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U.S. Securities and Exchange Commission


Litigation Release No. 18933 / October 15, 2004

U.S.A v. Reeder, et al., Criminal Action No. 4:02-CR-00128 USDC, NDTX (Ft. Worth Division)

Securities and Exchange Commission v. Cornerstone Prodigy Group, Inc., Gary D. Reeder, Sandra Reeder, Case No. 4:99-CV-0978-Y USDC, NDTX (Ft. Worth Division)

On October 8, 2004, a federal jury presided over by U.S. District Judge Terry R. Means, Northern District of Texas, Fort Worth Division, returned a guilty verdict against Gary D. Reeder and Sandra M. Reeder on 14 counts of mail fraud and conspiracy to commit money laundering in a Ponzi investment scam conducted by the Reeders and their Ft. Worth, Texas company, Cornerstone Prodigy Group, Inc. A sentencing date is scheduled for January 24, 2005.

The Reeders and Cornerstone were previously enjoined by the Commission for their fraudulent conduct. During the course of the lawsuit, a court-appointed receiver liquidated all of the defendants' assets, including the Reeders' home, which had been paid for with investor funds and distributed these liquidated assets, totaling approximately $7 million, to the victims of the Reeders' fraud.

The Commission's lawsuit, filed in November 1999, alleged that the Reeders fraudulent operation, based in Forth Worth, Texas, raised over $16.5 million from over 600 investors, many of whom were elderly, through internet postings and cold-call sales. The complaint further alleged that the defendants promised investors that their business operations would generate 120% annual returns when, in reality, they had no significant business revenue. Finally, the Complaint alleged the Reeders were operating a classic Ponzi scheme wherein the funds of new investors were used to make promised payments to existing investors.

On April 14, 2000, Judge Means, who also presided over the civil lawsuit, entered a Permanent Injunction against Cornerstone Prodigy Group, Inc. and its principals Gary Reeder, a convicted felon, and Sandra Reeder, a licensed securities professional. The Court's order enjoined Cornerstone and the Reeders, who consented to the issuance of the order, from future violations of the anti-fraud and securities registration provisions of the federal securities laws, specifically, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered the Reeders to disgorge $16.5 million, less the approximate $6 million of investor funds recovered, but waived the balance based upon the Reeders demonstrated financial inability to pay.

The Commission wishes to acknowledge the valuable assistance of the Texas State Securities Board and the Federal Bureau of Investigation. For further information, please see Litigation Release No. 16390 (December 15, 1999) and Litigation Release No. 16521 (April 18, 2000).


Modified: 10/19/2004