U.S. Securities and Exchange Commission
Litigation Release No. 18377 / September 30, 2003
Securities and Exchange Commission v. John J. Lawbaugh, Civil Action No. 8:03-cv-2768 (D. Md.)
Commission Sues John J. Lawbaugh For Fraud, Embezzlement And Other Prohibited Conduct With Regard To Two-Face Amount Certificate Companies
The Securities and Exchange Commission ("Commission") announced that, on September 29, 2003, it filed a civil action in the United States District Court for the District of Maryland, against John J. Lawbaugh, age 38, of Maryland, the former majority shareholder, Chief Executive Officer, and Chairman of the Board of both 1st Atlantic Guaranty Corporation ("1st Atlantic") and SBM Certificate Company ("SBM"), face-amount certificate companies registered with the Commission. The complaint seeks a permanent injunction; disgorgement of ill-gotten gains; the imposition of civil penalties; a bar from acting as an officer or director of a public company; a bar pursuant to section 36(a) of the Investment Company Act, from serving as an officer, director, member of an advisory board, investment adviser, or depositor of any registered investment company, or as a principal underwriter for any registered open-end investment company, unit investment trust, or face-amount certificate company; as well as penalties pursuant to Section 49 of the Investment Company Act.
The Commission alleges that Lawbaugh made material misrepresentations and omissions in 1st Atlantic's and SBM's annual and periodic filings with the Commission by overstating assets and failing to disclose transfers, thereby hiding the fact that Lawbaugh had misappropriated approximately $2 million in corporate funds for his personal use. The Complaint also alleges that Lawbaugh stole and willfully converted to his own use funds of 1st Atlantic and SBM.
The Commission's complaint also alleges that Lawbaugh misappropriated approximately $1 million from investors by promising to invest their money in 1st Atlantic's face-amount certificates. Lawbaugh never invested the money, and instead deposited the money into his personal accounts.
The complaint charges the defendant with violating 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 17(e)(1), 34(a), 34(b) and 37 of the Investment Company Act of 1940.