UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 50359 / September 14, 2004
FILE NO. 3-11647
IN THE MATTER OF MICHAEL I. NNEBE, NELSON C. WALKER, AND HILDRETH J. FLEMING, JR.
The Securities and Exchange Commission issued an Order Instituting Public Administrative Proceedings and Notice of Hearing Pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") against Michael I. Nnebe ("Nnebe"), Nelson C. Walker ("Walker"), and Hildreth J. Fleming, Jr. ("Fleming") (collectively, the "Respondents"). In the Order, the Division of Enforcement alleges that the Respondents have been enjoined from future violations of the antifraud and registration provisions of the securities laws as a result of their involvement in a fraudulent offering of securities by Fargo Holdings, Inc. ("Fargo").
The Commission instituted this administrative proceeding after, on March 15, 2004, a district court in the Southern District of New York found the Respondents liable for their role in the fraudulent Fargo offering and granted the Commission's motion for a default judgment, concluding that Respondents violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and that Walker and Fleming violated Section 15(a) of the Exchange Act. ("Injunctive Action"). As a result of its findings, the Court, inter alia, permanently enjoined the Respondents from future violations of the antifraud and registration provisions of the securities laws, enjoined the Respondents from participating in any offering of penny stock, and ordered the following monetary relief: Nnebe was ordered to disgorge $2,407,966 and pay a civil penalty in the amount of $220,000; Walker was ordered to disgorge $241,659.81 and pay a civil penalty in the amount of $110,000; and Fleming was ordered to disgorge $18,948.26 and pay a civil penalty in the amount of $75,000. SEC v. Nnebe, et al., 01 Civ. 5247 (S.D.N.Y.) (KMW).
The judgment in the Injunctive Action found that from at least July 1997 through at least November 1999, Respondents induced the investing public to buy shares of stock issued by Fargo, a non-operating Delaware corporation that purported to be a day-trading firm and/or a manufacturer of blue jeans, in an unregistered and non-exempt offering. Specifically, the judgment in the Injunctive Action held that: (a) Respondents solicited investors through a series of false or misleading statements including, inter alia, that Fargo would be imminently conducting an IPO and investors could resell their private placement shares at a substantial profit; (b) Nnebe prepared false and misleading written offering memoranda about Fargo's business and the use of Fargo's offering proceeds; (c) Respondents distributed the offering memoranda to investors even though Respondents knew or were reckless in not knowing that the materials contained material misstatements and omissions; and (d) Walker and Fleming were not registered as, or affiliated with, a broker-dealer at the time they sold shares of Fargo.
A hearing will be scheduled before an administrative law judge to determine whether the allegations in the Order are true, to provide Respondents an opportunity to dispute the allegations, and to determine what, if any, remedial sanctions against the Respondents are appropriate in the public interest pursuant to Section 15(b) of the Exchange Act. The Commission also directed that an administrative law judge shall issue an initial decision in this matter within 210 days from the date of service of the Order Instituting Proceedings.
See also the Order in this matter