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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22179 / December 5, 2011

Securities and Exchange Commission v. Integrity Financial AZ, LLC, Steven R. Long, Stanley M. Paulic, Walter W. Knitter, and Robert C. Koeller Civil Action No. 10-CV-782 (SO) (N.D. Ohio filed Apr. 15, 2010)

COURT ORDERS INTEGRITY FINANCIAL FOUNDERS TO PAY $4.2 MILLION FOR OFFERING FRAUD CONNECTED TO ARIZONA REAL ESTATE

The U.S. Securities and Exchange Commission (Commission) today announced that, on November 23, 2011, the U.S. District Court for the Northern District of Ohio entered final judgments against Steven R. Long and Stanley M. Paulic in a Commission injunctive action, United States Securities and Exchange Commission v. Integrity Financial AZ, LLC, Steven R. Long, Stanley M. Paulic, Walter W. Knitter, and Robert C. Koeller, Civil Action No. 10-CV-782 (SO) (N.D. Ohio filed Apr. 15, 2010). The Commission’s complaint alleges that Long and Paulic founded Integrity Financial AZ, LLC (IFAZ) and, with assistance from Walter W. Knitter and Robert C. Koeller, used the company to raise more than $8 million in a fraudulent unregistered offering of promissory notes purportedly secured by real estate in Arizona.

The final judgments were entered after the district court granted the Commission’s motion for summary judgment against Long and Paulic. The order granting summary judgment found that Long “knowingly made misrepresentations or omissions of material fact regarding the offer and sale of securities, while utilizing investors’ money for his own gain” and that “Paulic misrepresented material facts in connection with the offer and sale of securities” and “acted recklessly in conjunction with his activities and responsibilities as CEO and co-owner of IFAZ.”

The final judgments against Long and Paulic permanently enjoin each of them from further violations of Sections 5 and 17(a) of the Securities Act of 1933 (Securities Act), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rule 10b‑5. The final judgment against Long also finds him liable for disgorgement in the amount of $1,481,736, plus prejudgment interest thereon in the amount of $97,723.32, and a civil penalty in the amount of $1,465,306. The final judgment against Paulic also finds him liable for disgorgement in the amount of $586,225, plus prejudgment interest thereon in the amount of $38,662.65, and a civil penalty in the amount of $586,225.

The Commission also announced today, that on October 7, 2011, the district court entered a default judgment against IFAZ permanently enjoining it from violations of Sections 5 and 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act, and Exchange Act Rule 10b‑5, and finding it liable for disgorgement in the amount of $5,598,717, plus prejudgment interest thereon in the amount of $429,403.44, and a civil penalty in the amount of $650,000.

Knitter settled with the Commission previously. The remaining defendant, Koeller, reached a partial settlement with the Commission on September 28, 2011.

See also: Litigation Release Nos. 21488 (April 15, 2010), and 21742 (November 15, 2010).

 

http://www.sec.gov/litigation/litreleases/2011/lr22179.htm


Modified: 12/05/2011