U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21757 / November 24, 2010
SEC v. One Equity Corp., et al., Civil Action No. 2:08-cv-667 (S.D. Ohio)
SEC Obtains Final Judgments Against Michael S. Spillan and Melissa K. Spillan for Running a Fraudulent Stock-Based Loan Operation
The Securities and Exchange Commission (“Commission”) announced that on November 3, 2010, the Honorable Edmund A. Sargus, Jr. of the United States District Court for the Southern District of Ohio entered a final judgment against Michael S. Spillan and his wife, Melissa K. Spillan, (collectively, “the Spillans”) in connection with their operation of a fraudulent stock-based loan enterprise. The final judgment permanently enjoins the Spillans from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and orders the Spillans to pay disgorgement of $1,816,265 and prejudgment interest in the amount of $515,389, for a total of $2,331,654, for which amount each defendant is jointly and severally liable with the other. Judge Sargus also imposed civil penalties of $908,132 upon each defendant.
The Spillans are former principals of One Equity Corporation, Triangle Equities Group, Inc., Victory Management Group, Inc. and Dafcan Finance, Inc. (“the One Equity Companies”). The Commission's complaint, filed on July 10, 2008, alleged that, beginning in at least 2004, the Spillans and the One Equity Companies raised approximately $70 million from 125 borrowers by holding themselves out as stock-based lenders, underwriters, or administrators. According to the complaint, the defendants raised the money by inducing borrowers to transfer ownership of millions of shares of publicly traded stock to them as collateral for purported non-recourse loans based on a false promise to return the shares to borrowers who repaid their loans. In fact, the defendants generally sold all of the stock received from borrowers before funding each loan. After funding each loan, the Spillans did not set aside any cash reserves to repurchase and return shares to borrowers who repaid their loans. Instead, they used all of the money to pay expenses, including over $1 million in salaries and benefits to themselves.
For more information, see Litigation Release Nos. 21385 (January 20, 2010), 21234 (October 1, 2009), 20716A (September 15, 2008), 20643 (July 14, 2008), and 20652 (July 22, 2008).