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SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C.
Litigation Release No. 16034 / January 21, 1999
SECURITIES AND EXCHANGE COMMISSION v. DONALD WALLACE, et al.,
Case No.
1:99CV00120 (RWR) (D.D.C., filed Jan. 14, 1999).
SEC FILES CIVIL INJUNCTIVE ACTION IN PRIME BANK FRAUD
The Securities and Exchange Commission announced today
that
it filed a Complaint in the United States District
Court for the District of
Columbia against Donald Wallace,
The Investment Group, Linda Schroeder,
John McNulty, Berach
International, Ltd. and Gary Tedford
for the fraudulent
offer and sale of non-existent, prime
bank securities.
The
Complaint
alleges that Schroeder and McNulty were principals
of
The Investment Group and that Tedford was a principal
of
Berach.
The Complaint alleges that Wallace was responsible
for
arranging the purported prime bank trades.
The Complaint alleges that in April 1995, The
Investment
Group obtained $100,000 from an investor under
the pretense that his money
would be invested in a prime
bank program with a guaranteed return
of 15% per week.
The
Complaint
also alleges that The Investment Group wired the
investor’s $100,000 to a bank
account, designated by
Tedford, pursuant to a contract between
The Investment Group
and Berach.
According to the Complaint, that contract,
pursuant
to which Berach was to invest the $100,000 in
prime
bank
securities, guaranteed The Investment Group a
return of
2,000%
per month.
The Complaint alleges that
Berach sent
the $100,000 to Wallace. The Complaint further alleges that
in
the spring of 1995, Wallace held himself out as
an
investment adviser on prime
bank programs, promising
extraordinary returns on investments
with essentially no
risk.
The Complaint alleges that by their conduct, the
defendants
violated 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.
The Complaint also alleges that Wallace failed
to
register as an investment adviser and thereby
violated
Section
203(a) of the Investment Advisers Act of 1940. The
Complaint seeks a permanent injunction
barring the
defendants from future violations
of the antifraud
provisions of the federal securities
laws and barring
Wallace from future violations of
the investment adviser
registration provisions of the federal
securities laws, an
accounting, disgorgement and the
imposition of civil
monetary penalties.
Simultaneously with the filing of the Complaint, and
without
admitting or denying the Commission’s allegations,
The
Investment Group, Schroeder and McNulty consented
to the
entry
of a final judgment permanently enjoining them
from
future violations of Section
17(a) of the Securities Act,
Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder.
The final judgment will require McNulty
to pay disgorgement
of $8,000, plus prejudgment interest
of $2,245, and a civil
penalty of $9,755.
With respect to Schroeder and The
Investment
Group, the Commission waived the payment of
disgorgement and did not seek
the imposition of civil
monetary penalties against them based
on their demonstrated
financial inability to pay.
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