UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17656 / August 5, 2002
Accounting and Auditing Enforcement Release No. 1610
U.S. Securities and Exchange Commission v. Church Extension of the Church of God, Inc., United Management Services, Inc., James Perry Grubbs and Shearon Louis Jackson, U.S. District Court for the Southern District of Indiana, Cause No. IP 02-1118 C H/S (S.D. Indiana 2002).
The U.S. Securities and Exchange Commission ("Commission") announced that on July 31, 2002, the Honorable Judge David F. Hamilton of the United States District Court for the Southern District of Indiana entered a Final Judgment and Order of Permanent Injunction and Other Equitable Relief against Church Extension of the Church of God, Inc. ("Church Extension") and United Management Services, Inc. ("United Management"), a Church Extension affiliate. Church Extension and United Management consented to the entry of the Order without admitting or denying the allegations of the Complaint. The Order was based on the Commission's Complaint, filed on July 22, 2002, which alleged that Church Extension, United Management, James Perry Grubbs ("Grubbs"), the former president of Church Extension, and Shearon Louis Jackson ("Jackson"), the former president of United Management, fraudulently raised approximately $85 million from the sale of investment notes to thousands of investors nationwide. The litigation is currently pending against Defendants Grubbs and Jackson in federal district court in Indianapolis, where they will have an opportunity to respond to the charges filed.
Specifically, the Order permanently enjoins Church Extension and United Management from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Order also requires Church Extension and United Management to pay disgorgement of approximately $81 million to investors.
In addition, Judge Hamilton appointed Jeff J. Marwil, a partner at the law firm of Jenner & Block in Chicago, Illinois, as an independent Conservator in this matter. The Conservator's mandate is to protect the interests of the investors who invested or reinvested in Church Extension's investment note program.
Church Extension and United Management have established a Joint Oversight Committee ("Joint Committee") for the purpose of drafting a joint corporate restructuring plan ("Restructuring Plan"). The Restructuring Plan will address, among other things, a manner in which to meet Church Extension and United Management's $81 million disgorgement obligations. During the time period when the Joint Committee is drafting the Restructuring Plan, the Commission and the Conservator will aggressively monitor the activities of Church Extension and United Management. Within 60 days of the Order, the Joint Committee will submit the Restructuring Plan to the Court, the Commission and the Conservator. After a limited period of review, the Restructuring Plan will be presented to the Court for its ultimate determination, including its approval, modification or rejection of the plan. At all times, the Commission and the Conservator will reserve the right to petition the Court for immediate relief, including, the appointment of a federal receiver, if either deems any activity, transaction or expenditure contemplated by Church Extension and United Management is not in the best interests of investors.