LITIGATION RELEASE NO. 17287 / December 20, 2001
S.E.C. v. Skyline Group, Inc., Robert L. Sheets, and Mary A. West (D. Minnesota, Case No. 1355 JMR-FLN filed June 1, 2000.)
MINNESOTA CORPORATION AND OFFICERS SETTLE OFFERING FRAUD CASE
The Securities and Exchange Commission announced today that it has reached a settlement with Skyline Group, Inc. ("Skyline"), a Minnesota corporation, its President, Robert L. Sheets ("Sheets") and its C.F.O. Mary A. West ("West") (collectively referred to as "the defendants"), Sheets and West are married to each other and reside in Shoreview, Minnesota.
The Commission filed a Complaint in the U.S. District Court for the District of Minnesota against the defendants on June 1, 2000, alleging that they violated the registration and antifraud provisions of the federal securities laws while raising funds to finance a Native American tribe's request to the Department of the Interior for return of land in the Chicago area for the possible development of a casino.
The Complaint alleged that Skyline issued unregistered promissory notes to investors pursuant to private placement memoranda which provided that substantially all of the investment proceeds would be expended on project expenses, including land reclamation, casino development and working capital needs. In return, Skyline claimed it would share any profits generated by a casino with investors. The Complaint also alleged that over the four-year period from August 1995 to at least November 1999, Skyline, through Sheets and West, raised over $3 million by selling unregistered promissory notes to the investing public. The Complaint further alleged that instead of using all of the offering proceeds to finance the tribe's application, Sheets and West purportedly borrowed over 40% of the $3 million raised to cover their own personal expenses. Sheets and West claim to have taken the loans from Skyline in lieu of compensation. The Commission did not allege that the Native American tribe engaged in any wrongdoing, that the tribe was a victim of the alleged fraud, or that there was any wrongdoing associated with the tribe's application to the Department of Interior.
The defendants have agreed to withdraw their denials and defenses to the Complaint and to settle the Commission's action. The defendants have consented, without admitting or denying the allegations of the Complaint, to the entry of a judgment that permanently enjoins them from any 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. The judgment orders the defendants to pay $1.43 million in disgorgement and prejudgment interest, but waives payment of such disgorgement and prejudgment interest, and does not assess a civil penalty, based upon the defendants' sworn statements demonstrating their inability to pay. The judgment also orders Sheets and West to pay Skyline investors back their investment fully from any future profits Sheets and West receive from the casino development stage of the Skyline project.