United States Securities and Exchange Commission
LITIGATION RELEASE NO. 16579 / June 1, 2000
S.E.C. v. Skyline Group, Inc, Robert L. Sheets, and Mary A. West (D. Minnesota, Case No. 1355JMR-FLN)
The Securities and Exchange Commission ("the Commission") announced that on June 1, 2000, it filed a complaint in the U.S. District Court for the District of Minnesota against Skyline Group, Inc. ("Skyline"), a Minnesota corporation, its President, Robert L. Sheets ("Sheets") of North Oaks, Minnesota, and its C.F.O. Mary A. West ("West"), Sheets' spouse, also of North Oaks, Minnesota (collectively "the Defendants"). The case involves the alleged misappropriation of $1.36 million dollars by the Defendants from the proceeds of a promissory note offering by Skyline.
As alleged in the Complaint, Skyline issued the notes purportedly to finance a Native American tribe's request to the Department of Interior for return of land in the Chicago area for the possible development of a casino. In return, Skyline claimed it would be entitled to profits generated by any casino built on the land. The terms of the offering provided that substantially all the proceeds would be expended on casino development, land reclamation, and working capital. Over a four-year period from August 1995 to at least November 1999, Skyline, through Sheets and West, raised over 3 million dollars by selling unregistered promissory notes to the investing public. Instead of using all of the offering proceeds to finance the tribe's application, the Complaint alleges that Sheets and West diverted 1.36 million dollars of the 3 million dollars raised to cover their own personal debts and expenses, including, among other things, mortgage payments for their home.
The Commission charges that the Defendants' conduct violated the antifraud and securities registration requirements of the federal securities laws, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The Commission seeks an order of permanent injunction against each defendant, disgorgement of their ill-gotten gains, and the imposition of civil penalties. However, while the Commission alleges that the Defendants' engaged in a fraudulent, unregistered offering, the Commission does not allege that the Native American tribe engaged in any wrongdoing or that there was any wrongdoing associated with the tribe's application to the Department of Interior.