SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 16907 \ February 23, 2001

SECURITIES AND EXCHANGE COMMISSION V. DAVID E. FITZGERALD AND PACIFIC GENESIS GROUP, INC. (United States District Court for the Northern District of California, Case No. C 00-4802 CRB).

The Securities and Exchange Commission announced that on February 16, 2001, the Honorable Charles R. Breyer, U.S. District Court Judge for the Northern District of California entered an order halting a $13.5 million offering of municipal bonds underwritten by Pacific Genesis Group, Inc. and its Chairman David E. Fitzgerald by requiring that all proceeds raised in the offering be immediately returned to investors. The order further prohibits these defendants from future conduct in violation of section 17(a) of the Securities Act of 1933 and requires that they submit written marketing materials to the Commission seven days prior to offering any other bonds secured by the same development project.

The order, which entered a permanent injunction, was based upon Judge Breyer's February 14, 2001 finding that the defendants violated sections 17(a)(2) and (3) of the Securities Act, section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by making fraudulent and negligent misrepresentations in the Official Statement for the offering. The Court's ruling came after a seven-day trial on the defendants' role in underwriting the most recent in a series of nine municipal bond offerings for the proposed Rancho Lucerne Master Planned Community located in the desert region of San Bernardino County California. The order also holds that prior to selling or offering any additional or existing bonds pertaining to Rancho Lucerne the defendants are required to provide the Commission with all information to be used in connection with the sale or offer of such bonds. Litigation is still pending with respect to the Commission's claims for disgorgement and penalties for the ninth offering, as well as for all claims against the defendants for their role in underwriting the eight previous offerings for Rancho Lucerne.

On December 27, 2000, the Commission filed its complaint in federal district court in San Francisco alleging that the defendants violated the antifraud provisions of the federal securities laws in connection with all nine offerings for a total of over $70 million in tax-exempt municipal bonds to finance Rancho Lucerne. According to the Complaint, four years after the first offering, not a single road has been paved, no homes have been built and not a single residential lot has been sold to a homebuilder.