U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18411 / October 15, 2003
SECURITIES AND EXCHANGE COMMISISON V. JOHN L. MONTANA, JR., MELVIN R. LYTTLE, PAUL E. KNIGHT, WORLDWIDE T&P, INC., FIRST NATIONAL EQUITY, LLC, P.K. TRUST & HOLDING, INC., UTA-BVI, LTD. AND VIOLET GAIL ELDRIDGE AND RELIEF DEFENDANTS THE UNITED TRIBES OF THE AMERICAS, INC. AND EXECUTIVE BUREAU OF RESEARCH AND RECOVERY, INC., Civil Action No. 1:03CV1513 (SEB) (S.D.Ind.)
The Securities and Exchange Commission announced today that it filed a complaint in U.S. District Court for the Southern District of Indiana alleging that from August 1999 until April 2000, Defendants John L. Montana, Jr., Melvin R. Lyttle and Paul E. Knight raised approximately $30 million from about 29 investors through the fraudulent sale of investments in a non-existent bank trading program ("Trading Program"). The Complaint alleges that Montana, Lyttle and Knight raised these funds through the entities that they controlled: Montana's Worldwide T&P, Inc., Lyttle's First National Equity, LLC and Knight's P.K. Trust & Holding, Inc.
The SEC's Complaint alleges that Montana, Lyttle and Knight told investors that they would earn high returns, risk-free in the Trading Program, which purported to invest money in the trading of various instruments including medium term notes. In reality, the Trading Program did not exist and the funds were not kept safe. According to the Complaint, Lyttle misappropriated at least $6 million for his personal use instead of investing the investors' funds in the supposed Trading Program. The Complaint alleges that the remaining $24 million in investor funds was transferred to Defendant UTA-BVI, Ltd. which used the funds to engage in highly leveraged and unprofitable stock trading. According to the Complaint, Defendant Violet Gail Eldridge, the president of UTA-BVI, controlled the brokerage accounts used for the stock trading.
The SEC's Complaint also alleges that Eldridge and UTA-BVI, in turn, defrauded First National Equity and P.K. Trust. Pursuant to "trust management agreements," UTA-BVI agreed to serve as trustee for a trust that consisted of the $24 million in investor funds transferred to UTA-BVI by First National Equity and P.K. Trust and which identified First National Equity and P.K. Trust as beneficiaries of the trust. According to the Complaint, instead of managing the funds for the benefit of First National Equity and P.K. Trust, UTA-BVI, among other things, used the trust funds to pay Eldridge's personal expenses and also transferred funds to bank accounts that she controlled in the name of the Relief Defendants, The United Tribes of the Americas, Inc. and Executive Bureau of Research and Recovery, Inc. The Complaint alleges that Eldridge never disclosed to First National Equity and P.K. Trust that UTA-BVI would use the trust funds in this manner.
The SEC's Complaint alleges that Montana, Lyttle, Knight, Worldwide T&P, First National Equity and P.K. Trust violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10b of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, that Montana, Knight and Worldwide T&P violated Sections 15(a)(1) and 15(c)(1) of the Exchange Act, that UTA-BVI violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") and that Eldridge aided and abetted UTA-BVI's violations of the Advisers Act. The SEC's Complaint requests that the Court permanently enjoin Montana, Lyttle, Knight, Worldwide T&P, First National Equity P.K. Trust, UTA-BVI and Eldridge from the securities law violations alleged, order each of them to pay a civil penalty and order Lyttle, Knight, First National Equity, P.K. Trust, UTA-BVI, Eldridge and Relief Defendants The United Tribes of the Americas, Inc. and Executive Bureau of Research and Recovery, Inc. to disgorge, with prejudgment interest, all ill-gotten gains.