United States Securities and Exchange Commission
Litigation Release No. 18380 / September 30, 2003
SEC Sues Recidivist, Clarence E. Long and His Company, ACI, Inc., for Fraud in Connection with Alleged High Yield Trading Scheme
Securities and Exchange Commission v. ACI, Inc. and Clarence E. Long, Defendants, and Jon G. Ervin, Sr., Relief Defendant, Civil Action No. 6:03-CV-01343-JTM-DWB (USDC/D.KAN/Wichita Div.)
On September 25, 2003, the Commission filed a civil action in the United States District Court for the District of Kansas against ACI, Inc. ("ACI") and Clarence E. Long, a securities law recidivist. According to the complaint, from October 2000 through September 2001, Long and ACI raised over $7.7 million from the fraudulent offer and sale of interests in high yield trading programs to at least 586 investors located throughout the United States. The Commission alleges, specifically, that Long misled investors by stating, falsely, that ACI's trading programs were paying weekly returns of up to 45 percent and that investors were "guaranteed" return of their principal plus 6½ percent at the end of the program's 13-month term. None of the investors' funds were invested as promised; rather, Long used the funds to make Ponzi payments couched as "trading profits" and misappropriated most of the remaining funds. Finally, the Commission alleges that Long favorably portrayed his background and experience without disclosing to investors that he had previously been civilly enjoined and criminally convicted for securities fraud.
In its complaint, the Commission alleges that Long and ACI violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In its action, the Commission is seeking against ACI and Long a permanent injunction, disgorgement with prejudgment interest, a civil money penalty and an accounting. Additionally, the Commission seeks a "conduct-based" permanent injunction against Long, enjoining him from participating in any sale or offer to sell any security in an unregistered transaction while acting in association with an issuer, underwriter, broker or dealer involved in such transaction. Finally, the Commission seeks disgorgement with prejudgment interest and an accounting against Jon G. Ervin, Sr., the relief defendant, for his alleged unjust enrichment at the investors' expense.
The Commission acknowledges the assistance and cooperation of the U.S. Attorney's Office for Arizona and the Securities Division of the Arizona Corporation Commission.