 UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 17181 / October 11, 2001
UNITED
STATES v. FRANK L. PEITZ, DANIEL B. BENSON, PETER
A. LOUTOS, SR., ROBERT D. PALADINO, RANDALL W.
LAW, and MONICA M. ILES, Criminal Action No. 01CR0852
(N.D. Ill., Eastern Division)
On
October 9, 2001, a grand jury in the U.S. District
Court for the Northern District of Illinois (Eastern
Division) returned an indictment against Frank
L. Peitz, Daniel B. Benson, Peter A. Loutos, Sr.,
Robert D. Paladino, Randall W. Law and Monica
M. Iles. The indictment arises from the offer
and sale of a fraudulent prime bank trading program
through Lennox Investment Group, Ltd., an entity
owned and controlled by Law, and the subsequent
misappropriation of funds collected from investors.
The indictment charges each defendant with eight
counts of wire fraud and further charges Peitz,
Benson, Loutos and Paladino with seven counts
each of money laundering and one count each of
conspiracy to commit money laundering.
The
indictment charges that the defendants raised
over $11 million from at least 30 investors through
the offer and sale of a purported "Small
Investment High-Yield Program." The defendants
obtained investor funds through material misstatements
and omissions, including the following: (1) investor
funds would be used in the international trading
of bank instruments; (2) investor funds would
be held in an escrow account or that collateral
of equal value would insure the safety of investor
funds; (3) investor principal was guaranteed;
(4) investors would receive returns of 122 per
cent per week for forty weeks during the one year
term of their investment; and (5) the trading
program was regulated and approved by governmental
entities such as the Federal Reserve or by the
International Monetary Fund. In fact, the indictment
charges, the purported trading program did not
exist and investor funds were not used to trade
banking instruments. Rather, the defendants systematically
disbursed investor funds for the benefit of themselves
and their designees.
The
indictment is based on the same conduct alleged
in a civil action brought by the Commission's
Fort Worth District Office in June 1998. [SEC
v. Lennox Investment Group, Ltd., et al., USDC/ND/TX
[Fort Worth Division], Civil Action No. 498-CV-536-Y].
The Commission's complaint, filed June 22, 1998,
alleged that Peitz, Benson, Law, and Iles, among
others, violated the antifraud and securities
registration provisions of the federal securities
laws by engaging in the scheme described in the
October 9, 2001 indictment. Specifically, the
Commission complaint charged these defendants
with violations of Section 5(a), 5(c) and 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's complaint named
Paladino, among others, as a relief defendant,
alleging that he was unjustly enriched through
the receipt of funds and assets derived from investors.
[Lit. Rel. 15789, June 24, 1998.]
The
Commission has obtained Final Judgments against
all defendants and relief defendants named in
its civil action. However, a receiver appointed
by the Court is continuing his efforts to marshal
and conserve funds and assets on behalf of defrauded
investors.
For
more information on prime bank fraud, investors
are advised to access the Commission's "Prime
Bank" Investor Alert that provides tips on
how to avoid being a victim of these scams. The
investor alert can be found on the Commission's
web site, at http://www.sec.gov/divisions/enforce/primebank.shtml.
from:
http://www.sec.gov/litigation/litreleases/lr17181.htm
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