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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Release No. 18185 / June 10, 2003

Securities and Exchange Commission v. Stephen G. Donahue and Donahue Securities Inc., (U.S.D.C. S.D. Ohio, Western Division at Cincinnati, Civil Action No. C-1-01-116, filed February 26, 2001).

U.S.A. v. Stephen G. Donahue, (U.S.D.C. S.D. Ohio, Western Division at Cincinnati, Criminal Action No. 02-CR-81-ALL, filed June 28, 2002).

The Securities and Exchange Commission and the Office of the United States Attorney for the Southern District of Ohio announced that on April 3, 2003, Senior U.S. District Court Judge Herman J. Weber sentenced Stephen G. Donahue, a former Cincinnati investment advisor and broker-dealer, to 46 months in prison for his conviction on charges of fraud and deceit by an investment advisor. Judge Weber also sentenced Donahue to 500 hours of community service, fined him $5,000 and ordered him to serve three years of supervised release after he is released from prison.

The Commission filed its own action against Donahue and his company, Donahue Securities Inc., on February 26, 2001. The Commission's Complaint alleged that Donahue engaged in a 12-year scheme to misappropriate at least $6 million from at least 200 of his brokerage clients. Among other things, Donahue told clients he would deposit their funds into a tax-free bond fund. Instead, he deposited the clients' funds into personal bank accounts and used the clients' funds to pay both personal and business expenses. The Court entered an Order of Permanent Injunction against Donahue on February 26, 2001 permanently enjoining Donahue from further violating the antifraud provisions of the federal securities laws, freezing all funds belonging to Donahue or in which he held a beneficial interest and ordering Donahue to pay disgorgement and civil penalties in amounts to be determined in a separate hearing.

For further information, see LR-16909 (February 28, 2001), LR-17075 (July 24, 2001) and LR-17508 (May 8, 2002).



Modified: 06/10/2003