IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

COMPLAINT

Plaintiff Securities and Exchange Commission alleges as follows:

SUMMARY

1. Defendants Greenline Capital Corporation ("Greenline"), Merrell W. Williams ("Williams") and Timothy C. Olk ("Olk") (collectively, "the defendants"), defrauded elderly investors of $2.1 million through their fraudulent sale of securities.

2. From about April 1998 through about July 2000, the defendants engaged in a fraudulent and unregistered offering of investment interests in a series of Greenline limited partnerships. In selling these interests to investors, the defendants made numerous misrepresentations and omissions of material fact concerning, among other things, the use of investor funds, the potential investment return, liquidity and risks associated with the investment.

3. For example, while promising investors a substantial guaranteed return on their investments, the defendants knew that Greenline was not generating sufficient revenue to pay the promised returns. Additionally, while promising investors that their investment involved no risk, defendant Williams was diverting investor funds for his personal use and benefit, rather than using them in the manner represented to investors.

4. By engaging in the conduct detailed in this Complaint, Defendants Greenline, Williams and Olk, directly or indirectly, singly or in concert, have engaged in, and unless enjoined will again engage in, transactions, acts, practices and courses of business that constitute violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), [15 U.S.C. §§ 77e(a), 77e(c) and 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), [15 U.S.C. § 78j(b)], and Rule 10b-5, [17 C.F.R. § 240.10b-5], promulgated thereunder. Additionally Defendant Olk, who offered and sold the securities described herein while not registered with the Commission as a broker or dealer as required, directly or indirectly, singly or in concert, has engaged in, and unless enjoined will again engage in, transactions, acts, practices and courses of business that constitute violations of Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].

JURISDICTION AND VENUE

5. This Court has jurisdiction over this action, and venue is proper, pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].

6. The Commission brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act, [15 U.S.C. § 77t(b)], and by Section 21(d) of the Exchange Act, [15 U.S.C. § 78u(d)].

7. Defendants, directly or indirectly, have made use of the means and instrumentalities of interstate commerce and the mails, in connection with the acts, practices, and courses of action alleged herein. Certain of the transactions, acts, practices and courses of business alleged herein took place in the Northern District of Texas.

DEFENDANTS

8. Greenline Capital Corporation, a privately owned Texas corporation located in Dallas, is purportedly in the business of acquiring and servicing used car automobile receivables. Greenline is the general partner of all of the Greenline limited partnerships: Greenline Capital 1, Ltd.; Greenline Capital 1A, Ltd.; Greenline Capital 2, Ltd.; and Greenline Capital 3, Ltd. The investors victimized by the misconduct that is the subject of this complaint purchased limited partner interests in Greenline Capital 2, Ltd. and Greenline Capital 3, Ltd. Neither Greenline securities nor any offer or sale of Greenline securities have ever been registered with the Commission or any state.

9. Merrell W. Williams, age 51, of Allen, Texas, is the president, director and sole owner of Greenline. Since 1981, Williams has been licensed to sell insurance in Texas. Although Williams was associated as a registered representative with a registered broker-dealer between August 7, 1995 and April 29, 1996, he was not registered with the Commission in any capacity during the period relevant to this complaint.

10. Timothy C. Olk, age 55, of Granbury, Texas, is a Texas-licensed insurance agent. Olk has never been registered with the Commission in any capacity.

STATEMENT OF FACTS

The Greenline Offering

11. Between April 1998 and July 2000, Greenline, Williams, and Olk raised approximately $2.1 million from 25 investors in Texas and Michigan through sales of limited partnership interests in Greenline Capital 2, Ltd. and Greenline Capital 3, Ltd. (collectively, the "Greenline LPs"). Greenline served as the general partner for each of the partnerships. During the relevant period, the Greenline LPs were purportedly in the business of using investor funds to purchase discounted used car notes, and Greenline purportedly serviced the notes on behalf of the Greenline LPs.

12. Williams and Olk promoted the investments by conducting seminars, meeting with prospective investors, and soliciting investors by telephone. Williams induced his insurance industry colleagues to direct their clients to his seminars. Olk also sold the limited partnership interests to his neighbors, and their families and friends.

13. Most significantly, Williams misappropriated approximately $1.3 million of investor funds. Olk received approximately $150,000 in "referral fees," computed as a percentage of the funds invested in the Greenline LPs, as a result of his sales efforts.

Defendants' Misrepresentations

14. In the course of offering and selling the Greenline limited partnership interests, Greenline, Williams and Olk made materially false and misleading statements and omissions regarding the use of investor proceeds, and the potential return on, and liquidity and risk of, the Greenline investments.

Use of Investor Funds

15. Williams and Olk falsely advised investors, both orally and through Greeline's printed offering materials, that Greenline would use 82% ($1.77 million) of investors' funds to purchase used car notes, and would use the remainder to pay sales commissions, administrative costs and working capital expenses.

16. In fact, only a small percentage of the investors' funds were used to purchase used car notes.

17. Williams misappropriated approximately $1.3 million of investor funds, issuing checks payable to himself and to his car dealerships, Eaglesnest Auto Sales, Inc. ("Eaglesnest") and Auto Acceptance Associates, Inc. ("AAA").

18. Williams concealed the fact of his misappropriation by making certain distributions to the Greenline investors. These distributions were derived from a number of sources, including the investment funds of prior Greenline investors, proceeds from the operation of Williams' car dealerships, and the investors' own invested principal — disguised as profits generated by the Greenline LPs. The investors were led to believe that the source of the distributions was the stream of installment payments yielded by the used car notes Greenline purportedly purchased with investor funds.

Investment Return, Liquidity and Risk

19. The defendants made materially misleading statements to investors concerning the investment return, liquidity and risk of the Greenline investments.

20. The defendants made materially misleading statements to investors, claiming that the investments would yield annual distributions in the following "guaranteed" amounts: 12% in the first year; 14% in the second year; and 16% in each of the third, fourth and fifth years.

21. The defendants falsely advised investor that they would be able to liquidate their Greenline investments at any time within the term of the investment, with 30-day notice.

22. Williams lacked a reasonable basis for these representations at the time he made them, inasmuch as he was simultaneously misappropriating investor funds, and thereby depriving Greenline of the ostensible source of the promised distributions: used car notes. In fact, Williams knew that Greenline lacked sufficient revenue to make legitimate distributions or return investors' funds upon demand.

23. Although Olk may not have been aware of Williams' depredations, Olk made no genuine effort, over the entire course of his solicitations, to determine the true nature or status of Greenline's operations, the source of the monthly distributions, or whether notes had been purchased on behalf of the investors, and if so, whether the notes were properly collateralized. In fact, Olk never bothered to read the offering materials that were provided to investors. Notwithstanding this dereliction, Olk told investors that the monthly distributions, which he quantified, were guaranteed; that the investments were fully collateralized and liquid; and that the investors' principal would be returned in full at the investments' five-year expiration.

24. The defendants made additional materially misleading statements to investors by misrepresenting the risk of the Greenline investment. The defendants falsely advised investors that the investment was a "sure thing" and "fully collateralized" by the underlying used vehicles.

Defendants' Material Omissions

25. The defendants failed to disclose to investors that a substantial percentage of investor funds would not be used by the defendants as promised.

26. The defendants failed to disclose to investors that a substantial percentage of investor funds had been misappropriated by defendant Williams.

27. The defendants failed to disclose to investors that certain distributions that they received were not generated by earnings of the partnership, but were, in fact, derived from the investment funds of prior Greenline investors, proceeds from the operation of Williams' car dealerships, and the investors' own invested principal.

28. The defendants failed to disclose to investors that they had no reasonable basis for making the projected returns on investment that the investors were being promised.

29. The defendants failed to disclose to investors that they were financially incapable of returning investors' principal, as they had represented.

30. The defendants failed to disclose the true risks of the investment to the investors.

FIRST CLAIM
Violations Of Sections 5(a) And 5(c) Of The Securities Act

31. Paragraphs 1 through 30 are hereby realleged and incorporated by reference herein.

32. Greenline, Williams and Olk, directly or indirectly, singly or in concert with others, have been offering to sell, selling and delivering after sale, certain securities and have been, directly and indirectly, (a) making use of the means and instruments of transportation and communication in interstate commerce and of the mails to sell securities, through the use of written contracts, offering documents and otherwise, (b) carrying and causing to be carried through the mails and in interstate commerce by the means and instruments of transportation such securities for the purpose of sale and for delivery after sale, and (c) making use of the means or instruments of transportation and communication in interstate commerce and of the mails to offer to sell such securities.

33. The sale of limited partnership interests was offered and sold to the public through a general solicitation of investors.

34. No registration statements were filed with the Commission or were otherwise in effect with respect to these securities.

35. By reason of the foregoing, Greenline, Williams and Olk have violated and, unless enjoined, will continue to violate Sections 5(a) and (c) of the Securities Act, [15 U.S.C. §§ 77e(a) and (c)].

SECOND CLAIM
Violations of Section 17(a) of the Securities Act

36. Paragraphs 1 through 30 are hereby realleged and incorporated by reference herein.

37. Greenline, Williams and Olk, in connection with the offer and sale of securities, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, directly and indirectly, have employed schemes and artifices to defraud; made untrue statements of material fact and have 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, courses of business which have operated as a fraud and deceit upon purchasers and sellers.

38. As a part of and in furtherance of their scheme to defraud, Greenline, Williams and Olk, directly and indirectly, prepared, disseminated or used contracts, written offering documents, promotional materials, investor and other correspondence and oral presentations which contained untrue statements of material facts and misrepresentations of material facts and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth above.

39. Greenline, Williams and Olk made these misrepresentations and omissions knowingly or with reckless disregard for the truth.

40. By reason of the foregoing, Greenline, Williams and Olk have violated and, unless enjoined, will continue to violate the provisions of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

THIRD CLAIM
Violations of Section 10(b) of the Exchange Act and Rule 10b-5

41. Paragraphs 1 through 30 are hereby realleged and incorporated by reference herein.

42. Greenline, Williams and Olk, in connection with the purchase and sale of securities, by use of the means and instrumentalities of interstate commerce and by use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly employed devices, schemes and artifices to defraud, (b) have made untrue statements of material facts and have omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and engaged in acts, practices and courses of business which have operated as a fraud and deceit upon purchasers, prospective purchasers and other persons.

43. As a part of and in furtherance of their scheme to defraud, Greenline, Williams and Olk, directly and indirectly, prepared, disseminated or used contracts, written offering documents, promotional materials, investor and other correspondence and oral presentations which contained untrue statements of material facts and misrepresentations of material facts and which omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, including, but not limited to, those set forth above.

44. Greenline, Williams and Olk made these misrepresentations and omissions knowingly or with reckless disregard for the truth.

45. By reason of the foregoing, Greenline, Williams and Olk have violated and, unless enjoined, will continue to violate the provisions of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.

FOURTH CLAIM
(As to Defendant Olk)
Violations of Section 15(a)(1) of the Exchange Act

46. Plaintiff Commission repeats and realleges paragraphs 1 through 30 of this Complaint and incorporated herein by reference as if set forth verbatim.

47. At the times alleged in this Complaint, Defendant Olk has been in the business of effecting transactions in securities for the accounts of others.

48. Defendant Olk made use of the mails and of the means and instrumentalities of interstate commerce to effect transactions in and to induce or attempt to induce the purchase of securities.

49. At the times alleged in this Complaint, Defendant Olk was not registered with the Commission as a broker or dealer, as required by section 15(b) of the Exchange Act [15 U.S.C. § 78o(b)].

50. By reason of the foregoing, Defendant Olk has violated and, unless enjoined, will continue to violate section 15(a)(1) of the Exchange Act [15 U.S.C. § 78o(a)(1)].

PRAYER FOR RELIEF

WHEREFORE, Plaintiff respectfully requests that this Court issue Orders:

I.

Permanently enjoining Greenline, Williams, Olk and their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice by personal service or otherwise, from violating, directly or indirectly, Sections 5(a), 5(c) and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a) and(c) and § 77q(a)], and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and of Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.

II.

Permanently enjoining Olk and his officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice by personal service or otherwise, from violating, directly or indirectly, Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].

III.

Requiring all Defendants to disgorge an amount equal to the funds and benefits they obtained illegally as a result of the violations alleged, plus prejudgment interest on that amount.

IV.

Requiring all Defendants to file with the Court and serve upon the Commission, an accounting, under oath, detailing all assets, funds or other property received from investors and the disposition of such assets, funds and property.

V.

Requiring all Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], for the violations alleged herein.

VI.

Ordering such other and further relief as the Court may deem just and proper.

Dated this ______ day of May 2003.

http://www.sec.gov/litigation/complaints/comp18151.htm