U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16293 / September 27, 1999
SECURITIES AND EXCHANGE COMMISSION v. MICHAEL CARNICLE, MICHAEL HANSEN, WILLIAM STRAUGHAN, RANDY GLAD, LIONEL REIFLER, HOWARD RAY AND ARIE FROM, No. 1:95-CV-110C (D. Utah)
The Securities and Exchange Commission ("Commission") announced that on September 20, 1999, the Honorable Tena Campbell of the United States District Court for the District of Utah issued an Order granting the Commission summary judgment against Defendant Michael Carnicle ("Carnicle") on all issues, and assessing civil penalties against Defendants Howard Ray ("Ray") and Randy Glad ("Glad"). The Court found undisputed the Commission's evidence that Carnicle secretly established and controlled two Los Angeles based mutual funds, Public Funding Portfolios, Inc. ("PFP") and American Vision Funds ("AVF"), and that he knowingly made misrepresentations and omissions of material fact, including failing to disclose his control of the Funds in the Funds' registration statements, falsely representing that particular entities and individuals were acting as the Funds' general counsel, administrator and custodian, and falsely representing that only 10% of the funds' monies would be invested in "illiquid" securities and that "exchange" transactions would only be conducted under limited circumstances.
The Court found that Carnicle violated the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 34(b) of the Investment Company Act of 1940 by making the above misrepresentations. The Court further found that Carnicle violated Section 7(f) of the Exchange Act by overvaluing the Funds' shares (at $44 million for PFP and $120 million for AVF) in order to obtain margin credit, violated Section 17(a)(1) of the Investment Company Act by engaging in self-dealing, violated Section 17(e)(1) of the Investment Company Act by receiving improper compensation in the form of Funds' shares in exchange for arranging the Funds' stock purchases, and violated Section 37 of the Investment Company Act by converting to his own use monies purportedly paid to an attorney for legal services.
The Court found that the Commission has demonstrated that it is entitled to all of the relief it sought against Carnicle: a permanent injunction, full disgorgement of the $444,323 Carnicle received in margin loans plus prejudgment interest, and the maximum third-tier penalty equal to Carnicle's pecuniary gain of $444,323. Similarly, the Court found that the Commission was entitled to the second-tier penalties of $20,000 each that it sought against Glad and Ray, who had previously been enjoined by default.
Although this concludes the litigation of this action, Carnicle remains a defendant in Securities and Exchange Commission v. Autocorp Equities, Inc. fka Chariot Entertainment, et al., 98CV 05625 (D. Utah). See Litigation Release 15838 (August 11, 1998).
See Litigation Releases 15209 (January 8, 1997), 15173 (December 3, 1996), 15051 (September 17, 1996), 14935 (June 6, 1996), and 14669 (October 2, 1995) for further information.