U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18558 / January 29, 2004
Securities and Exchange Commission v. J. Scott Eskind, Lorus Investments, Inc., and Capital Management Fund, Limited Partnership, United States District Court for the Northern District of Georgia, Civil Action No. 1:02-CV-2429-MHS
On January 20, 2004, the Honorable Marvin H. Shoob, U. S. District Judge for the Northern District of Georgia, entered a Final Judgment as to defendants J. Scott Eskind (Eskind), Lorus Investments, Inc. (Lorus) and Capital Management Fund, Limited Partnership (Capital), enjoining them from further violations of 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 enjoining Eskind and Lorus from violating or aiding and abetting violations of Section 206 of the Investment Advisers Act of 1940. Eskind, Lorus and Capital consented to the entries of the judgment without admitting or denying any of the allegations of the Commission's Complaint. Further, the court ordered joint and several disgorgement and prejudgment interest against defendants in the respective amounts of $3,661,786 and $808,403. The court ordered each defendant to pay a civil penalty of $120,000. Defendants were also ordered to transfer to the court appointed special master $94,584.64 currently held in brokerage accounts frozen by previous court order. Eskind was also ordered to comply with a prior order of the Commission barring him from association with an investment adviser.
The Commission's Complaint, filed on September 3, 2002, alleged that Eskind was a recidivist violator who was preliminarily enjoined in June 1997 and permanently enjoined on January 12, 1998 from violating the antifraud provisions of the federal securities laws. Eskind was subsequently barred by the Commission from association with any investment adviser. That case was based upon allegations of fraudulent conduct by Eskind which included misappropriating investors' funds, failing to disclose that Eskind had been suspended by the New York Stock Exchange (NYSE) in 1991, and inducing at least five investors to invest at least $500,000 in what was falsely represented to the investors to be a specified limited partnership. The Complaint further alleged that subsequent to being enjoined, and continuing until the filing of the Complaint, Eskind raised at least $3 million through sales of limited partnership units in Capital. Capital purportedly does business by trading in securities through initial or secondary public offerings. The sales materials misrepresented to investors Eskind's broker-dealer experience, and did not disclose his 1991 NYSE suspension, the Commission's 1997 civil action or the Commission's 2000 order barring him from association with an investment adviser. The Complaint alleged that investors were told that IRA accounts had been opened for them at a trust company which serves as an IRA custodian and that investors had received statements from Lorus indicating their funds in those accounts. In fact, no such accounts were opened. The sales materials falsely stated that a major law firm provided legal representation for Lorus. Finally, the Complaint alleged that Lorus is an investment adviser and Eskind's continuing association with Lorus was a violation of the Commission's 2000 order.
See also: L. R. 15395 (June 25, 1997); and L. R. 15618 (January 14, 1998); L. R. 17725 (September 13, 2002); L. R. No. 17735 (September 18, 2002); L. R. No. 17808 (October 28, 2002); and Litigation Release No. 18165 / June 2, 2003