UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16797 / November 8, 2000
SEC V. ROY E. MATLOCK and ALAN ROOT, N.D.ILL., 99 Cv 7399, filed November 12, 1999
The Commission announced the entry of an Order of Permanent Injunction and other Equitable Relief (Order) against Roy E. Matlock ("Matlock") and Alan Root ("Root"). Matlock and Root consented to the entry of the order without admitting or denying the allegations of the Complaint. The Complaint, which was filed on November 12, 1999, alleged that, from November 1992 through May 1993, Matlock and Root, through their companies Legacy Trust and Legacy Management Group, Inc., raised $3.5 million from 8 investors, including $3.2 million from the Chicago Housing Authority pension plans. The Complaint alleged that Matlock and Root made misstatements and omitted to state material facts to investors regarding the true use of proceeds, the rate of return and the risk of the investment.
The Complaint alleged that investors were told that their funds would be pooled with other investors' funds to buy and sell prime bank instruments, specifically, letters of credit, standby letters of credit, and notes issued by the top 100 world banks. Prime bank instruments do not exist. Instead of investing the money as represented, the Complaint alleged that Matlock and Root used the investor funds to pay personal and business expenses and to operate a Ponzi scheme by paying interest and principal to prior investors. The Complaint further alleged that Matlock and Root told investors to expect a high rate of return on their investment, and their principal investment was guaranteed Finally, the complaint alleged that investors suffered losses of over $2.6 million dollars.
The Honorable Judge Joan Gottschallof the U.S. District Court for the Northern District of Illinois entered the Order enjoining Matlock and Root from future violations of 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.