SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16940 / March 22, 2001
SECURITIES AND EXCHANGE COMMISSION v. EARL A. ABBOTT, RICHARD
L. STALVEY, GLENN PURDUE, ROBERT E. GERWIN, KENNETH C. NUNN AND THOMAS J. O'KEEFFE (United States District Court for the Middle District of Florida, C.A. No. 6:01cvORL31KRS )
The Commission announced today the filing of a civil fraud action in the United States District Court for the Middle District of Florida against five men for the fraudulent sale of over $3.5 million in non-existent prime bank securities. According to the complaint, Earl A. Abbott ("Abbott"), a Titusville, Florida businessman and three of his sales agents, Richard L. Stalvey ("Stalvey"), an Albany, Georgia accountant, Glenn Purdue, of Indianapolis, Indiana and Robert E. Gerwin, of Cincinnati, Ohio, sold $3.55 million of non-existent prime bank securities which were purportedly supplied by defendant Kenneth C. Nunn ("Nunn"), a resident of England. The Commission alleges that the defendants violated the securities registration, antifraud and broker-dealer registration provisions of the federal securities laws in connection with their offer and sale of these securities. Thomas J. O'Keeffe ("O'Keeffe"), of Ireland, is alleged to have received over $1 million of these funds, supposedly to trade the securities. O'Keeffe is named as a relief defendant.
The Commission's complaint alleges that the defendants engaged in the fraudulent offer and sale of unregistered securities in the form of interests in a non-existent "trading program." The complaint further alleges that the defendants claimed that they would use investor funds to buy and sell "medium term debentures" issued by some of the world's "top 25 banks," with the trading to be conducted by an unidentified "trading group" in a secret location somewhere in Europe. According to the complaint, the defendants promised investors extraordinarily high returns (between 80% and 160%) with no risk. The Commission alleges that the defendants' representations were false: There were no bank debentures and no trading took place. According to the Commission, as a result of the defendants' actions, U.S. investors lost approximately $3.1 million. It is alleged that the defendants' "trading program" has all the hallmarks of a "prime bank" scheme, a type of investment fraud involving fictitious instruments supposedly issued by leading world banks.
The complaint alleges that the defendants raised over $3.5 million from twelve investors in five different states between May and October 1998. Approximately $3.3 million of those investor funds, according to the Commission's complaint, were wired to an off-shore account on Guernsey in the Channel Islands controlled by defendant Nunn. The Commission contends that Nunn transferred approximately $1 million to relief defendant O'Keeffe who, Nunn claimed, would conduct the "trading."
The Commission's Complaint alleges that in connection with this scheme, the defendants engaged in transactions, acts, practices and courses of business which constitute violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, Section 5(a) and 5(c) of the Securities Act, and Section 15(a) of the Exchange Act.
The Commission seeks a permanent injunction prohibiting the defendants from violating the securities registration, antifraud and broker-dealer registration provisions of the Securities Act and the Exchange Act. In addition, the Commission seeks disgorgement of ill-gotten gains from Abbott, Stalvey and Nunn, and the imposition of civil monetary penalties against all the primary defendants pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act .
Defendant Stalvey has agreed, without admitting or denying the Commission's allegations, to settle the action by agreeing to the entry of an injunction against him and a disgorgement order requiring him to disgorge $50,000 of ill-gotten gains. Based on his demonstrated inability to pay disgorgement, the settlement agreement waives disgorgement and does not assess a civil monetary penalty.
In an earlier related action, the Commission filed a complaint in the United States District Court for the District of Massachusetts against Richard J. Briden ("Briden"), an Ashland, Massachusetts business consultant, alleging violations of the securities registration, antifraud and broker-dealer registration provisions of the federal securities laws in connection with his offer and sale of fraudulent prime bank securities. That complaint alleged that Briden convinced seven investors, three of whom were from Massachusetts, to invest $295,000 in a prime bank program. The Florida complaint alleges that Briden found the Abbott/Nunn program through defendant Gerwin.
For further information on the Briden action, see Litigation Release No. 16134.http://www.sec.gov/litigation/litreleases/lr16940.htm