 UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 16940 / March 22, 2001
SECURITIES
AND EXCHANGE COMMISSION v. EARL A. ABBOTT, RICHARD
L. STALVEY, GLENN PURDUE, ROBERT E. GERWIN, KENNETH
C. NUNN AND THOMAS J. O'KEEFFE (United States
District Court for the Middle District of Florida,
C.A. No. 6:01cvORL31KRS)
The
Commission announced today the filing of a civil
fraud action in the United States District Court
for the Middle District of Florida against five
men for the fraudulent sale of over $3.5 million
in non-existent prime bank securities. According
to the complaint, Earl A. Abbott ("Abbott"),
a Titusville, Florida businessman and three of
his sales agents, Richard L. Stalvey ("Stalvey"),
an Albany, Georgia accountant, Glenn Purdue, of
Indianapolis, Indiana and Robert E. Gerwin, of
Cincinnati, Ohio, sold $3.55 million of non-existent
prime bank securities which were purportedly supplied
by defendant Kenneth C. Nunn ("Nunn"),
a resident of England. The Commission alleges
that the defendants violated the securities registration,
antifraud and broker-dealer registration provisions
of the federal securities laws in connection with
their offer and sale of these securities. Thomas
J. O'Keeffe ("O'Keeffe"), of Ireland,
is alleged to have received over $1 million of
these funds, supposedly to trade the securities.
O'Keeffe is named as a relief defendant.
The
Commission's complaint alleges that the defendants
engaged in the fraudulent offer and sale of unregistered
securities in the form of interests in a non-existent
"trading program." The complaint further
alleges that the defendants claimed that they
would use investor funds to buy and sell "medium
term debentures" issued by some of the world's
"top 25 banks," with the trading to
be conducted by an unidentified "trading
group" in a secret location somewhere in
Europe. According to the complaint, the defendants
promised investors extraordinarily high returns
(between 80% and 160%) with no risk. The Commission
alleges that the defendants' representations were
false: There were no bank debentures and no trading
took place. According to the Commission, as a
result of the defendants' actions, U.S. investors
lost approximately $3.1 million. It is alleged
that the defendants' "trading program"
has all the hallmarks of a "prime bank"
scheme, a type of investment fraud involving fictitious
instruments supposedly issued by leading world
banks.
The
complaint alleges that the defendants raised over
$3.5 million from twelve investors in five different
states between May and October 1998. Approximately
$3.3 million of those investor funds, according
to the Commission's complaint, were wired to an
off-shore account on Guernsey in the Channel Islands
controlled by defendant Nunn. The Commission contends
that Nunn transferred approximately $1 million
to relief defendant O'Keeffe who, Nunn claimed,
would conduct the "trading."
The
Commission's Complaint alleges that in connection
with this scheme, the defendants engaged in transactions,
acts, practices and courses of business which
constitute violations of Section 17(a) of the
Securities Act of 1933 ("Securities Act"),
Section 10(b) of the Securities Exchange Act of
1934 ("Exchange Act") and Rule 10b-5
thereunder, Section 5(a) and 5(c) of the Securities
Act, and Section 15(a) of the Exchange Act.
The
Commission seeks a permanent injunction prohibiting
the defendants from violating the securities registration,
antifraud and broker-dealer registration provisions
of the Securities Act and the Exchange Act. In
addition, the Commission seeks disgorgement of
ill-gotten gains from Abbott, Stalvey and Nunn,
and the imposition of civil monetary penalties
against all the primary defendants pursuant to
Section 20(d) of the Securities Act and Section
21(d)(3) of the Exchange Act .
Defendant
Stalvey has agreed, without admitting or denying
the Commission's allegations, to settle the action
by agreeing to the entry of an injunction against
him and a disgorgement order requiring him to
disgorge $50,000 of ill-gotten gains. Based on
his demonstrated inability to pay disgorgement,
the settlement agreement waives disgorgement and
does not assess a civil monetary penalty.
In
an earlier related action, the Commission filed
a complaint in the United States District Court
for the District of Massachusetts against Richard
J. Briden ("Briden"), an Ashland, Massachusetts
business consultant, alleging violations of the
securities registration, antifraud and broker-dealer
registration provisions of the federal securities
laws in connection with his offer and sale of
fraudulent prime bank securities. That complaint
alleged that Briden convinced seven investors,
three of whom were from Massachusetts, to invest
$295,000 in a prime bank program. The Florida
complaint alleges that Briden found the Abbott/Nunn
program through defendant Gerwin.
For
further information on the Briden action,
see Litigation Release No. 16134.
from:
http://www.sec.gov/litigation/litreleases/lr16940.htm
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