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SEC v. CDH & Affiliates, Inc.

U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 17386 / February 27, 2002 SEC v. CDH & Affiliates, Inc. and C. David Hallman, Civil Action Number 3:02-CV-017-JTC (N.D. Ga.) SEC CHARGES CDH & AFFILIATES, INC. AND C. DAVID HALLMAN OF FAYETTEVILLE, GEORGIA WITH FRAUD

The Securities and Exchange Commission announced that it filed a civil injunctive action on February 25, 2002, in United States District Court for the Northern District of Georgia, against C. David Hallman and CDH & Affiliates, Inc., both of Fayetteville, Georgia.

The Commission's complaint alleges that from September 1997 through at least June 1999, Hallman and CDH, a corporation that Hallman controlled, fraudulently raised more than $2.2 million in fees from at least 27 customers, purportedly to prepare corporate bond offerings and sell the bonds for its customers. According to the complaint, Hallman and CDH misappropriated the funds for their own purposes. The complaint also alleges that in an effort to avoid detection of their scheme, Hallman and CDH continued, until at least July 2001 to tell their customers that the customers' bond issues would be funded, and made other misrepresentations to encourage the customers to believe that funding was imminent.

According to the complaint, Hallman made numerous misrepresentations to CDH's customers, including false claims that some companies' bonds had been successfully sold, that bond sales were imminent and that the proceeds of the bond sales would be invested in a high-yield investment program that would pay 30%-40% every ten days. The complaint alleges that CDH never sold bonds for any customer and that no such high-yield investment program exists. The complaint also alleges that Hallman and CDH operated as unregistered brokers while selling this investment scheme to CDH's customers.

The SEC's complaint charges Hallman and CDH with violations of Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, accountings, disgorgement of ill-gotten gains, and civil penalties against both Hallman and CDH.