 UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 17322 / January 16, 2002
SECURITIES
AND EXCHANGE COMMISSION v. LEWIS J. MCCONNELL,
JR., NED L. HUGGINS, AND GREGORY T. WOOD, United
States District Court for the District of Columbia,
Civil Action No. 02 0075 RCL
On
January 16, 2002, the Securities and Exchange
Commission filed a securities fraud case in the
United States District Court for the District
of Columbia alleging that Lewis J. McConnell,
Jr., Ned L. Huggins, and Gregory T. Wood engaged
in the fraudulent offering of unregistered "prime
bank note" securities.
The
Commission's complaint alleges that the defendants
raised over $7 million from at least 21 investors
by promoting their "Secure Private Placement
Program," which purportedly generated risk-free
returns of 20-25% per week. In material distributed
to investors, the Secure Private Placement Program
was described as a joint venture between the investor
and Gold Stream Holdings, Inc., in which the investor
would participate in a program of trading certain
"highly rated financial instruments."
However, according to the complaint, the Secure
Private Placement Program was merely a ploy by
McConnell to obtain financing for Gold Stream
Holdings, which was a company through which he
was conducting or trying to conduct his entertainment
business. The complaint further alleges that McConnell
hired Huggins and Wood to distribute certain materials
to the investors, and that these materials contained
numerous material misrepresentations and omissions
concerning, among other things, the existence
of such "highly rated financial instruments,"
Gold Stream Holdings' ability to participate in
such a trading program, and the intended use of
the investors' funds.
The
Commission's complaint charges all of the defendants
with violations of the registration and antifraud
provisions of the securities laws [Sections 5(a),
5(c), and 17(a) of the Securities Act of 1933
("Securities Act"), and Section 10(b)
of the Securities Exchange Act of 1934 (the "Exchange
Act"), and Rule 10b-5 thereunder]. The Commission's
complaint seeks judgments permanently enjoining
the defendants from future violations of the registration
and antifraud provisions and ordering them to
pay civil monetary penalties.
Without
admitting or denying the allegations in the complaint,
Huggins and Wood consented to the entry of a final
judgment permanently enjoining each of them from
violating Sections 5(a), 5(c), and 17(a) of the
Securities Act, Section 10(b) of the Exchange
Act, and Rule 10b-5 thereunder, and waiving payment
of civil monetary penalties based on their inability
to pay. The charges against McConnell are pending.
All funds obtained by the defendants as a result
of their illegal scheme have been returned to
investors.
*
* * *
This
case is part of the SEC's continuing effort to
combat prime bank fraud and to alert the public
to the risks posed by these phony instruments.
The risks of this type of fraud and warnings about
how to avoid it are spelled out in the Interagency
Advisory: Warning Concerning "Prime Bank"
Notes, Guarantees, and Letters of Credit and Similar
Financial Instruments (October 21, 1993), and
other information which is available through the
SEC's Homepage at http://www.sec.gov/divisions/enforce/primebank.shtml.
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