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UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Litigation Release No. 14701 / October 26, 1995 U.S.A. v. John
Lauer, N.D. Ill., No. 94 CR 614, filed October
17, 1995)
The Commission
and the U.S. Attorney's Office for the Northern
District of Illinois announced that on October
17, 1995, a criminal Information was filed in
the United States District Court for the Northern
District of Illinois charging John Lauer (Lauer)
with obstructing a Commission investigation regarding
the purported trading of "Prime Bank Instruments"
by Konex Holding Corp. In addition, the Information
charges Lauer with mail and wire fraud for his
participation in multiple frauds against the Chicago
Housing Authority (CHA), including his investment
of $12.5 million of CHA funds in a purported "Prime
Bank Instrument" trading program called the
Konex Roll Program (Roll Program). The charges
relating to the Roll Program arise from the same
facts alleged in a Commission action against Lauer
and others in June 1994 for violations of Section
17(a) of the Securities Act of 1933 and Section
10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder.
The Commission
filed its Complaint against Lauer, Joseph Polichemi
(Polichemi), Lyle Neal (Neal), and their respective
companies, Clifton Capital Investors L.P. (CCI),
Copol Investments Limited (Copol) and Konex Holding
Corp. (Konex) on June 21, 1995 in the United States
District Court for the Northern District of Illinois.
The Commission's Complaint alleged that from January
1993 to the present, Konex, Neal's company, raised
at least $12.5 million from the CHA through the
offer and sale of investments in the Roll Program.
In fact, the purported Roll Program, which was
designed to pool investor funds to purchase and
trade in "Prime Bank Instruments," was
nothing more than a scam to defraud investors.
Thus, the Complaint alleged that Polichemi and
Neal, through their respective companies, Copol
and Konex, made false and misleading statements
regarding the use of CHA proceeds and the risks
and returns associated with the investment.
The Complaint
further alleged that Lauer, CHA's Director of
Risk Management and Benefits, among other things,
failed to disclose to the CHA the role of his
private company, CCI, in the administration of
CHA's investment, his receipt of "compensation"
in an amount exceeding $4 million and his resulting
conflict of interest. Moreover, the Complaint
alleged that Lauer made false and misleading statements
to prospective investors concerning the rate of
return CHA earned and the circumstances under
which the CHA invested in the Roll Program.
2- On
June 21, 1994, the Honorable Wayne Andersen entered
an order temporarily restraining and enjoining
the defendants from future violations of the antifraud
provisions of the federal securities laws and,
among other things, froze their assets. On July
29, 1994, the Court entered an Order of Permanent
Injunction and Other Equitable Relief by Default
against Polichemi, Neal, Copol and Konex. On August
25, 1994, the Court entered an Order of Preliminary
Injunction and Other Relief against Lauer and
CCI.
The action remains pending as to Lauer and CCI.
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