SEC v. DAVID A. SOUZA; and D.A. SOUZA INVESTMENTS, LLC, No. 2:09-cv-02421-FCD, Eastern District of California (Aug. 31, 2009) — Complaint

 
  
 
  
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MARC J. FAGEL (Cal. Bar No. 154425) 
JUDITH L. ANDERSON (Cal. Bar No. 124281) 
[email protected] 
JENNIFER L. SCAFE (Cal. Bar No. 194649) 
[email protected] 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, 26th Floor 
San Francisco, California  94104 
Telephone:  (415) 705-2500 
Facsimile:  (415) 705-2501 
UNITED STATES DISTRICT COURT 
EASTERN DISTRICT OF CALIFORNIA 
SACRAMENTO DIVISION 
SECURITIES AND EXCHANGE COMMISSION,    Case   No.   
                        Plaintiff,            
COMPLAINT 
v.            
DAVID A. SOUZA and D.A. SOUZA 
INVESTMENTS, LLC,  
Defendants.            
Plaintiff Securities and Exchange Commission (the “Commission”) alleges: 
SUMMARY OF THE ACTION 
1. This matter involves a fraudulent investment scheme targeting members of a 
Redding, California church community, carried out by David A. Souza (“Souza”) and his 
company, D.A. Souza Investments, LLC (“Souza Investments”).  From August 2007 to April 
2008, Souza baselessly touted his alleged investing acumen and promised sky high rates of 
return.  Souza induced approximately 28 investors within the church community to invest a total 
of more than $1 million into pooled funds to purchase stocks and enter into other investment 
opportunities.  Souza took advantage of his recent affiliation with the church to gain investors’ 
SEC V. SOUZA 
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COMPLAINT 

 
  
 
  
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trust by appealing to their religious faith through such slogans as “Where Business Is Moral and 
the Miraculous Is Routine.” 
2. In reality, Souza and Souza Investments never invested any of the money they 
received from investors.  Instead, they diverted most of the investors’ money to expenditures 
designed to create the false appearance of a successful business operation.  Defendants used 
another portion of the money to pay certain investors fictitious high returns in the style of a 
Ponzi scheme, with the remainder used for payment of Souza’s personal living expenses.  Souza 
had no formal training or experience in investing or money management and no prior track 
record of successful (or any) investing. 
3. Souza’s scheme unraveled after he was confronted by investors and church 
officials who had grown suspicious.  In subsequent letters, Souza assured investors that he would 
soon return their “investment[s] plus accrued earnings,” but failed to deliver on his promises and 
had no means to do so. 
4. Defendants Souza and Souza Investments violated the antifraud provisions of 
the federal securities laws by misappropriating investor assets and by making materially false 
and misleading statements in connection with the offer, purchase, and sale of securities.  Souza 
further made misrepresentations or omissions of material fact to investors in pooled investment 
funds.  In addition, Defendants violated the registration provisions of the federal securities laws 
by offering and issuing securities without filing with the Commission a registration statement 
that would have provided investors with important information about Defendants’ business and 
finances. 
5. As a result of these violations, the Commission brings this civil enforcement 
action to require that Defendants be enjoined from future violations of the federal securities laws, 
disgorge their ill-gotten gains, with prejudgment interest, and pay civil money penalties. 
JURISDICTION AND VENUE 
6. The Commission brings this action pursuant to Sections 20(b), 20(d), and 22(a) 
of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b) and 77t(d)]; Sections 21(d) 
and 21(e) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d) and 
SEC V. SOUZA 
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COMPLAINT 

 
  
 
  
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78u(e)]; and Sections 209 and 214 of the Investment Advisers Act of 1940 (“Advisers Act”) 
[15 U.S.C. §§ 80b-9 and 80b-14]. 
7. This Court has jurisdiction over this action pursuant to Sections 20(b) and 22(a) 
of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)]; Sections 21(d), 21(e), and 27 of the 
Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]; and Sections 209 and 214 of the 
Advisers Act [15 U.S.C. §§ 80b-9 and 80b-14].  The defendants, directly or indirectly, have 
made use of the means and instrumentalities of interstate commerce and of the mails in 
connection with the acts, practices, and courses of business alleged in this complaint. 
8. Venue is proper in this District pursuant to Section 22(a) of the Securities Act 
[15 U.S.C. § 77v]; Section 27 of the Exchange Act [15 U.S.C. § 78aa]; and Section 214 of the 
Advisers Act [15 U.S.C. § 80b-14].  During the period described in this complaint, Souza resided 
in the District, and Souza Investments’ principal place of business is located in the District.  In 
addition, acts, practices, and courses of business alleged in the complaint occurred in the District.  
This action has been filed in the Sacramento Division according to Local Rule 3-120(d) because 
the case arises from acts, practices, and courses of business that occurred in Shasta County, 
California. 
DEFENDANTS 
9. David A. Souza, age 53, of Redding, California, is the President, CEO, and sole 
Manager of Souza Investments.  He has never been registered with the Commission in any 
capacity. 
10. D.A. Souza Investments, LLC is a Nevada limited liability company formed 
by David Souza on October 10, 2007 with headquarters in Redding, California.  Souza 
Investments has never been registered with the Commission in any capacity. 
FACTUAL ALLEGATIONS 
Souza Solicited Investors From A Church Community By Falsely Claiming 
Extraordinarily High Rates Of Return 
11. In approximately May 2007, Souza, a former handyman, automotive body shop 
owner and truck driver, entered a Redding, California church community.  Beginning in August 
SEC V. SOUZA 
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COMPLAINT 

 
  
 
  
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2007 through at least April 2008, Souza fraudulently induced individuals with ties to the church 
community to invest in what he claimed were pooled investment programs that he managed.  
Using his affiliation with the church, Souza gained the trust of prospective investors by 
appealing to their religious faith, claiming, for example, that Souza Investments’ purported 
success could be attributed not only to its management, but to the “obvious favor of God.” 
12. Initially, investors provided investment funds directly to Souza.  In October 
2007, Souza established a limited liability company called D.A. Souza Investments, LLC.  Souza 
distributed written materials to investors under the Souza Investments name, and some investors 
purchased interests in an investment pool purportedly operated by Souza Investments.  At all 
times, Souza acted as President and CEO of Souza Investments and held himself out to investors 
as the only person involved in making investment decisions and managing investor funds. 
13. Although Souza had no formal financial training or investment experience, he 
convinced individuals to invest with him by touting the purportedly phenomenal success he was 
achieving in the stock market.  Representing that the investments would generate high returns, 
Souza individually and through Souza Investments told investors that their money would be 
placed into pools that would be invested in stocks.  Souza also told some investors that their 
money would purchase interests in a separate pooled investment fund that would invest in 
business projects, such as a property development venture in Calexico, California or a 
prospective water bottling plant in Oklahoma. 
14. Both before and after investors gave him money, Souza frequently cited the 
high rates of return he claimed to be earning (e.g., 78% quarterly) by investing in stocks.  As an 
example, Souza persuaded one investor to refinance the mortgage on her home and invest the 
funds with him to take advantage of the better rate of return he insisted he could earn for her.  
Souza also told prospective investors about existing investors who had already doubled or tripled 
their money.  In March 2008, Souza paid $10,000 to a young couple who had invested $1,500 six 
months earlier.  Upon hearing of this apparent 566% dividend payment, others acquainted with 
the couple invested money with Souza.  In addition, some existing investors contributed 
additional money based on Souza’s representations about the growth in their initial investments.   
SEC V. SOUZA 
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15. For Souza’s efforts as an investment adviser, investor agreements provided that 
he would be compensated by management fees as high as 20 per cent, calculated as a percentage 
of the net gains on the investments. 
16. In early 2008, Souza provided prospective investors with an eight-page, full-
color Souza Investments business prospectus, featuring the slogan, “Where Business Is Moral 
and the Miraculous Is Routine.”  Among other representations, the prospectus contains a line 
graph depicting a “2007 Rate of Return” of 79%, shown to have been reached between July 2007 
and January 2008.  A note to the graph states:  “Actualized annual rate of return on investments 
would equal 158%.”  Certain individuals invested money with Souza based in part on the rate of 
return depicted in the prospectus. 
17. By offering and selling investments in pooled investment funds, for which 
investors expected profits solely from Defendants’ efforts, Souza and Souza Investments 
participated in the offer and sale of securities. Defendants offered the securities without filing a 
registration statement with the Commission and without having a registration statement in effect 
as to the securities offering, as required by the federal securities laws.  Had such a statement 
been filed, investors would have had access to important information pertinent to their 
investment decisions. 
18. In just nine months, Souza and Souza Investments raised more than $1 million 
from approximately 28 investors residing in multiple states, including California, Arizona, and 
Texas.  Some out-of-state investors wired the money for their investments to Defendants.  
Defendants took no steps to determine whether prospective investors were financially qualified 
or had the requisite investment experience to invest in the purported investment programs they 
offered.  Many investors were not financially sophisticated and did not have sufficient assets or 
income to take on the risk of investing with Souza. 
In Reality, Souza Never Made Any Investments And Instead Used Investor Money 
For Unauthorized Purposes 
19. Although Souza told investors that he would invest their money in stocks and/or 
in various business ventures, in reality, Defendants never made any investments whatsoever.  
SEC V. SOUZA 
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COMPLAINT 

 
  
 
  
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Souza pooled the money Defendants received from investors in multiple bank accounts, 
including his personal accounts, and commingled funds among the accounts.  Rather than 
investing the money as he had represented to investors, Souza used it for a number of 
expenditures that were undisclosed to and unauthorized by investors. 
20. Souza used a substantial portion of investor funds for expenditures that made it 
appear as if his supposed investment programs were operating successfully, thereby making the 
investments more attractive to prospective investors.  For example, of the more than $1 million 
Defendants raised from investors, Souza distributed approximately $230,000 back to certain 
investors, much of it as purported dividend payments in the style of a Ponzi scheme.  Souza also 
spent approximately $100,000 to rent a luxurious office space and to supply it with furniture and 
computers, and he made more than $100,000 in charitable contributions to the church 
community. 
21. Souza misappropriated additional investor funds for his personal living 
expenses, including dental and optical expenses, clothing, and groceries. In addition, he spent 
nearly $45,000 on multi-level marketing programs and used approximately $35,000 to purchase 
investment books and investment products advertised on the Internet.  These uses of funds were 
never disclosed to investors. 
22. Defendants knew or were reckless in not knowing that the claims they made to 
prospective and existing investors regarding their purported investment returns were materially 
false and misleading.  Further, Defendants knew or were reckless in not knowing that they were 
misappropriating investor funds, using investor funds contrary to disclosed purposes, and making 
materially false and misleading statements and omissions regarding their use of investor funds. 
Souza’s Scheme Unraveled When Investors Became Suspicious 
23. In approximately April 2008, an investor asked Souza to redeem his $200,000 
investment.  Souza wrote the investor a check for $350,000, stating that the original investment 
had grown to that amount.  When the investor attempted to cash the check, however, it bounced.  
Thereafter, Souza offered a series of excuses, but never fully repaid the investor.  The investor 
SEC V. SOUZA 
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COMPLAINT 

 
  
 
  
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became suspicious and shared his concerns with others.  Ultimately, investors and church 
officials confronted Souza, and the fraudulent scheme came to light. 
24. In June 2008, Souza sent investors a form letter stating that “[d]ue to the 
scrutiny of [the] Church,” he had “resolved to divest [sic] all investors.”  In the letter, Souza 
promised to “pay your investment plus accrued earnings by cashier’s check within thirty days . . . 
contingent upon the receipt of expected funds sufficient to effect [t]his buyout.”  Souza had no 
reasonable basis for making that statement, and he has never delivered on his promise to redeem 
the investments. 
FIRST CLAIM FOR RELIEF
 
Violations Of Section 17(a) Of The Securities Act By All Defendants 

25. The Commission hereby incorporates by reference Paragraphs 1 through 24 
above. 
26. By engaging in the conduct set forth above, Defendants Souza and Souza 
Investments, and each of them, have, directly or indirectly, in the offer or sale of securities, by 
the use of means or instruments of transportation or communication in interstate commerce, or of 
the mails:  (a) with scienter, employed devices, schemes, or artifices to defraud; (b) obtained 
money or property by means of untrue statements of material fact or by omitting to state material 
facts necessary in order to make statements made, in the light of the circumstances under which 
they were made, not misleading; and (c) engaged in transactions, practices, or courses of 
business which operated or would operate as a fraud or deceit upon the purchasers of such 
securities. 
27. By reason of the foregoing, Defendants have directly or indirectly violated, and 
unless enjoined, will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 
SECOND CLAIM FOR RELIEF 
Violations Of Section 10(b) Of The Exchange Act And 
Rule 10b-5 Thereunder By All Defendants 
28. The Commission hereby incorporates by reference Paragraphs 1 through 24 
above. 
SEC V. SOUZA 
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29. By engaging in the conduct set forth above, Defendants Souza and Souza 
Investments, and each of them, directly or indirectly, by use of means or instrumentalities of 
interstate commerce, or of the mails, or of a facility of a national security exchange, with 
scienter:  (a) employed devices, schemes, or artifices to defraud; (b) made untrue statements of 
material fact or omitted to state material facts necessary in order to make the statements made, in 
light of the circumstances under which they were made, not misleading; and (c) engaged in acts, 
practices, or courses of business which operated or would operate as a fraud or deceit upon other 
persons, in connection with the purchase or sale of securities. 
30. By reason of the foregoing, Defendants have directly or indirectly violated, and 
unless enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] 
and Rule 10b-5 thereunder [17 C.F.R. §§ 240.10b-5]. 
THIRD CLAIM FOR RELIEF 
Violations Of Sections 206(1) And (2) Of The 

Investment Advisers Act Of 1940 By Souza
 
31. The Commission hereby incorporates by reference Paragraphs 1 through 24 
above. 
32. At all relevant times, Souza acted as an investment adviser, as defined by 
Section 202(a)(11) of the Advisers Act [15 U.S.C. § 80b-2(a)(11)], to the pooled investment 
funds. 
33. By engaging in the acts and conduct alleged above, Souza, directly or indirectly, 
through use of the means or instruments of transportation or communication in interstate 
commerce or of the mails, and while engaged in the business of advising others for compensation 
as to the advisability of investing in, purchasing, or selling securities:  (a) with scienter, 
employed devices, schemes, and artifices to defraud; and (b) engaged in acts, practices, or 
courses of business which operated or would operate as a fraud or deceit upon clients or 
prospective clients. 
SEC V. SOUZA 
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34. By reason of the foregoing, Souza has violated, and unless enjoined will 
continue to violate, Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(1) and 
80b-6(2)]. 
FOURTH CLAIM FOR RELIEF 
Violations Of Section 206(4) Of The Advisers Act And 

Rule 206(4)-8 Thereunder By Souza 

35. The Commission hereby incorporates by reference Paragraphs 1 through 24 
above. 
36. At all relevant times, Souza acted as an investment adviser, as defined by 
Section 202(a)(11) of the Advisers Act [15 U.S.C. § 80b-2(a)(11)], to the pooled investment 
funds. 
37. At all relevant times, Souza purported to operate a pooled investment vehicle, as 
defined by Rule 206(4)-8(b) promulgated under the Advisers Act [17 C.F.R. § 275.206(4)-8(b)]. 
38. Souza, by engaging in the acts and conduct alleged above, while acting as an 
investment adviser to a pooled investment vehicle, by the use of the means and instrumentalities 
of interstate commerce and of the mails, directly and indirectly, has engaged in transactions, 
practices, and courses of business which operate as a fraud or deceit upon investors in the pooled 
investment funds.  Souza made untrue statements of a material fact or omitted to state a material 
fact necessary to make the statements made, in the light of the circumstances under which they 
were made, not misleading, to any investor or prospective investor in the pooled investment 
funds, and otherwise engaged in acts, practices or courses of business that were fraudulent, 
deceptive, or manipulative with respect to any investor or prospective investor in the pooled 
investment funds. 
39. By reason of the foregoing, Souza has violated, and unless enjoined will 
continue to violate, Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 
thereunder [17 C.F.R. § 275.206(4)-8]. 
SEC V. SOUZA 
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FIFTH CLAIM FOR RELIEF
 
Violations Of Section 5(a) And 5(c) Of The Securities Act By All Defendants 

40. The Commission hereby incorporates by reference Paragraphs 1 through 24 
above. 
41. By engaging in the acts and conduct alleged above, Defendants Souza and 
Souza Investments, and each of them, directly or indirectly, made use of means or instruments of 
transportation or communication in interstate commerce or of the mails to offer and to sell 
securities through the use or medium of a prospectus or otherwise when no registration statement 
had been filed or was in effect as to such securities and no exemption from registration was 
available. 
42. By reason of the foregoing, Defendants have violated and, unless enjoined, will 
continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)]. 
RELIEF REQUESTED 
WHEREFORE, the Commission respectfully requests that the Court: 
I. 
Enjoin Defendants Souza and Souza Investments from directly or indirectly violating 
Sections 5(a), 5(c), and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], 
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R.  
§ 240.10b-5]. 
II. 
Enjoin Defendant Souza from directly or indirectly violating Sections 206(1), 206(2), and 
206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(1), 80b-6(2), and 80b-6(4)] and Rule 206(4)-8 
thereunder [17 C.F.R. § 275.206(4)-8]. 
III. 
Order Defendants Souza and Souza Investments to disgorge their ill-gotten gains 
according to proof, plus prejudgment interest thereon. 
SEC V. SOUZA 
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IV. 
Order Defendant Souza to pay civil money penalties pursuant to Section 20(d) of the 
Securities Act [15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], and 
Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]. 
V. 
Retain jurisdiction of this action in accordance with the principles of equity and the 
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and 
decrees that may be entered, or to entertain any suitable application or motion for additional 
relief within the jurisdiction of this Court. 
VI. 
Grant such other and further relief as this Court may determine to be just, equitable, and 
necessary. 
Dated:  August 28, 2009 Respectfully submitted, 
/s/ Jennifer L. Scafe __________________ 
Jennifer L. Scafe 
Attorney for Plaintiff
SECURITIES AND EXCHANGE 
COMMISSION 
SEC V. SOUZA 
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COMPLAINT 

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MARC J. FAGEL (Cal. Bar No. 154425) 
JUDITH L. ANDERSON (Cal. Bar No. 124281) 

[email protected] 
JENNIFER L. SCAFE (Cal. Bar No. 194649) 

[email protected] 

Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, 26th Floor 
San Francisco, California 94104 
Telephone: (415) 705-2500 
Facsimile:  (415) 705-2501 

UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

SACRAMENTO DIVISION 

SECURITIES AND EXCHANGE COMMISSION,  Case No. 

  Plaintiff, COMPLAINT 
v. 

DAVID A. SOUZA and D.A. SOUZA 
INVESTMENTS, LLC,  

Defendants. 

Plaintiff Securities and Exchange Commission (the “Commission”) alleges: 

SUMMARY OF THE ACTION 

1. This matter involves a fraudulent investment scheme targeting members of a 

Redding, California church community, carried out by David A. Souza (“Souza”) and his 

company, D.A. Souza Investments, LLC (“Souza Investments”).  From August 2007 to April 

2008, Souza baselessly touted his alleged investing acumen and promised sky high rates of 

return. Souza induced approximately 28 investors within the church community to invest a total 

of more than $1 million into pooled funds to purchase stocks and enter into other investment 

opportunities. Souza took advantage of his recent affiliation with the church to gain investors’ 

SEC V. SOUZA 1 COMPLAINT 

maguirep
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2:09-cv-02421-FCD-KJM



 

   
  

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trust by appealing to their religious faith through such slogans as “Where Business Is Moral and 

the Miraculous Is Routine.” 

2. In reality, Souza and Souza Investments never invested any of the money they 

received from investors. Instead, they diverted most of the investors’ money to expenditures 

designed to create the false appearance of a successful business operation.  Defendants used 

another portion of the money to pay certain investors fictitious high returns in the style of a 

Ponzi scheme, with the remainder used for payment of Souza’s personal living expenses.  Souza 

had no formal training or experience in investing or money management and no prior track 

record of successful (or any) investing. 

3. Souza’s scheme unraveled after he was confronted by investors and church 

officials who had grown suspicious. In subsequent letters, Souza assured investors that he would 

soon return their “investment[s] plus accrued earnings,” but failed to deliver on his promises and 

had no means to do so. 

4. Defendants Souza and Souza Investments violated the antifraud provisions of 

the federal securities laws by misappropriating investor assets and by making materially false 

and misleading statements in connection with the offer, purchase, and sale of securities.  Souza 

further made misrepresentations or omissions of material fact to investors in pooled investment 

funds. In addition, Defendants violated the registration provisions of the federal securities laws 

by offering and issuing securities without filing with the Commission a registration statement 

that would have provided investors with important information about Defendants’ business and 

finances. 

5. As a result of these violations, the Commission brings this civil enforcement 

action to require that Defendants be enjoined from future violations of the federal securities laws, 

disgorge their ill-gotten gains, with prejudgment interest, and pay civil money penalties. 

JURISDICTION AND VENUE 

6. The Commission brings this action pursuant to Sections 20(b), 20(d), and 22(a) 

of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b) and 77t(d)]; Sections 21(d) 

and 21(e) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d) and 

SEC V. SOUZA 2 COMPLAINT 



 

   
  

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78u(e)]; and Sections 209 and 214 of the Investment Advisers Act of 1940 (“Advisers Act”) 

[15 U.S.C. §§ 80b-9 and 80b-14]. 

7. This Court has jurisdiction over this action pursuant to Sections 20(b) and 22(a) 

of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)]; Sections 21(d), 21(e), and 27 of the 

Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]; and Sections 209 and 214 of the 

Advisers Act [15 U.S.C. §§ 80b-9 and 80b-14].  The defendants, directly or indirectly, have 

made use of the means and instrumentalities of interstate commerce and of the mails in 

connection with the acts, practices, and courses of business alleged in this complaint. 

8. Venue is proper in this District pursuant to Section 22(a) of the Securities Act 

[15 U.S.C. § 77v]; Section 27 of the Exchange Act [15 U.S.C. § 78aa]; and Section 214 of the 

Advisers Act [15 U.S.C. § 80b-14]. During the period described in this complaint, Souza resided 

in the District, and Souza Investments’ principal place of business is located in the District.  In 

addition, acts, practices, and courses of business alleged in the complaint occurred in the District.  

This action has been filed in the Sacramento Division according to Local Rule 3-120(d) because 

the case arises from acts, practices, and courses of business that occurred in Shasta County, 

California. 

DEFENDANTS 

9. David A. Souza, age 53, of Redding, California, is the President, CEO, and sole 

Manager of Souza Investments.  He has never been registered with the Commission in any 

capacity. 

10. D.A. Souza Investments, LLC is a Nevada limited liability company formed 

by David Souza on October 10, 2007 with headquarters in Redding, California.  Souza 

Investments has never been registered with the Commission in any capacity. 

FACTUAL ALLEGATIONS 

Souza Solicited Investors From A Church Community By Falsely Claiming 
Extraordinarily High Rates Of Return 

11. In approximately May 2007, Souza, a former handyman, automotive body shop 

owner and truck driver, entered a Redding, California church community.  Beginning in August 

SEC V. SOUZA 3 COMPLAINT 



 

   
  

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2007 through at least April 2008, Souza fraudulently induced individuals with ties to the church 

community to invest in what he claimed were pooled investment programs that he managed.  

Using his affiliation with the church, Souza gained the trust of prospective investors by 

appealing to their religious faith, claiming, for example, that Souza Investments’ purported 

success could be attributed not only to its management, but to the “obvious favor of God.” 

12. Initially, investors provided investment funds directly to Souza.  In October 

2007, Souza established a limited liability company called D.A. Souza Investments, LLC.  Souza 

distributed written materials to investors under the Souza Investments name, and some investors 

purchased interests in an investment pool purportedly operated by Souza Investments.  At all 

times, Souza acted as President and CEO of Souza Investments and held himself out to investors 

as the only person involved in making investment decisions and managing investor funds. 

13. Although Souza had no formal financial training or investment experience, he 

convinced individuals to invest with him by touting the purportedly phenomenal success he was 

achieving in the stock market. Representing that the investments would generate high returns, 

Souza individually and through Souza Investments told investors that their money would be 

placed into pools that would be invested in stocks.  Souza also told some investors that their 

money would purchase interests in a separate pooled investment fund that would invest in 

business projects, such as a property development venture in Calexico, California or a 

prospective water bottling plant in Oklahoma. 

14. Both before and after investors gave him money, Souza frequently cited the 

high rates of return he claimed to be earning (e.g., 78% quarterly) by investing in stocks.  As an 

example, Souza persuaded one investor to refinance the mortgage on her home and invest the 

funds with him to take advantage of the better rate of return he insisted he could earn for her.  

Souza also told prospective investors about existing investors who had already doubled or tripled 

their money.  In March 2008, Souza paid $10,000 to a young couple who had invested $1,500 six 

months earlier. Upon hearing of this apparent 566% dividend payment, others acquainted with 

the couple invested money with Souza.  In addition, some existing investors contributed 

additional money based on Souza’s representations about the growth in their initial investments.   

SEC V. SOUZA 4 COMPLAINT 



 

   
  

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15. For Souza’s efforts as an investment adviser, investor agreements provided that 

he would be compensated by management fees as high as 20 per cent, calculated as a percentage 

of the net gains on the investments. 

16. In early 2008, Souza provided prospective investors with an eight-page, full-

color Souza Investments business prospectus, featuring the slogan, “Where Business Is Moral 

and the Miraculous Is Routine.” Among other representations, the prospectus contains a line 

graph depicting a “2007 Rate of Return” of 79%, shown to have been reached between July 2007 

and January 2008. A note to the graph states: “Actualized annual rate of return on investments 

would equal 158%.” Certain individuals invested money with Souza based in part on the rate of 

return depicted in the prospectus. 

17. By offering and selling investments in pooled investment funds, for which 

investors expected profits solely from Defendants’ efforts, Souza and Souza Investments 

participated in the offer and sale of securities. Defendants offered the securities without filing a 

registration statement with the Commission and without having a registration statement in effect 

as to the securities offering, as required by the federal securities laws.  Had such a statement 

been filed, investors would have had access to important information pertinent to their 

investment decisions. 

18. In just nine months, Souza and Souza Investments raised more than $1 million 

from approximately 28 investors residing in multiple states, including California, Arizona, and 

Texas. Some out-of-state investors wired the money for their investments to Defendants.  

Defendants took no steps to determine whether prospective investors were financially qualified 

or had the requisite investment experience to invest in the purported investment programs they 

offered. Many investors were not financially sophisticated and did not have sufficient assets or 

income to take on the risk of investing with Souza. 

In Reality, Souza Never Made Any Investments And Instead Used Investor Money 
For Unauthorized Purposes 

19. Although Souza told investors that he would invest their money in stocks and/or 

in various business ventures, in reality, Defendants never made any investments whatsoever.  

SEC V. SOUZA 5 COMPLAINT 



 

   
  

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Souza pooled the money Defendants received from investors in multiple bank accounts, 

including his personal accounts, and commingled funds among the accounts.  Rather than 

investing the money as he had represented to investors, Souza used it for a number of 

expenditures that were undisclosed to and unauthorized by investors. 

20. Souza used a substantial portion of investor funds for expenditures that made it 

appear as if his supposed investment programs were operating successfully, thereby making the 

investments more attractive to prospective investors.  For example, of the more than $1 million 

Defendants raised from investors, Souza distributed approximately $230,000 back to certain 

investors, much of it as purported dividend payments in the style of a Ponzi scheme.  Souza also 

spent approximately $100,000 to rent a luxurious office space and to supply it with furniture and 

computers, and he made more than $100,000 in charitable contributions to the church 

community. 

21. Souza misappropriated additional investor funds for his personal living 

expenses, including dental and optical expenses, clothing, and groceries. In addition, he spent 

nearly $45,000 on multi-level marketing programs and used approximately $35,000 to purchase 

investment books and investment products advertised on the Internet.  These uses of funds were 

never disclosed to investors. 

22. Defendants knew or were reckless in not knowing that the claims they made to 

prospective and existing investors regarding their purported investment returns were materially 

false and misleading.  Further, Defendants knew or were reckless in not knowing that they were 

misappropriating investor funds, using investor funds contrary to disclosed purposes, and making 

materially false and misleading statements and omissions regarding their use of investor funds. 

Souza’s Scheme Unraveled When Investors Became Suspicious 

23. In approximately April 2008, an investor asked Souza to redeem his $200,000 

investment.  Souza wrote the investor a check for $350,000, stating that the original investment 

had grown to that amount.  When the investor attempted to cash the check, however, it bounced.  

Thereafter, Souza offered a series of excuses, but never fully repaid the investor.  The investor 

SEC V. SOUZA 6 COMPLAINT 



 

   
  

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became suspicious and shared his concerns with others.  Ultimately, investors and church 

officials confronted Souza, and the fraudulent scheme came to light. 

24. In June 2008, Souza sent investors a form letter stating that “[d]ue to the 

scrutiny of [the] Church,” he had “resolved to divest [sic] all investors.”  In the letter, Souza 

promised to “pay your investment plus accrued earnings by cashier’s check within thirty days . . . 

contingent upon the receipt of expected funds sufficient to effect [t]his buyout.”  Souza had no 

reasonable basis for making that statement, and he has never delivered on his promise to redeem 

the investments. 

FIRST CLAIM FOR RELIEF
 

Violations Of Section 17(a) Of The Securities Act By All Defendants 


25. The Commission hereby incorporates by reference Paragraphs 1 through 24 

above. 

26. By engaging in the conduct set forth above, Defendants Souza and Souza 

Investments, and each of them, have, directly or indirectly, in the offer or sale of securities, by 

the use of means or instruments of transportation or communication in interstate commerce, or of 

the mails:  (a) with scienter, employed devices, schemes, or artifices to defraud; (b) obtained 

money or property by means of untrue statements of material fact or by omitting to state material 

facts necessary in order to make statements made, in the light of the circumstances under which 

they were made, not misleading; and (c) engaged in transactions, practices, or courses of 

business which operated or would operate as a fraud or deceit upon the purchasers of such 

securities. 

27. By reason of the foregoing, Defendants have directly or indirectly violated, and 

unless enjoined, will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

SECOND CLAIM FOR RELIEF 

Violations Of Section 10(b) Of The Exchange Act And 
Rule 10b-5 Thereunder By All Defendants 

28. The Commission hereby incorporates by reference Paragraphs 1 through 24 

above. 

SEC V. SOUZA 7 COMPLAINT 



 

   
  

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29. By engaging in the conduct set forth above, Defendants Souza and Souza 

Investments, and each of them, directly or indirectly, by use of means or instrumentalities of 

interstate commerce, or of the mails, or of a facility of a national security exchange, with 

scienter: (a) employed devices, schemes, or artifices to defraud; (b) made untrue statements of 

material fact or omitted to state material facts necessary in order to make the statements made, in 

light of the circumstances under which they were made, not misleading; and (c) engaged in acts, 

practices, or courses of business which operated or would operate as a fraud or deceit upon other 

persons, in connection with the purchase or sale of securities. 

30. By reason of the foregoing, Defendants have directly or indirectly violated, and 

unless enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] 

and Rule 10b-5 thereunder [17 C.F.R. §§ 240.10b-5]. 

THIRD CLAIM FOR RELIEF 

Violations Of Sections 206(1) And (2) Of The 

Investment Advisers Act Of 1940 By Souza
 

31. The Commission hereby incorporates by reference Paragraphs 1 through 24 

above. 

32. At all relevant times, Souza acted as an investment adviser, as defined by 

Section 202(a)(11) of the Advisers Act [15 U.S.C. § 80b-2(a)(11)], to the pooled investment 

funds. 

33. By engaging in the acts and conduct alleged above, Souza, directly or indirectly, 

through use of the means or instruments of transportation or communication in interstate 

commerce or of the mails, and while engaged in the business of advising others for compensation 

as to the advisability of investing in, purchasing, or selling securities:  (a) with scienter, 

employed devices, schemes, and artifices to defraud; and (b) engaged in acts, practices, or 

courses of business which operated or would operate as a fraud or deceit upon clients or 

prospective clients. 

SEC V. SOUZA 8 COMPLAINT 



 

   
  

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34. By reason of the foregoing, Souza has violated, and unless enjoined will 

continue to violate, Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(1) and 

80b-6(2)]. 

FOURTH CLAIM FOR RELIEF 

Violations Of Section 206(4) Of The Advisers Act And 

Rule 206(4)-8 Thereunder By Souza 


35. The Commission hereby incorporates by reference Paragraphs 1 through 24 

above. 

36. At all relevant times, Souza acted as an investment adviser, as defined by 

Section 202(a)(11) of the Advisers Act [15 U.S.C. § 80b-2(a)(11)], to the pooled investment 

funds. 

37. At all relevant times, Souza purported to operate a pooled investment vehicle, as 

defined by Rule 206(4)-8(b) promulgated under the Advisers Act [17 C.F.R. § 275.206(4)-8(b)]. 

38. Souza, by engaging in the acts and conduct alleged above, while acting as an 

investment adviser to a pooled investment vehicle, by the use of the means and instrumentalities 

of interstate commerce and of the mails, directly and indirectly, has engaged in transactions, 

practices, and courses of business which operate as a fraud or deceit upon investors in the pooled 

investment funds.  Souza made untrue statements of a material fact or omitted to state a material 

fact necessary to make the statements made, in the light of the circumstances under which they 

were made, not misleading, to any investor or prospective investor in the pooled investment 

funds, and otherwise engaged in acts, practices or courses of business that were fraudulent, 

deceptive, or manipulative with respect to any investor or prospective investor in the pooled 

investment funds. 

39. By reason of the foregoing, Souza has violated, and unless enjoined will 

continue to violate, Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8 

thereunder [17 C.F.R. § 275.206(4)-8]. 

SEC V. SOUZA 9 COMPLAINT 



 

   
  

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FIFTH CLAIM FOR RELIEF
 

Violations Of Section 5(a) And 5(c) Of The Securities Act By All Defendants 


40. The Commission hereby incorporates by reference Paragraphs 1 through 24 

above. 

41. By engaging in the acts and conduct alleged above, Defendants Souza and 

Souza Investments, and each of them, directly or indirectly, made use of means or instruments of 

transportation or communication in interstate commerce or of the mails to offer and to sell 

securities through the use or medium of a prospectus or otherwise when no registration statement 

had been filed or was in effect as to such securities and no exemption from registration was 

available. 

42. By reason of the foregoing, Defendants have violated and, unless enjoined, will 

continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)]. 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that the Court: 

I. 

Enjoin Defendants Souza and Souza Investments from directly or indirectly violating 

Sections 5(a), 5(c), and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], 

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R.  

§ 240.10b-5]. 

II. 

Enjoin Defendant Souza from directly or indirectly violating Sections 206(1), 206(2), and 

206(4) of the Advisers Act [15 U.S.C. §§ 80b-6(1), 80b-6(2), and 80b-6(4)] and Rule 206(4)-8 

thereunder [17 C.F.R. § 275.206(4)-8]. 

III. 

Order Defendants Souza and Souza Investments to disgorge their ill-gotten gains 

according to proof, plus prejudgment interest thereon. 

SEC V. SOUZA 10 COMPLAINT 



 

   
  

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IV. 

Order Defendant Souza to pay civil money penalties pursuant to Section 20(d) of the 

Securities Act [15 U.S.C. § 77t(d)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], and 

Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]. 

V. 

Retain jurisdiction of this action in accordance with the principles of equity and the 

Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and 

decrees that may be entered, or to entertain any suitable application or motion for additional 

relief within the jurisdiction of this Court. 

VI. 

Grant such other and further relief as this Court may determine to be just, equitable, and 

necessary. 

Dated: August 28, 2009 Respectfully submitted, 

/s/ Jennifer L. Scafe __________________ 
Jennifer L. Scafe 

Attorney for Plaintiff
SECURITIES AND EXCHANGE 
COMMISSION 

SEC V. SOUZA 11 COMPLAINT