U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17968 / February 4, 2003
SECURITIES AND EXCHANGE COMMISSION V. PINNFUND USA, INC., PEREGRINE FUNDING, INC., ALLIED CAPITAL PARTNERS, GRAFTON PARTNERS, SIX SIGMA, LLC A/K/A 6 SIGMA, LLC, RELIANCE HOLDINGS, LLC, MICHAEL J. FANGHELLA, JAMES L. HILLMAN, and KELLY COOK A/K/A KELLY JAYE A/K/A KELLY SPAGNOLA, Civil Action No. 01-CV-0496 H (LAB) (S.D. Cal.)
United States v. James L. Hillman and Piotr Kodzis, Case No. 03-CR-275 (S.D. Cal.)
On January 30, 2003, the United States Attorney for the Southern District of California announced that a federal grand jury had returned indictments of James L. Hillman, a 62 year old resident of Minden, Nevada, and three other individuals, charging them with intentionally defrauding investors out of hundreds of millions of dollars. Hillman is charged with conspiracy, mail fraud, and wire fraud in connection with misrepresentations relating to investments in PinnFund USA, Inc. Specifically, the indictment charges that Hillman misrepresented the extent of his oversight and review of PinnFund's operations, and concealed various material facts, including his knowledge of multiple sets of contradictory PinnFund financial statements.
PinnFund was a Carlsbad, California-based mortgage lender placed under receivership by court order as a result of an emergency civil action filed by the Securities and Exchange Commission in March 2001. The Commission alleged that Hillman raised $330 million of investor proceeds through his control of Peregrine Funding, Inc. and by selling securities in Allied Capital Partners, Grafton Partners and Six Sigma, LLC. The Commission's complaint also alleged that Hillman and the other defendants misused the proceeds for their own purposes, to pay for operational losses of defendant PinnFund, and to make repayments to investors as part of a Ponzi-like scheme. See Litigation Release 16941, March 22, 2001.
In December 2001, a Final Judgment was entered against Hillman, concluding the Commission's litigation in this action. The final judgment permanently enjoined Hillman from committing any future violations of the registration and antifraud provisions of the federal securities laws, and required Hillman to pay disgorgement of $67,749,192.39 and $110,000 in civil penalties. See Litigation Release 17321, January 16, 2002.