UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 37167 / May 3, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8997 ------------------------------ : ORDER INSTITUTING PUBLIC In the Matter of : ADMINISTRATIVE PROCEEDINGS : PURSUANT TO SECTIONS 15(b) LAWRENCE R. HARTZ; : AND 19(h) OF THE SECURITIES and STEPHEN S. KNEPP : EXCHANGE ACT OF 1934, : MAKING FINDINGS AND : IMPOSING REMEDIAL SANCTIONS : ------------------------------- I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute public administrative proceedings pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act") against Respondents Lawrence R. Hartz ("Hartz") and Stephen S. Knepp ("Knepp"). II. In anticipation of the institution of these proceedings, Respondents Hartz and Knepp have submitted Offers of Settlement ("Offers") to the Commission, which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over the Respondents and over the subject matter of this proceeding and with respect to Respondent Hartz as to Section III.1. and III.4., and with respect to Respondent Knepp as to Section III.2. and III. 3., which are admitted, Respondents Hartz and Knepp by their Offers consent to the entry of findings and remedial sanctions set forth below. Accordingly, IT IS ORDERED that proceedings pursuant to Sections 15(b) and 19(h) of the Exchange Act be, and they hereby are, instituted. III. On the basis of this Order and the Offers submitted by Respondents Hartz and Knepp, the Commission finds -[1]- that: 1. During the period from in or about January 1993 until July 1993, Respondent Hartz was associated as a Regional Vice- President and sales agent with Premier Financial Services, Inc. ("Premier Financial"), an unregistered broker-dealer during all relevant periods. 2. During the period from in or about January 1993 until July 1993, Respondent Knepp was associated as an Area Vice- President and sales agent with Premier Financial, an unregistered broker-dealer during all relevant periods. 3. During the period from in or about November 1991 until May 1993, Respondent Knepp was associated as a registered representative with Chubb Securities Corporation, a broker-dealer registered with the Commission during all relevant periods. 4. On October 17, 1995, a final judgment of permanent injunction by consent was entered against Respondent Hartz in the United States District Court for the Middle District of Florida, permanently enjoining Respondent Hartz from further violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. Securities and Exchange Commission v. Jon D. Aldrich, et al., USDC, M.D. Fla., Civil Action No. 94- 1737-CIV-T-17A. 5. The Commission's complaint, filed in the matter described in Section III.4, above, alleges, among other things, that while Respondent Hartz was associated with Premier Financial, an unregistered broker-dealer, during a period from at least January 1993 and continuing through at least July 1993, Hartz offered and sold to the public certain securities, namely "Capital Note Certificates" (the "Certificates"), issued by Premier Benefit Capital Trust ("Premier Trust"), when no registration statement was filed or in effect as to said securities pursuant to the Securities Act. The complaint further alleges that from at least January 1993 and continuing through at least July 1993, Respondent Hartz, while actively offering and ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Respondents Hartz's and Knepp's Offers of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. ==========================================START OF PAGE 2====== selling to investors and prospective investors the Certificates issued by Premier Trust, distributed various offering materials to investors and prospective investors which misrepresented and omitted material facts regarding Premier Trust, its operations, its officers and trustees, the risks involved in the investment, and the use of investors' funds obtained from the sale of the Certificates. 6. During the period from at least March 1993 and continuing through at least June 1993, Respondent Knepp willfully violated Sections 5(a) and 5(c) of the Securities Act, in that he, directly and indirectly, made use of the means and instruments of transportation and communication in interstate commerce and of the mails, to offer to sell and to sell to members of the public certain securities, namely the Certificates issued by Premier Trust, when no registration statement was filed or in effect as to said securities pursuant to the Securities Act. 7. During the period from at least March 1993 and continuing through at least June 1993, Respondent Knepp willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that, in connection with the purchase and sale of certain securities, namely the Certificates issued by Premier Trust, by use of the means and instrumentalities of interstate commerce and by use of the mails, Respondent Knepp, directly or indirectly, employed devices, schemes, and artifices to defraud; made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in acts, practices and a course of business which would and did operate as a fraud and deceit. As part of the aforesaid conduct, Respondent Knepp distributed various offering brochures, advertisements and other offering materials, and made verbal statements to investors and prospective investors that misrepresented and omitted material facts regarding Premier Trust, its operations, its officers and trustees, the risks involved in the investment, and the use of investors' funds obtained from the sale of the Certificates. 8. During the period from at least March 1993 and continuing through at least June 1993, Respondent Knepp willfully violated Section 17(a)(1) of the Securities Act, in that, in the offer and sale of certain securities, namely the Certificates issued by Premier Trust, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, Respondent Knepp, directly and indirectly, employed devices, schemes and artifices to defraud. As part of the aforesaid conduct, Respondent Knepp engaged in acts and practices described in Section III.7., above. 9. During the period from at least March 1993 and ==========================================START OF PAGE 3====== continuing through at least June 1993, Respondent Knepp willfully violated Sections 17(a)(2) and 17(a)(3) of the Securities Act, in that, in the offer and sale of certain securities, namely the Certificates issued by Premier Trust, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, Respondent Knepp, directly and indirectly, obtained money or property by means of untrue statements of material facts and omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in transactions, practices and a course of business which would and did operate as a fraud and deceit upon the purchasers and prospective purchasers of such securities. As part of the aforesaid conduct, Respondent Knepp engaged in acts and practices described in Section III.7., above. IV. Based on the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified by Respondents Hartz and Knepp in their Offers. Accordingly, IT IS ORDERED THAT: 1. Respondent Hartz be, and he hereby is, barred from association with any broker, dealer, municipal securities dealer, investment company or investment adviser provided, however, that after a period of three (3) years subsequent to the entry of this Order he has a right to apply to the appropriate self-regulatory organization or, where there is none, to the Commission for permission to become so associated. 2. Respondent Knepp be, and he hereby is, barred from association with any, broker, dealer, municipal securities dealer, investment company or investment adviser. By the Commission. Jonathan G. Katz Secretary ==========================================START OF PAGE 4======