The Securities and Exchange Commission (the "Commission") announced that on March 25, 2004, the Honorable C. Ashley Royal of the United States District Court for the Middle District of Georgia, entered an order of permanent injunction and other relief against John Benjamin Stewart ("Stewart") of Union Point, Georgia for engaging in unlawful offerings of securities, for which no exemption from registration existed. Stewart engaged in the unregistered offerings individually and through his solely owned companies Stewart Finance Company ("SFC") and Stewart National Finance Company ("SNFC"). Stewart also caused an unregistered offering of securities to be conducted through D&E Acquisitions, Inc. ("D&E"), a company solely owned by Donald N. Ellis ("Ellis"). All three companies were based in Greene County Georgia. Judge Royal's order permanently enjoined Stewart from further violating the registration provisions set forth in Sections 5(a) and 5(c) of the Securities Act of 1933. Stewart consented to the entry of the order without admitting or denying the allegations of the Commission's complaint and first amended complaint. Stewart was ordered to pay disgorgement, prejudgment interest and a civil penalty in amounts to be resolved upon motion of the Commission at a later date.
The Commission's complaint and first amended complaint alleged that in 1989, SFC commenced a continuous series of offerings to Georgia investors of its subordinated debentures and senior demand notes, and in 1998, SFC sold preferred stock to Georgia investors. Although the initial offers and sales of securities by SFC were purportedly exempt from registration pursuant to the intrastate offering exemption set forth in Section 3(a)(11) of the Securities Act of 1933 ("Securities Act"), by 1999, SFC could no longer rely on that exemption and was, in fact, engaging in unregistered offers and sales of securities without an exemption from registration. The complaint and amended complaint alleged that in or about August 1999, after learning that SFC could no longer issue securities, Stewart began personally issuing promissory notes to investors and transferring the proceeds of those notes to SFC. The pleadings further alleged that the offers and sales of Stewart's promissory notes were not registered with the Commission and were not exempt from registration, and that in January 2002, SNFC began offering $25 million in variable rate subordinated debentures in a purported private placement pursuant to Regulation D of the Securities Act. The SNFC offering was not exempt from the registration requirements of the Securities Act because the facts and circumstances of the offering required it to be integrated with the prior and contemporaneous non-exempt offerings by SFC and Stewart. The offering through D&E, which occurred from July 2002 through January 2003, unlawfully raised approximately $6 million, and similarly constituted an unregistered offering of securities, which was integrated with the earlier unregistered, non-exempt offerings.
See also: L. R. 18630 (March 19, 2004); L.R. 18565 (February 5, 2004) and L.R. 18141 (May 16, 2003)