Federal Judge Travis McDonough has ruled that longtime Chattanooga Quarterback Club president Doug Dyer should be prosecuted for contempt of court in connection with a fraud case in which he is charged.
Judge McDonough said Dyer violated terms of a court-ordered asset freeze by distributing certain stock to investors.
He said Dyer would go on trial for contempt on April 3.
Attorneys for Dyer said the stock issue was a "misunderstanding" and said it benefited the alleged fraud victims and not Dyer.
Judge McDonough said, "Preliminary Injunction did not proscribe only actions that 'benefited' Defendants or Relief Defendants. The purpose of the Preliminary Injunction, of course, was to preserve the status quo, not simply to deprive Defendants and Relief Defendants from further benefit from allegedly fraudulent actions. Defendants have forfeited to the Court their authority to take such actions, regardless of whom Defendants believe the actions benefit. The Court cannot overlook the violation of its Preliminary Injunction, especially in the context of this case and the facts presented concerning Defendant Dyer’s conduct.
"Because Defendant Dyer chose to change the status quo in a manner that cannot be cured without significant difficulty, if at all, the only effective way to adequately address his violation of the Preliminary Injunction is a criminal contempt proceeding."
Judge McDonough also denied a motion for relief from the asset freeze.
The judge also said, "Despite the millions of dollars allegedly received from investors, Defendants acknowledged at the August 31, 2016 hearing that they have insufficient assets to satisfy the disgorgement Plaintiff seeks."
His ruling says, "Defendants represent that on October 25, 2016, Dyer sent two documents to the Executive VP of Fision Corp. (“the Irrevocable Stock Power and Corporate Resolution for Sole Signing Officers”) that needed to be signed in order to effect the distribution of Fision stock to Scenic City F-10 VIII investors. (Id. at 3.) They also represent that on November 4, 2016, Defendants and their counsel met about the need to disburse the Fision stock. Defense counsel represents that Defendants misunderstood that Dyer could proceed with directing that the stock be disbursed and that, on November 9, 2016, Dyer called the Executive VP of Fision Corp. and instructed him to issue the shares."
The Securities and Exchange Commission last July announced that it had won a court-ordered asset freeze to halt "an ongoing fraud by two former Chattanooga brokers with disciplinary histories who allegedly raised more than $5 million from investors without using the money as promised." One was the 56-year-old Dyer and the other was James Hugh Brennan III, 67.
The SEC said Dyer and Brennan sold purported shares in eight similarly named companies to more than 240 investors nationwide since 2008 without ever registering the stock as they promised. Instead, according to the SEC’s complaint, Brennan and Dyer transferred investor funds into their personal accounts or those belonging to their wives.
The action says over a five-year period that Carole Johnston Brennan received $30,000 of the funds and Alison Ford Dyer received $286,000. Ms. Dyer was also active in the Quarterback Club and would send out Facebook notices about the meetings.