U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18010 / March 3, 2003
Securities and Exchange Commission v. Genesis Leasing IX, Inc., et al., United States District Court for the Southern District of Florida, Civil Action No. 01-9111-CIV-Hurley/Lynch
The Securities and Exchange Commission announced that on February 25, 2003, the Honorable Daniel T. K. Hurley, United States District Judge for the Southern District of Florida, entered a Judgment of Permanent Injunction and Other Relief as to Defendants Genesis Leasing IX, Inc., Kadie Corp., Lisa Klinger Paonessa (Klinger), Brian Dominick Paonessa (Paonessa), Excalibur Investment Group PAIF II, Inc., Excalibur Investment Group Holdings, Inc., Excalibur Investment Group, Inc., Trident/KD Investment Group, Inc., and Endeavor Investment Group, Inc., restraining and enjoining them from further violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The defendants consented to the entry of the judgment without admitting or denying any of the allegations of the Commission's complaint. The Court ordered disgorgement against defendants, jointly and severally, in the amount of $2,824,165, plus $556,819 in prejudgment interest, but waived additional payment of disgorgement and prejudgment interest from Klinger after defendants' payment of $133,000 to a Court-ppointed special master and disgorgement of additional assets. The remaining defendants are liable for the full amount of disgorgement. The Court did not order defendants to pay a civil penalty based on their sworn financial statement.
The Commission's complaint alleged that individual defendants George Robert Hoffman, Klinger and Paonessa controlled and caused eight corporate defendants to make at least 21 fraudulent mini-tender offers for the securities of five publicly traded limited partnerships since 1997. The complaint alleged that defendants made the mini-tender offers by means of separate, but substantially similar three-page offering circulars, which conveyed to investors a certain offering price in large, bold print on the first page and buried deductions in very small, closely spaced print on the second page. According to the complaint, the defendants paid investors who tendered their limited partnership units only a small fraction of the offering price stated on the first page of the circular. As a result of the fraudulent mini-tender offers, the defendants obtained more than 80,000 units of five limited partnerships from more than 4,000 investors.