United States Securities and Exchange Commission
Litigation Release No. 17164 / September 28, 2001
Securities and Exchange Commission v. Gilbert Merrell Wynne, et al., Civil Action No. 01-4936 (E. D. Pa.)
The Securities and Exchange Commission ("Commission") announced today that, on September 28, 2001, it filed a complaint in federal district court in Philadelphia, Pennsylvania, charging that Gilbert Merrell Wynne and Richard V. Dear engaged in a fraudulent scheme to defraud public investors through the offer and sale of securities issued by three entities controlled by Wynne, namely Kingdom Growth Fund, Ltd., Kingdom Financial Services and Orthodox Church of Jesus Christ, Inc. The Commission's complaint charges that from at least November 1998 through November 1999, Wynne and Dear, directly and through their salespersons, fraudulently induced investors to purchase the securities by making numerous material misrepresentations and omissions including, among other things, guaranteeing investors returns ranging from 15-20 percent per month. They claimed that the investments were risk free and that the guaranteed returns would be generated through investing in so-called "prime bank" instruments. In actuality the instruments touted by the defendants did not exist and there was no reasonable basis for guaranteeing the exorbitant returns. Ultimately, the defendants raised at least $2.2 million from more than 200 investors located in Pennsylvania and other states. According to the complaint, none of the investor funds was invested as promised. Instead, Wynne used those funds for personal and business expenses, to pay existing investors, and to pay commissions to Dear and other salespeople.
In its complaint, the Commission also charges Stephen W. Beik, an attorney practicing in Maitland, Florida, with aiding and abetting the fraudulent scheme. Beik did so by drafting certain offering documents used in the scheme, acting as escrow agent for funds raised in the scheme, attempting to generate fees by identifying prime bank investments ostensibly suitable for investor funds and by transferring investor funds to offshore accounts after he was aware that the Commission was investigating the matter.
Based on the conduct described above, the complaint alleges that Wynne, Dear, Kingdom Growth Fund, Ltd., Kingdom Financial Services and Orthodox Church of Jesus Christ, Inc. violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also alleges that Beik aided and abetted the violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, the complaint alleges that Wynne and Dear each violated Section 15(a) of the Exchange Act by failing to register as a broker or dealer. Based on those violations, the complaint seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties against each defendant.