U.S. Securities and Exchange Commission
Litigation Release No. 17802 / October 23, 2002
Securities and Exchange Commission v. Saint James Asset Management, Inc. and John Raymond Linney Clain, Defendants and Clain Family Corporation, Relief Defendant, Civil Action Number 1:02-CV-426 (N.D. Ga.)
Order Setting Disgorgement, Prejudgment Interest and Civil Penalties Issued Against Georgia Investment Adviser and Its Controlling Shareholder as a Result of Fraudulent Activities, and Order Setting Disgorgement and Prejudgment Interest Issued Against Relief Defendant
The Securities and Exchange Commission ("Commission") announced today that on October 16, 2002, the Honorable Robert L. Vining of the United States District Court for the Northern District of Georgia issued an order setting disgorgement, prejudgment interest and civil penalties against defendants John Raymond Linney Clain ("Clain") and his investment adviser firm, Saint James Asset Management, Inc. ("St. James"), both of Alpharetta, Georgia, and ordered disgorgement and prejudgment interest against relief defendant Clain Family Corporation ("CFC"), a corporation controlled by Clain. In an earlier order, the Court permanently enjoined permanently enjoined Clain and Saint James from further 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 and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In its recent order, the Court ordered Clain and St. James to pay disgorgement, jointly and severally in the amount of $927,000, along with prejudgment interest thereon, ordered Clain and St. James to pay "third tier" statutory civil penalties in the amounts of $110,000 and $550,000 respectively. The Court also ordered CFC to pay disgorgement in the amount of $32,000 along with prejudgment interest thereon. The Court's Order directed that disgorgement, prejudgment interest and civil penalties be paid into the registry of the Court within thirty days from the entry of the Order.
The Commission's complaint alleged that Clain and Saint James obtained the funds from sixteen clients between January 1998 and October 2000 by misrepresenting that the clients' money would be used to purchase various securities. Without the clients' knowledge or permission, Clain used the money primarily to fund the operations for an Augusta, Georgia company in which Clain had an interest, Alternate Energy Resources, Inc. The complaint also alleged that Clain used misappropriated funds to purchase two cars and a diamond ring, and to pay the mortgage on his house. Clain Family Corporation, which is controlled by Clain, owns one of the cars. The complaint also alleged that the defendants' misconduct included providing clients with materially false and misleading periodic account statements that represented falsely that they had bought specific securities for the clients, when in fact they had not.