The SEC on Tuesday charged and obtained an emergency court order to halt a prime bank scheme involving law firm Baylor & Jackson, PLLC and The Milan Trading Group, a Pennsylvania-based firm.  From at least August 2010 and continuing to the present, defendants Frank Pavlico III, Brynee K. Baylor, and the entities they control, conducted a "Prime Bank" scheme that defrauded at least 13 investors out of some $2.1 million.

Prime bank schemes typically lure investors into believing they are being given an exclusive chance to participate in an international investing program involving complex financial instruments that generate astronomical profits. Promoters often stress secrecy as a key to the success of the investments, and explain away the lack of specificity by stating that the financial instruments are too technical and complicated for non-experts to understand.

SEC Findings and Allegations. Pennsylvania resident Frank Pavlico III and Washington, D.C. attorney Brynee Baylor. Pavlico and Baylor lured investors into the scheme by offering them extraordinary returns.  In at least 1 instance, Pavlico offered returns of up to 20 times the original investment within 45 days.  Investors were told that the investment involved no risk and that their principal would be returned if a successful bank instrument transaction was not completed.  Baylor cloaked these offers in legitimacy by acting through her capacity as a licensed attorney and by identifying herself and her Washingt;on, D.C. law firm, as counsel for Milan and engaging in the scheme through Baylor & Jackson. Pavlico and Baylor told investors both orally and in writing that Milan would use investor funds to "lease," "leverage", and "trade" foreign bank instruments, including "standby LOCs" and "bank guarantees."  The Milan investment was entirely fictitious.  Pavlico and Baylor provided investors with investment contracts and other documents that described the investment in vague and complex terms.  These documents had all the appearance of legitimate legal documents, but were written and designed to deceive investors into believing they were participants in a viable investment.  And, contrary to their representations, investor funds were never used investor funds to lease, leverage, or trade any purported foreign bank instruments.  Pavlico and Baylor used investor funds on personal expenditures like luxury cars, trips, business expenses of the 2 companies, and payments to relief defendants. Material Misrepresentations to Investors. Among other things, Pavlico and Baylor lied to investors about the existence of the supposed investment and the use of investor funds.  Baylor falsely claimed that she had been involved in prior successful transactions with Milan and that she had personally witnessed prior investors receive large 'returns' through Baylor & Jackson's attorney trust ("IOLTA") account consistent with Pavlico's  representations.  Baylor & Jackson participated in and aided and abetted the scheme by acting as escrow agent for Milan pursuant to written agreements between Baylor & Jackson and investors that Baylor executed as Baylor & Jackson's managing partner.  At least 7 investors deposited at least $1.65 million into Baylor & Jackson's IOLTA account.  In addition, agreements with investors provided that investment profits would be shared among investors, Milan, and B&J. Pavlico and Baylor are continuing to deceive investors about the status of their purported investments.  Pavlico and Baylor have sent investors dozens of emails describing the progress of the supposed transaction, and Baylor has sent investors notarized "Attorney Attestation" letters on Baylor & Jackson letterhead assuring them that the investment is legitimate and will be consummated soon.  Pavlico and Baylor have also sent investors fictitious computer generated "screen shots" and copies of purported foreign bank instruments to deceive them into believing that Milan has acquired bank instruments. Status of Case. The Honorable Rosemary Collyer granted the SEC’s request for a temporary restraining order, asset freezes, and other emergency relief to prevent Pavlico, Milan, Baylor, and Baylor & Jackson from further engaging in the investment program.  The SEC seeks permanent injunctive relief and financial penalties against the individuals and their companies, as well as disgorgement from them and the relief defendants of all ill gotten gains.  Separately, the FBI arrested Pavlico on 11/29/11, charging him with wire fraud. SEC Staff Credits. Investigation by Christopher McLean, Carolyn Morris.  Litigation will be led by James Kidney. For further details, go to:  [SEC PR 11-254, 12/6/11] and [SEC Complaint, Case  1:11-cv-02132].