifetime royalty shares for each DVD produced and sold by
RESPONDENTS; and (2) paid subscriptions to their Website.
13. In one example, RESPONDENTS represent that, in return for a $10,000
investment, an investor could earn a profit as follows:
Return on $10k Investment = 20 cents per DVD sold
(for lifetime of company DVD sales)
10,000 copies sold = $2,000
*25,000 copies sold = $5,000”
50,000 copies sold = $10,000
100,000 copies sold = $20,000
3
..
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Docket No. S-20574A-08-0023
500,000 copies sold = $1 00,000
1,000,000 copies sold = $200,000
(Emphasis in original). In another example, RESPONDENTS represent that, in return for the
aforementioned $2,500 LINGERIE NIGHTS investment, an investor could earn a profit as follows:
Return on $2,500 Investment = 5 cents per DVD sold
(for lifetime of company DVD and Web subscription sales)
10,000 copies sold = $500
20,000 copies sold = $1,000
*50,000 copies sold = $2,500*
100,000 copies sold = $5,000
1,000,000 copies sold = $50,000
(Emphasis in original).
14. RESPONDENTS’ offering materials fail to adequately disclose the risk of the
investments including, but not limited to, the fact that an investor could lose all or a portion of their
principal investment. Rather, RESPONDENTS’ offering materials merely state their greatest
business risk is from market competition.
IV.
VIOLATION OF A.R.S. 3 44-1841
(Offer and Sale of Unregistered Securities)
15. Since at least September 2007, RESPONDENTS have been offering or selling
securities in the form of investment contracts, within or from Arizona.
16. The securities referred to above are not registered pursuant to Articles 6 or 7 of the
Securities Act.
17. This conduct violates A.R.S. 5 44-1841.
4
..
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Docket No. S-20574A-08-0023
V.
VIOLATION OF A.R.S. 0 44-1842
(Transactions by Unregistered Dealers or Salesmen)
18. RESPONDENTS are offering or selling securities within or fi-om Arizona while not
registered as dealers or salesmen pursuant to Article 9 of the Securities Act.
19. This conduct violates A.R.S. 0 44-1842.
VI.
VIOLATION OF A.R.S. 0 44-1991
(Fraud in Connection with the Offer or Sale of Securities)
20. In connection with the offer or sale of securities within or from Arizona,
Respondents are, directly or indirectly: (i) employing a device, scheme, or artifice to deli-aud; (ii)
naking untrue statements of material fact or omitting to state material facts that are necessary in
xder to make the statements made not misleading in light of the circumstances under which they are
made; or (iii) engaging in transactions, practices, or courses of business that operate or would
2perate as a fi-aud or deceit upon offerees and investors. Respondents' conduct includes, but is not
limited to, failing to adequately disclose the risks of the investment opportunity including, but not
limited to, the fact that an investor could lose all or a portion of their principal investment and the
risks associated with investing in a new, financially unproven entity.
21. This conduct violates A.R.S. 3 44-1991.
111
I l l
111
111
Ill
111
Ill
5
.,
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Docket No. S-20574A-08-0023
VII.
TEMPORARY ORDER
Cease and Desist from Violating the Securities Act
THEREFORE, based on the above allegations, and because the Commission has determined
that the public welfare requires immediate action,
IT IS ORDERED, pursuant to A.R.S. 8 44-1972(C) and A.A.C. R14-4-307, that
RESPONDENTS, their agents, servants, employees, successors, assigns, and those persons in active
concert or participation with RESPONDENTS CEASE AND DESIST from any violations of the
Securities Act.
IT IS FURTHER ORDERED that this Temporary Order to Cease and Desist shall remain in
effect for 180 days unless sooner vacated, modified, or made permanent by the Commission.
IT IS FURTHER ORDERED that this Order shall be effective immediately.
VIII.
REQUESTED RELIEF
The Division requests that the Commission grant the following relief:
1. Order RESPONDENTS to permanently cease and desist from violating the
Securities Act pursuant to A.R.S. 0 44-2032;
2. Order RESPONDENTS to take affirmative action to correct the conditions resulting
from RESPONDENTS’ acts, practices, or transactions, including a requirement to make restitution
pursuant to A.R.S. 8 44-2032;
3. Order Respondents to pay the state of hzona administrative penalties of up to five
thousand dollars ($5,000) for each violation of the Securities Act, pursuant to A.R.S. 8 44-2036;
4. Order that the marital communities of RESPONDENTS and Respondent Spouses
are subject to any order of restitution, rescission, administrative penalties, or other appropriate
affirmative action pursuant to A.R.S. tj 25-215; and
5. Order any other relief that the Commission deems appropriate.
6
~
1 .
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Docket No. S-20574A-08-0023
XIV.
HEARING OPPORTUNITY
Each RESPONDENT, including Respondent Spouses, may request a hearing pursuant to
A.R.S. $44-1972 and A.A.C. Rule 14-4-307. If a RESPONDENT or Respondent Spouse
requests a hearing, the requesting respondent must also answer this Temporary Order and
Notice. A request for hearing must be in writing and received by the Commission within 20 days
after service of this Temporary Order and Notice. The requesting respondent must deliver or mail
the request for hearing to Docket Control, Arizona Corporation Commission, 1200 West
Washngton, Phoenix, Arizona 85007. Filing instructions may be obtained fiom Docket Control by
Galling (602) 542-3477 or on the Commission’s Internet web site at
www.azcc.gov/divisions/hearings/docket.a sp.
If a request for hearing is timely made, the Commission shall schedule a hearing to begin 10
to 30 days fiom the receipt of the request unless otherwise provided by law, stipulated by the parties,
3r ordered by the Commission. Unless otherwise ordered by the Commission, this Temporary
Order shall remain effective from the date a hearing is requested until a decision is entered.
After a hearing, the Commission may vacate, modi@, or make permanent this Temporary Order,
with written findings of fact and conclusions of law. A permanent Order may include ordering
restitution, assessing administrative penalties, or other action.
If a request for hearing is not timely made, the Division will request that the Commission
make permanent this Temporary Order, with written findings of fact and conclusions of law, which
may include ordering restitution, assessing administrative penalties, or other relief.
Persons with a disability may request a reasonable accommodation such as a sign language
interpreter, as well as request this document in an alternative format, by contacting Linda Hogan,
ADA Coordinator, voice phone number 602/542-393 1, e-mail Ihoqan@,azcc.gov. Requests should
be made as early as possible to allow time to arrange the accommodation.
7
~" .1
I
I 1
I
I
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
I 26
I
~
Docket No. S-20574A-08-0023
xv.
ANSWER REQUIREMENT
Pursuant to A.A.C. R14-4-305, if a RESPONDENT or Respondent Spouse requests a
hearing, the requesting respondent must deliver or mail an Answer to this Temporary Order and
Notice to Docket Control, Arizona Corporation Commission, 1200 W. Washington, Phoenix,
Arizona 85007, within 30 calendar days after the date of service of this Temporary Order and
Notice. Filing instructions may be obtained from Docket Control by calling (602) 542-3477 or on
the Commission's Internet web site at www.azcc.gov/divisions/hearings/docket.asp.
Additionally, the answering respondent must serve the Answer upon the Division.
Pursuant to A.A.C. R14-4-303, service upon the Division may be made by mailing or by hand-delivering
a copy of the Answer to the Division at 1300 West Washington, 3rd Floor, Phoenix,
Arizona, 85007, addressed to Mike Dailey.
The Answer shall contain an admission or denial of each allegation in this Temporary
Order and Notice and the original signature of the answering respondent or the respondent's
attorney. A statement of a lack of sufficient knowledge or information shall be considered a denial
of an allegation. An allegation not denied shall be considered admitted.
When the answering respondent intends in good faith to deny only a part or a qualification
of an allegation, the respondent shall specify that part or qualification of the allegation and shall
admit the remainder. Respondent waives any affirmative defense not raised in the answer.
The officer presiding over the hearing may grant relief from the requirement to file an
Answer for good cause shown.
BY ORDER OF THE ARIZONA CORPORATION COMMISSION, this / r d a y of
ka VA* ,200 8.
Director of Securities