SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16751 \ October 4, 2000
SEC v. William F. Mahon and Dean J. Jupiter, Civil Action No. S-00-2918
The Securities and Exchange Commission announced today that on September 28, 2000, it filed a complaint against William F. Mahon, a resident of Timonium, Maryland and Dean J. Jupiter, a resident of Coral Springs, Florida, alleging that Mahon violated the antifraud and certain record-keeping provisions and Jupiter violated the antifraud provisions of the federal securities laws. The Commission also announced that on September 29, 2000, pursuant to Mahon's consent, the Honorable Frederic N. Smalkin, United States District Judge for the District of Maryland, Northern Division, permanently enjoined Mahon and ordered him to pay disgorgement of $190,000 as well as prejudgment interest. The Court reserved ruling on the appropriate rate of interest to be used to calculate prejudgment interest and the amount of civil penalties, if any, Mahon will be ordered to pay. The lawsuit against Jupiter is pending.
According to the complaint, from at least 1992 through April 1997, Mahon, a portfolio manager for Alexander & Alexander Services Inc., engaged in a scheme to defraud by trading millions of dollars in high-risk derivative securities and concealing $62 million in losses and $35 million in gains resulting from such trading on Alexander's books and records. The complaint alleges that this caused Alexander to materially overstate its pretax income by as much as 103.9% in Alexander's first, second and third quarter 1994 and second and third quarter 1995 Forms 10-Q; and 17.8% in Alexander's 1994 and 1995 Forms 10-K. It also caused Alexander to materially understate its pretax income by as much as 14% in Alexander's third quarter 1993 and second quarter 1996 Forms 10-Q. The complaint further alleges that Mahon purchased many of these securities through Jupiter, a former registered representative of a registered broker-dealer, a registered municipal securities dealer, and their successors, in exchange for at least $190,000 in kickbacks Jupiter paid Mahon to induce Mahon to continue investing in the high-risk securities through Jupiter. The complaint alleges Jupiter and Mahon concealed the kickback payments from Alexander and that Jupiter earned at least $14.3 million in commissions from the securities transactions Mahon executed through Jupiter.
The Commission's complaint charges that Mahon violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("the Exchange Act") and Rules 10b-5 and 13b2-1 promulgated thereunder, and that Jupiter violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Judge Smalkin's order permanently enjoined Mahon from future violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1. The Complaint also seeks an order of permanent injunction from future violations of the federal securities laws, disgorgement of ill-gotten gains, including prejudgment interest, and the imposition of civil penalties against Jupiter for his fraudulent acts.