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U.S. Securities and Exchange Commission


Litigation Release No. 18580 / February 18, 2004

Securities and Exchange Commission v. Security Asset Capital Corporation, et al., Civil Action No. 04-683 (LD)(E.D. Pa.)


The Securities and Exchange Commission announced the filing, on February 18, 2004, of securities fraud charges against Security Asset Capital Corporation ("Security Asset"), Apacor Financial, Inc. ("Apacor") and other individuals and entities involved in the offering of nine-month promissory notes. The Commission's complaint was filed in the United States District Court for the Eastern District of Pennsylvania, and seeks permanent injunctions, civil money penalties, disgorgement of ill-gotten gains, and bars preventing certain of the defendants from acting as an officer or director of a public company.

The complaint alleges that defendants made material misrepresentations and omissions in the offering of the promissory notes, whereby investors were promised secure investments with 12% (or more) annual returns, but instead lost all or the vast majority of their money. The complaint further alleges that, in these offerings of nine-month promissory notes, Security Asset raised approximately $7 million from December 1998 through January 2001, and Apacor raised approximately $1.5 million from August 2000 through March 2001. The complaint also alleges that no registration statement was in effect as to these promissory notes; nor were they exempt from registration.

Named as defendants in the Commission's complaint are:

  • Security Asset Capital Corporation ("Security Asset") headquartered in San Diego, California. Security Asset was in the business of, among other things, buying discounted debt portfolios, which the company would either collect or resell at a profit.
  • Darrell G. Musick, age 66, of Oceanside, California. Musick was the President and a director of Security Asset since 1993, and a member of Security Asset's audit committee.
  • David S. Walton, age 73, of the San Diego area. Walton was the Secretary, Treasurer, internal auditor and a director of Security Asset since 1996.
  • Richard E. Wensel, age 69, of Scottsdale, Arizona. Wensel was a director of Security Asset, and served as an executive vice president of one of Security Asset's subsidiaries.
  • Continental Capital Group, Ltd. ("Continental Capital") headquartered in Edina, Minnesota. Defendant Arthur B. Carlson, III, established Continental Capital for the stated purpose of helping parties secure financing through bank loans, private placements, and public registrations.
  • Arthur B. Carlson, III, age 52, of St. Paul, Minnesota. Carlson was the Chief Executive Officer and majority shareholder of Continental Capital. Carlson also served as the Chief Financial Officer of defendant, Apacor Financial, Inc. In addition, Carlson was a licensed certified public accountant in Minnesota from 1977 through 2000.
  • Secure Investments, Inc. ("Secure Investments") headquartered in Mountville, Pennsylvania. Defendant, Gary J. Spirk specifically formed Secure Investments to market promissory notes.
  • Gary J. Spirk, age 50, of Washington Boro, Pennsylvania. Spirk was the sole principal of Secure Investments.
  • Apacor Financial, Inc. ("Apacor") headquartered in Edina, Minnesota. Apacor is a finance company whose primary business is the refinancing of delinquent credit card debt. Apacor is one of a group of finance-related companies owned, in part or in whole, by defendant Richard C. Wallace.
  • Richard C. Wallace, age 48, is currently serving a three-year prison sentence at the Federal Correctional Institute in Elkton, Ohio, stemming from his guilty plea in December 2002 to charges of mail fraud and bank fraud relating to the sale of Apacor's promissory notes. Wallace was the majority shareholder of Apacor.

The complaint charges all defendants with violations of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint also charges defendants Security Asset, Musick, Wensel, Continental Capital, Carlson, Secure Investments, Spirk, Apacor and Wallace with violations of Sections 5 (a) and 5(c) of the Securities Act (securities registration provisions), and defendants Wensel, Continental Capital, Carlson, Secure Investments, and Spirk with violations of Section 15(a)(1) of the Exchange Act (broker-dealer registration provisions).

The Commission acknowledges the assistance of the Pennsylvania Securities Commission, the U.S. Attorney's Office in Harrisburg, Pennsylvania, and the Federal Bureau of Investigation in the Middle District of Pennsylvania.

SEC Complaint in this matter


Modified: 02/18/2004