SEC v. Chicago D&P, Inc.; Patricia Morgen; and Shalom Gibson, Northern District of California — Complaint

 
 
  
 
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HELANE L. MORRISON (Cal. Bar No. 127752) 
JUDITH L. ANDERSON (Cal. Bar No. 124281) 
MARC J. FAGEL (Cal. Bar No. 154425 
TRACY L. DAVIS (Cal. Bar No. 184129) 
STEVEN BUCHHOLZ (Cal. Bar No. 202638) 
 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 1100 
San Francisco, California  94104 
Telephone:  (415) 705-2500 
Facsimile:  (415) 705-2501 
UNITED STATES DISTRICT COURT 
NORTHERN DISTRICT OF CALIFORNIA 
OAKLAND DIVISION 
 
SECURITIES AND EXCHANGE COMMISSION, 
 
            Plaintiff,      
 
      vs.      
 
CHICAGO D&P, INC., PATRICIA MORGEN and 
SHALOM GIBSON, 
 
            Defendants,      
 
      and      
 
 REALTOPIA, INC. 
 
 
            Relief      Defendant.      
 
Case No. __________________ 
 
 
COMPLAINT 
 
 
 
 
 
 
Plaintiff Securities and Exchange Commission (“Commission”) alleges: 
JURISDICTION
1. This Court has jurisdiction over this action pursuant to Sections 20(d)(1) and 22(a) of 
the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. §§ 77t(d)(1) and 77v(a)] and Sections 
21(d)(3), 21(e) and 27 of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. §§ 

 
 
 
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78u(d)(3), 78u(e) and 78aa].  Defendants, directly or indirectly, have made use of the means and 
instrumentalities of interstate commerce or of the mails in connection with the acts, transactions, 
practices and courses of business alleged in this Complaint. 
2. Venue in this District is proper pursuant to Section 22(a) of the Securities Act 
[15 U.S.C. §77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa] because the defendants 
are located in the Northern District of California and a substantial portion of the conduct alleged in 
this Complaint occurred within the Northern District of California. 
3. Assignment to the Oakland Division of this Court is proper because a substantial part 
of the events or omissions that give rise to the claim occurred in Alameda, Contra Costa, and San 
Mateo counties.  
SUMMARY OF THE ACTION
4. This matter involves fraud in the offer and sale of unregistered securities by 
defendants Chicago D&P, Inc., Patricia (“Pat”) Morgen, and Shalom Gibson.  From at least January 
2001, Morgen and Chicago D&P have been soliciting investments in a purported real estate financing 
venture referred to as the Investor Funding Group.
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  Chicago D&P claims to offer “phenomenal” 
rates of return of as much as 36% (or more) annually.  The Company claims it will use investor funds 
to “close Chicago D&P’s property acquisitions in-house, thereby avoiding the necessity of obtaining 
outside funding.”  This purportedly “enables [the Company’s] investors, and not outside lenders, to 
recapture the rate of return on Chicago D&P’s real estate acquisitions.”  
5. The offering materials include a chart showing the “exact profits” to be paid to 
investors.  The chart states:  “Over a 6-month period, you have made a cumulative profit of 18% on 
your initial investment.  Every 6 months, your 18% compounds.  After 1 year, you are at 36% + 
bonuses and it keeps growing.”  The offering materials make no reference to any potential risk to 
one’s investment.  Rather, the materials promise investors “a safe, yet rather aggressive profit” and a 
“rare win-win opportunity” bringing “incredible returns.”   
                                                
 
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     The Chicago D&P offering materials represent that the company was founded by Morgen in 
1998, but the Commission is aware only of bank records showing that the bank account into which 
investors deposited funds was opened (and received its first investor deposit) in January 2001. 

 
 
 
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6. Since January 2001, defendants have raised at least $10 million from several hundred 
investors.  From at least October 16, 2003 through April 14, 2004 alone, defendants raised 
approximately $6.4 million from more than 200 investors (or groups of investors).  Defendants 
continue to raise money from investors and, in fact, defendants raised approximately $2 million from 
investors in the last month alone.   
7. In their offering materials provided to investors, defendants falsely represent that 
investors are purchasing investments in a real estate acquisition company “for the purpose of funding 
Chicago D&P, Inc. Real Estate Acquisitions,” and that those who invest between $10,000 and 
$100,000 in six month increments will receive a rate of return of from 18% to 27% based on profits 
generated from Chicago D&P’s real estate acquisition business.  Moreover, defendants promise “the 
opportunity for increased returns as investors are offered the opportunity to rollover their investment 
for an additional six months and the end of the original term.”  Defendants also promise “an 
additional bonus of 6% for referring other individuals....”  The offering materials additionally 
represent that investors will “share in the growth and profits of the company’s real estate endeavors.” 
8. All of these claims are false.  Chicago D&P primarily uses investment proceeds 
obtained from investors for improper and undisclosed purposes.  From October 16, 2003 to April 14, 
2004, defendants raised approximately $6.4 million from investors.  During the same time period, 
defendants raised at most $600,000 from non-investor sources, but paid approximately $3.2 million 
in so-called profits to investors.  The alleged profit payments to existing investors were funded 
almost entirely by money received from new investors to the scheme.  Moreover, defendants diverted 
a significant portion of investor funds – several hundred thousand dollars over the last six months 
alone – into cash and personal expenses.  In addition to at least $50,000 in cash withdrawals from 
Chicago D&P’s main account, defendants used a debit card to make payments to clothes stores, spas 
and for other personal items.  Defendants also used approximately $230,000 over the past six months 
to pay defendant Morgen’s American Express credit card bills.  
9. By offering to sell and selling unregistered securities, the defendants violated Sections 
5(a), and 5(c) and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c) and 77q(a)].  By making 
material misstatements and omissions in the offer and sale of securities, the defendants violated 

 
 
 
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Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and 
Rule 10b-5 [17 C.F.R. §§ 240.10b-5] thereunder.  The Commission seeks an injunction against future 
conduct that violates the securities laws, disgorgement of ill-gotten gains, and civil money penalties.  
As to Chicago D&P, the Commission also seeks the appointment of a Receiver to oversee the 
operations of Chicago D&P and all of its subsidiaries, including the receipt of any rent payments to 
the entities and the disbursement of interest payments to investors.  The Commission further seeks 
disgorgement of all investor funds disbursed to the relief defendant.   
AUTHORITY TO BRING THIS ACTION
10. The Commission brings this action pursuant to Sections 20(b) and 20(d) of the 
Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange Act 
[15 U.S.C. §§ 78u(d) and 78u(e)]. 
DEFENDANTS
11. Defendant Chicago D&P, Inc. is incorporated in the State of Nevada and primarily 
conducts business in the San Francisco Bay Area and Reno, Nevada.   
12. Defendant Patricia Morgen, age 57, is a resident of Emeryville, California.  Morgen is 
Chicago D&P’s Founder, President and Senior Vice President of Acquisitions. 
13. Defendant Shalom Gibson is a resident of either Berkeley, California or Reno, 
Nevada.  Gibson is a board member of Chicago D&P, and the President and Secretary of Chicago 
D&P’s subsidiary or affiliate, Realtopia, Inc.  Gibson controlled several of the Chicago D&P bank 
accounts, as well as that of Realtopia.   
RELIEF DEFENDANT
14. Relief defendant Realtopia, Inc. is incorporated in the State of Nevada and is a 
subsidiary of Chicago D&P.  Realtopia is controlled by Gibson and Morgen. 
FACTUAL ALLEGATIONS
15. Beginning in or about October 2003, defendants offered and sold securities in the form 
of investments in a purported funding group to finance real estate acquisitions.   
16. No registration statement was filed with the Commission or was in effect with respect 
to the securities that Chicago D&P, Morgen and Gibson offered and sold. 

 
 
 
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17. Potential investors are asked to execute a “Chicago Development & Planning 
Investment Agreement” (the “Agreement”), which Morgen executes on behalf of Chicago D&P.  The 
Agreement sets forth the rate of return promised to the investor for the initial investment period, and 
provides that the investment may be rolled over at the end of the period.  The Agreement states that 
“Chicago D&P, Inc. will use these funds in whatever way is necessary to operate Real Estate 
Business and culminate real estate transactions.”   
18. Once an investor signs the Agreement, she is provided wire transfer instructions to 
transmit investment funds to Chicago D&P’s Bank of America business checking account.  The 
money is then transferred to a variety of other accounts owned or controlled by Morgen and  Chicago 
D&P, including accounts of several Chicago D&P subsidiaries or affiliates.  These entities include 
California Development & Planning, Realtopia, Nasaky Investment Group, Oroshima Alliance, 
Diversified Builders, The Society of Financial Abundance, and Lifestyles of the Up and Coming. 
19. The Agreement provides that the money received from the investor is to be used “for 
the purpose of funding Chicago D&P, Inc. Real Estate Acquisitions.”  Chicago D&P also offered to 
pay bonuses to give prospective investors an incentive to invest promptly – usually within a few days 
or a couple of weeks after receiving the offering materials.  The “bonus” varied from month to 
month, and also varied based on whether the investor committed to “lend the funds” for a period of 
six months or one year.     
20. One investor, Shirley Brown, a 67 year old resident of Pasadena, California, entered 
into the “Lender Six Month Roll Over Agreement.”  Brown invested $10,000 on April 13, 2004.  
Brown’s agreement included a “DOUBLE your money APRIL Bonus of $10,000, making a total 
investment of $20,000 if funds are made available on or before April 13, 2004.”  Brown’s agreement 
further provided that Brown would receive 3 payments every 60 days after the funds had been 
invested for six months.  Brown’s agreement further provided that “[e]arly withdrawal on or before 
April 13, 2005 will void this contract and its promotions and any bonus.”   
21. Between October 16, 2003 and April 14, 2004, Chicago D& P raised more than $6.4 
million from more than 200 investors (or groups of investors) from individuals throughout the United 
States.  Morgen, Gibson and other individuals affiliated with Chicago D&P diverted a substantial 

 
 
 
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amount of money received by Chicago D&P from investors for personal expenses.  In addition to at 
least $50,000 in cash withdrawals from Chicago D&P’s main bank account, defendants used a debit 
card issued for the account to make payments to clothes stores such as Victoria’s Secret and Macy’s, 
spas and for other personal items.  Defendants also used approximately $230,000 of investor funds 
over the past six months to pay Morgen’s American Express credit card bills.  In addition, defendant 
Gibson used investor funds for such personal expenses as gambling and health club fees. 
22. Chicago D&P’s offering materials and the investor Agreement provided that funds 
invested in Chicago D&P would be used to fund Chicago D&P real estate acquisitions.  The offering 
materials also stated that profits from real estate acquisitions would be used to pay investors a return 
of up to 36% (or more) on their original investment.  
23. Chicago D&P’s offering materials further provided that Chicago D&P would pay an 
additional bonus of 6% “for referring other individuals who are looking for profitable investments.”   
The offering materials state that investors should “consider discussing the opportunity with two 2-3 
(sic) other individuals who are looking for prudent profitable investments.”     
24. The Chicago D&P offering materials represented that payments that investors received 
from Chicago D&P represented profits from Chicago D&P’s real estate acquisition business.  In 
reality, the payments to existing investors primarily came from new investors to the scheme.   
ALLEGATIONS RELATING TO RELIEF DEFENDANTS
25. Since October 2003, Chicago D&P has transferred large sums of investor money to 
Realtopia.  In April 2004, Chicago D&P transferred $200,000 of investor funds to a Morgan Stanley 
account controlled by defendant Morgen.  On May 3, 2004, Chicago D&P transferred $200,000 from 
the Morgan Stanley account and also certain other funds to Realtopia.  Realtopia improperly received 
these transfers of investors’ funds and used the funds to pay a variety of personal expenses.   
FIRST CLAIM FOR RELIEF
(Violations of Section 17(a) of the Securities Act) 
26. The Commission hereby incorporates paragraphs 1 through 25 by reference. 
27. Defendants Chicago D&P, Pat Morgen and Shalom Gibson have, by engaging in the 
conduct set forth above, directly or indirectly, in the offer or sale of securities, by the use of means or 

 
 
 
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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 
the statements made, in the light of the circumstances under which they were made, not misleading; 
or (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. 
28. By reason of the foregoing, defendants have directly or indirectly violated Section 
17(a) of the Securities Act [15 U.S.C. § 77q(a)] and unless enjoined will continue to violate Section 
17(a) of the Securities Act. 
SECOND CLAIM FOR RELIEF
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder) 
29. The Commission hereby incorporates Paragraphs 1 through 25 by reference. 
30. Defendants Chicago D&P, Pat Morgen and Shalom Gibson have, by engaging in the 
conduct set forth above, 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; or (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. 
31. By reason of the foregoing, defendants have directly or indirectly violated Section 
10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. §§ 240.10b-5] and unless 
enjoined will continue to violate Section 10(b) of the Exchange Act and Rule 10b-5. 
THIRD CLAIM FOR RELIEF
Violations of Section 5(a) and 5(c) of the Securities Act 
32. The Commission hereby incorporates Paragraphs 1 through 25 by reference. 
33. Defendants Chicago D&P, Pat Morgen and Shalom Gibson have, by engaging in the 
conduct set forth above, directly or indirectly, through use of the means or instruments of 

 
 
 
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transportation or communication in interstate commerce or of the mails, offered to sell or sold 
securities or carried or caused such securities to be carried through the mails or in interstate 
commerce, for the purpose of sale or delivery after sale. 
34. No registration statement was filed with the Commission or was in effect with respect 
to the securities offered by defendants prior to the offer or sale of these securities. 
35. By reason of the foregoing, defendants have directly or indirectly violated Sections 
5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)], and unless restrained and 
enjoined will continue to violate these provisions. 
PRAYER FOR RELIEF 
WHEREFORE, the Commission respectfully requests that the Court: 
I. 
Enjoin defendants Chicago D&P, Morgen and Gibson from, directly or indirectly, engaging in 
conduct in violation of Sections 5(a), and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a), and 77e(c)]. 
II 
Enjoin defendants Chicago D&P, Morgen and Gibson from, directly or indirectly, engaging in 
conduct in violation of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and 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]. 
III 
Enjoin defendant Chicago D&P, Morgen and Gibson from, directly or indirectly, engaging in 
conduct in violation of Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].   
IV. 
Order defendants Chicago D&P, Morgen and Gibson to disgorge their ill-gotten gains in an 
amount according to proof, plus prejudgment interest thereon. 
V. 
Order relief defendant Realtopia to disgorge its ill-gotten gains in an amount according to 
proof, plus prejudgment interest thereon. 

 
 
 
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VI. 
Order defendants Chicago D&P, Morgen and Gibson to pay civil money penalties pursuant to 
Section 20(d)(1) of the Securities Act [15 U.S.C. §77t(d)(1)] and Section 21A of the Exchange Act 
[15 U.S.C. §78u-1]. 
VII. 
Order appointment of a receiver to oversee the operations of Chicago D&P.  
VIII. 
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. 
IX. 
Grant such other and further relief as this Court may deem just, equitable, and necessary. 
Dated:  May 4, 2004 
Respectfully submitted: 
By:   _______________________________  
Helane L. Morrison 
Marc J. Fagel 
Judith L. Anderson 
Tracy L. Davis 
Steven Buchholz 
 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 

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HELANE L. MORRISON (Cal. Bar No. 127752) 
JUDITH L. ANDERSON (Cal. Bar No. 124281) 
MARC J. FAGEL (Cal. Bar No. 154425 
TRACY L. DAVIS (Cal. Bar No. 184129) 
STEVEN BUCHHOLZ (Cal. Bar No. 202638) 
 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 1100 
San Francisco, California  94104 
Telephone:  (415) 705-2500 
Facsimile:  (415) 705-2501 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

 

SECURITIES AND EXCHANGE COMMISSION, 
 
  Plaintiff, 
 
 vs. 
 
CHICAGO D&P, INC., PATRICIA MORGEN and 
SHALOM GIBSON, 
 
  Defendants, 
 
 and 
 
 REALTOPIA, INC. 
 
 
  Relief Defendant. 
 

Case No. __________________ 
 
 
COMPLAINT 
 
 
 

 

 
 

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

JURISDICTION

1. This Court has jurisdiction over this action pursuant to Sections 20(d)(1) and 22(a) of 

the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. §§ 77t(d)(1) and 77v(a)] and Sections 

21(d)(3), 21(e) and 27 of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. §§ 



  

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78u(d)(3), 78u(e) and 78aa].  Defendants, directly or indirectly, have made use of the means and 

instrumentalities of interstate commerce or of the mails in connection with the acts, transactions, 

practices and courses of business alleged in this Complaint. 

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

[15 U.S.C. §77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa] because the defendants 

are located in the Northern District of California and a substantial portion of the conduct alleged in 

this Complaint occurred within the Northern District of California. 

3. Assignment to the Oakland Division of this Court is proper because a substantial part 

of the events or omissions that give rise to the claim occurred in Alameda, Contra Costa, and San 

Mateo counties.  

SUMMARY OF THE ACTION

4. This matter involves fraud in the offer and sale of unregistered securities by 

defendants Chicago D&P, Inc., Patricia (“Pat”) Morgen, and Shalom Gibson.  From at least January 

2001, Morgen and Chicago D&P have been soliciting investments in a purported real estate financing 

venture referred to as the Investor Funding Group.1  Chicago D&P claims to offer “phenomenal” 

rates of return of as much as 36% (or more) annually.  The Company claims it will use investor funds 

to “close Chicago D&P’s property acquisitions in-house, thereby avoiding the necessity of obtaining 

outside funding.”  This purportedly “enables [the Company’s] investors, and not outside lenders, to 

recapture the rate of return on Chicago D&P’s real estate acquisitions.”  

5. The offering materials include a chart showing the “exact profits” to be paid to 

investors.  The chart states:  “Over a 6-month period, you have made a cumulative profit of 18% on 

your initial investment.  Every 6 months, your 18% compounds.  After 1 year, you are at 36% + 

bonuses and it keeps growing.”  The offering materials make no reference to any potential risk to 

one’s investment.  Rather, the materials promise investors “a safe, yet rather aggressive profit” and a 

“rare win-win opportunity” bringing “incredible returns.”   

                                                 
1  The Chicago D&P offering materials represent that the company was founded by Morgen in 
1998, but the Commission is aware only of bank records showing that the bank account into which 
investors deposited funds was opened (and received its first investor deposit) in January 2001. 



  

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6. Since January 2001, defendants have raised at least $10 million from several hundred 

investors.  From at least October 16, 2003 through April 14, 2004 alone, defendants raised 

approximately $6.4 million from more than 200 investors (or groups of investors).  Defendants 

continue to raise money from investors and, in fact, defendants raised approximately $2 million from 

investors in the last month alone.   

7. In their offering materials provided to investors, defendants falsely represent that 

investors are purchasing investments in a real estate acquisition company “for the purpose of funding 

Chicago D&P, Inc. Real Estate Acquisitions,” and that those who invest between $10,000 and 

$100,000 in six month increments will receive a rate of return of from 18% to 27% based on profits 

generated from Chicago D&P’s real estate acquisition business.  Moreover, defendants promise “the 

opportunity for increased returns as investors are offered the opportunity to rollover their investment 

for an additional six months and the end of the original term.”  Defendants also promise “an 

additional bonus of 6% for referring other individuals….”  The offering materials additionally 

represent that investors will “share in the growth and profits of the company’s real estate endeavors.” 

8. All of these claims are false.  Chicago D&P primarily uses investment proceeds 

obtained from investors for improper and undisclosed purposes.  From October 16, 2003 to April 14, 

2004, defendants raised approximately $6.4 million from investors.  During the same time period, 

defendants raised at most $600,000 from non-investor sources, but paid approximately $3.2 million 

in so-called profits to investors.  The alleged profit payments to existing investors were funded 

almost entirely by money received from new investors to the scheme.  Moreover, defendants diverted 

a significant portion of investor funds – several hundred thousand dollars over the last six months 

alone – into cash and personal expenses.  In addition to at least $50,000 in cash withdrawals from 

Chicago D&P’s main account, defendants used a debit card to make payments to clothes stores, spas 

and for other personal items.  Defendants also used approximately $230,000 over the past six months 

to pay defendant Morgen’s American Express credit card bills.  

9. By offering to sell and selling unregistered securities, the defendants violated Sections 

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

material misstatements and omissions in the offer and sale of securities, the defendants violated 



  

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Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and 

Rule 10b-5 [17 C.F.R. §§ 240.10b-5] thereunder.  The Commission seeks an injunction against future 

conduct that violates the securities laws, disgorgement of ill-gotten gains, and civil money penalties.  

As to Chicago D&P, the Commission also seeks the appointment of a Receiver to oversee the 

operations of Chicago D&P and all of its subsidiaries, including the receipt of any rent payments to 

the entities and the disbursement of interest payments to investors.  The Commission further seeks 

disgorgement of all investor funds disbursed to the relief defendant.   

AUTHORITY TO BRING THIS ACTION

10. The Commission brings this action pursuant to Sections 20(b) and 20(d) of the 

Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange Act 

[15 U.S.C. §§ 78u(d) and 78u(e)]. 

DEFENDANTS

11. Defendant Chicago D&P, Inc. is incorporated in the State of Nevada and primarily 

conducts business in the San Francisco Bay Area and Reno, Nevada.   

12. Defendant Patricia Morgen, age 57, is a resident of Emeryville, California.  Morgen is 

Chicago D&P’s Founder, President and Senior Vice President of Acquisitions. 

13. Defendant Shalom Gibson is a resident of either Berkeley, California or Reno, 

Nevada.  Gibson is a board member of Chicago D&P, and the President and Secretary of Chicago 

D&P’s subsidiary or affiliate, Realtopia, Inc.  Gibson controlled several of the Chicago D&P bank 

accounts, as well as that of Realtopia.   

RELIEF DEFENDANT

14. Relief defendant Realtopia, Inc. is incorporated in the State of Nevada and is a 

subsidiary of Chicago D&P.  Realtopia is controlled by Gibson and Morgen. 

FACTUAL ALLEGATIONS

15. Beginning in or about October 2003, defendants offered and sold securities in the form 

of investments in a purported funding group to finance real estate acquisitions.   

16. No registration statement was filed with the Commission or was in effect with respect 

to the securities that Chicago D&P, Morgen and Gibson offered and sold. 



  

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17. Potential investors are asked to execute a “Chicago Development & Planning 

Investment Agreement” (the “Agreement”), which Morgen executes on behalf of Chicago D&P.  The 

Agreement sets forth the rate of return promised to the investor for the initial investment period, and 

provides that the investment may be rolled over at the end of the period.  The Agreement states that 

“Chicago D&P, Inc. will use these funds in whatever way is necessary to operate Real Estate 

Business and culminate real estate transactions.”   

18. Once an investor signs the Agreement, she is provided wire transfer instructions to 

transmit investment funds to Chicago D&P’s Bank of America business checking account.  The 

money is then transferred to a variety of other accounts owned or controlled by Morgen and  Chicago 

D&P, including accounts of several Chicago D&P subsidiaries or affiliates.  These entities include 

California Development & Planning, Realtopia, Nasaky Investment Group, Oroshima Alliance, 

Diversified Builders, The Society of Financial Abundance, and Lifestyles of the Up and Coming. 

19. The Agreement provides that the money received from the investor is to be used “for 

the purpose of funding Chicago D&P, Inc. Real Estate Acquisitions.”  Chicago D&P also offered to 

pay bonuses to give prospective investors an incentive to invest promptly – usually within a few days 

or a couple of weeks after receiving the offering materials.  The “bonus” varied from month to 

month, and also varied based on whether the investor committed to “lend the funds” for a period of 

six months or one year.     

20. One investor, Shirley Brown, a 67 year old resident of Pasadena, California, entered 

into the “Lender Six Month Roll Over Agreement.”  Brown invested $10,000 on April 13, 2004.  

Brown’s agreement included a “DOUBLE your money APRIL Bonus of $10,000, making a total 

investment of $20,000 if funds are made available on or before April 13, 2004.”  Brown’s agreement 

further provided that Brown would receive 3 payments every 60 days after the funds had been 

invested for six months.  Brown’s agreement further provided that “[e]arly withdrawal on or before 

April 13, 2005 will void this contract and its promotions and any bonus.”   

21. Between October 16, 2003 and April 14, 2004, Chicago D& P raised more than $6.4 

million from more than 200 investors (or groups of investors) from individuals throughout the United 

States.  Morgen, Gibson and other individuals affiliated with Chicago D&P diverted a substantial 



  

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amount of money received by Chicago D&P from investors for personal expenses.  In addition to at 

least $50,000 in cash withdrawals from Chicago D&P’s main bank account, defendants used a debit 

card issued for the account to make payments to clothes stores such as Victoria’s Secret and Macy’s, 

spas and for other personal items.  Defendants also used approximately $230,000 of investor funds 

over the past six months to pay Morgen’s American Express credit card bills.  In addition, defendant 

Gibson used investor funds for such personal expenses as gambling and health club fees. 

22. Chicago D&P’s offering materials and the investor Agreement provided that funds 

invested in Chicago D&P would be used to fund Chicago D&P real estate acquisitions.  The offering 

materials also stated that profits from real estate acquisitions would be used to pay investors a return 

of up to 36% (or more) on their original investment.  

23. Chicago D&P’s offering materials further provided that Chicago D&P would pay an 

additional bonus of 6% “for referring other individuals who are looking for profitable investments.”   

The offering materials state that investors should “consider discussing the opportunity with two 2-3 

(sic) other individuals who are looking for prudent profitable investments.”     

24. The Chicago D&P offering materials represented that payments that investors received 

from Chicago D&P represented profits from Chicago D&P’s real estate acquisition business.  In 

reality, the payments to existing investors primarily came from new investors to the scheme.   

ALLEGATIONS RELATING TO RELIEF DEFENDANTS

25. Since October 2003, Chicago D&P has transferred large sums of investor money to 

Realtopia.  In April 2004, Chicago D&P transferred $200,000 of investor funds to a Morgan Stanley 

account controlled by defendant Morgen.  On May 3, 2004, Chicago D&P transferred $200,000 from 

the Morgan Stanley account and also certain other funds to Realtopia.  Realtopia improperly received 

these transfers of investors’ funds and used the funds to pay a variety of personal expenses.   

FIRST CLAIM FOR RELIEF

(Violations of Section 17(a) of the Securities Act) 

26. The Commission hereby incorporates paragraphs 1 through 25 by reference. 

27. Defendants Chicago D&P, Pat Morgen and Shalom Gibson have, by engaging in the 

conduct set forth above, directly or indirectly, in the offer or sale of securities, by the use of means or 



  

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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 

the statements made, in the light of the circumstances under which they were made, not misleading; 

or (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. 

28. By reason of the foregoing, defendants have directly or indirectly violated Section 

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

17(a) of the Securities Act. 

SECOND CLAIM FOR RELIEF

(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder) 

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

30. Defendants Chicago D&P, Pat Morgen and Shalom Gibson have, by engaging in the 

conduct set forth above, 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; or (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. 

31. By reason of the foregoing, defendants have directly or indirectly violated Section 

10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. §§ 240.10b-5] and unless 

enjoined will continue to violate Section 10(b) of the Exchange Act and Rule 10b-5. 

THIRD CLAIM FOR RELIEF

Violations of Section 5(a) and 5(c) of the Securities Act 

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

33. Defendants Chicago D&P, Pat Morgen and Shalom Gibson have, by engaging in the 

conduct set forth above, directly or indirectly, through use of the means or instruments of 



  

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transportation or communication in interstate commerce or of the mails, offered to sell or sold 

securities or carried or caused such securities to be carried through the mails or in interstate 

commerce, for the purpose of sale or delivery after sale. 

34. No registration statement was filed with the Commission or was in effect with respect 

to the securities offered by defendants prior to the offer or sale of these securities. 

35. By reason of the foregoing, defendants have directly or indirectly violated Sections 

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

enjoined will continue to violate these provisions. 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that the Court: 

I. 

Enjoin defendants Chicago D&P, Morgen and Gibson from, directly or indirectly, engaging in 

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

II 

Enjoin defendants Chicago D&P, Morgen and Gibson from, directly or indirectly, engaging in 

conduct in violation of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)] and 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]. 

III 

Enjoin defendant Chicago D&P, Morgen and Gibson from, directly or indirectly, engaging in 

conduct in violation of Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].   

IV. 

Order defendants Chicago D&P, Morgen and Gibson to disgorge their ill-gotten gains in an 

amount according to proof, plus prejudgment interest thereon. 

V. 

Order relief defendant Realtopia to disgorge its ill-gotten gains in an amount according to 

proof, plus prejudgment interest thereon. 



  

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VI. 

Order defendants Chicago D&P, Morgen and Gibson to pay civil money penalties pursuant to 

Section 20(d)(1) of the Securities Act [15 U.S.C. §77t(d)(1)] and Section 21A of the Exchange Act 

[15 U.S.C. §78u-1]. 

VII. 

Order appointment of a receiver to oversee the operations of Chicago D&P.  

VIII. 

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. 

IX. 

Grant such other and further relief as this Court may deem just, equitable, and necessary. 

Dated:  May 4, 2004 

Respectfully submitted: 

By:  _______________________________  
Helane L. Morrison 
Marc J. Fagel 
Judith L. Anderson 
Tracy L. Davis 
Steven Buchholz 
 

Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION