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U.S. Securities and Exchange Commission

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16521 / April 18, 2000

Securities and Exchange Commission v. Cornerstone Prodigy Group, Inc., Gary D. Reeder, Sandra Reeder. Case No. 4:99-CV-0978-Y USDC, NDTX (Dallas Division)

On April 14, 2000 Judge Terry R. Means, United States District Judge for the Northern District of Texas, entered a Permanent Injunction against Cornerstone Prodigy Group, Inc. and its principals Gary D. Reeder, a convicted felon, and Sandra Reeder, a licensed securities professional.

The Court's order enjoins Cornerstone and the Reeders, who consented to the issuance of the order, from future violations of the anti-fraud and securities registration provisions of the federal securities laws, specifically, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered the Reeders to disgorge $16.5 million, less the approximately $6 million of investor funds recovered to date, but waived the balance based upon the Reeders' demonstrated financial inability to pay. During the course of the lawsuit, a court-appointed receiver obtained all of the defendants' assets, including the Reeders' home, which had been paid for with investor funds and has, or is in the process of reducing, the assets into monies that will be distributed to the victims of the Reeders' fraud.

The Complaint filed by the U.S. Securities and Exchange Commission alleged that since early 1999, the Reeders fraudulent operation, based in Forth Worth, Texas, raised over $16.5 million from over 600 investors, many of whom are elderly, through internet postings and cold-call sales. The Commission alleged that the defendants promised investors that their business operations would generate 120% annual returns when, in reality, they had no significant business activity. According the Complaint, the Reeders were operating a Ponzi scheme, an investment fraud in which funds of recent investors are used to make payments to earlier investors.

The case was investigated jointly by the Commission, the Texas State Securities Board and the Federal Bureau of Investigation. The Commission wishes to acknowledge the very valuable assistance of both agencies.

http://www.sec.gov/litigation/litreleases/lr16521.htm


Modified:04/20/2000