U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 18967 / November 15, 2004

SEC v. Crescent Financial Group, Inc., Berkshire Tax Consultants Co., Warfield Capital Management Co., SpencerFerguson Receivables Corp., Thompson & Whitehurst Acquisition Consultants, and McKenzie Goldstein & Associates, Civil Action No. 04-22878-Civ-Seitz (S.D.Fla. filed November 15, 2004)

SEC FILES CIVIL FRAUD CHARGES AGAINST SIX BOILER ROOM OPERATIONS FOR A SERIES OF "RECOVERY ROOM" SCHEMES DIRECTED PRIMARILY AT OVERSEAS INVESTORS

The Securities and Exchange Commission ("SEC") today filed civil fraud charges in federal court in the Southern District of Florida against six boiler room operations in connection with their operation of a series of recovery room advance-fee schemes directed primarily at previously victimized investors from a number of countries, including Australia, Belgium, Greece, Hong Kong, Malaysia, New Zealand, Norway, Singapore, South Africa, Sweden and the United Kingdom. A "recovery room advance fee" scheme is a fraud wherein the perpetrators prey on investors who have lost money on particular stocks they purchased in the past. The perpetrators purport to offer these investors valuable assets in exchange for their nonperforming stocks but insist that the investors first pay an "advance fee."

The SEC's complaint alleges that the defendants carried out their fraudulent scheme by setting up companies that, while purporting to be legitimate tax and investment planning companies, in fact functioned as illegal "boiler room" operations. According to the SEC's complaint, to bolster their credibility as established businesses, the defendants created websites for each company with content that was plagiarized practically in toto from the websites of legitimate tax and investment planning companies. The defendants then contacted the investors, all of whom had purchased nonperforming shares of stock from other boiler rooms in the past, and offered them an opportunity to divest themselves of their nonperforming shares.

The SEC's complaint alleges that the defendants lured their victims by two similar fraudulent mechanisms, both of which required an advance fee payment by the targeted investors. Purportedly acting on behalf of a client, the defendants Crescent Financial Group, Inc., Berkshire Tax Consultants Co., Warfield Capital Management Co. and SpencerFerguson Receivables Corp., offered to swap one of their fictitious "client's" shares of a blue chip stock, such as Microsoft Corp. or Phillip Morris USA, for the investor's nonperforming shares. These defendants required an advance fee from their victims purportedly to make up the difference in value between the two securities. The complaint alleges that defendants Thompson & Whitehurst Acquisition Consultants ("Thompson") and McKenzie Goldstein & Associates ("McKenzie"), on the other hand, claimed to be agents for a buyer interested in acquiring a majority stake in the companies that had issued the nonperforming shares. These defendants offered to buy the targeted investors' nonperforming shares for an attractive price otherwise not available on the market, but first required that the investor make an advance payment for a portion of the purchase price of a refundable indemnity bond purportedly underwritten by a well-known insurance company, such as one of the Prudential Financial group members. The ostensible purpose of these indemnity bonds was to guarantee that the nonperforming shares could be re-registered in the names of either Thompson's or McKenzie's "clients."

According to the SEC's complaint, in many cases, to enhance further the appearance of the legitimacy of their schemes, the defendants told the targeted investors that the transactions were subject to monitoring by a federal regulator, either the Federal Trade Commission ("FTC") or the SEC. In these instances, once an investor had wired the advance payment into a defendant's bank account, he was told that either the FTC or the SEC required a further payment. According to the SEC's complaint, the defendants then sent the investors fabricated documents purporting to be from either the SEC or FTC that explained the reason for the additional payment. In all cases, after the investors sent their payment (or payments) to the defendants, they received neither the stock they had been promised nor, alternatively, the payment they had been promised. The SEC's complaint alleges that these frauds were very lucrative for the defendants. According to the SEC's complaint, at least sixty (60) investors lost over $650,000 as a result of the frauds perpetrated by Crescent, Warfield and Berkshire alone.

The SEC's complaint alleges that each of the defendants violated the anti-fraud and broker-dealer registration provisions of the federal securities laws contained within Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Complaint seeks injunctive relief against future violations, disgorgement, prejudgment interest and civil penalties against all of the defendants.

In a related criminal case, the U.S. Attorney's Office for the Southern District of Florida today announced the arrests of several individuals allegedly connected to the operation of several of the same consecutive recovery room advance-fee schemes alleged in the SEC's complaint. The SEC wishes to acknowledge the cooperation and assistance provided by the U.S. Attorney's Office for the Southern District of Florida and the Postal Inspection Service in this matter. The SEC would also like to thank the Financial Services Authority ("FSA") in the United Kingdom for their assistance in this matter. The SEC will continue to work with domestic and foreign law enforcement authorities to combat the proliferation of boiler rooms and advance fee schemes so that these international frauds will not find a safe haven from which to operate.

In order to assist investors, the Commission has released an Investor Alert entitled "Worthless Stock: How to Avoid Doubling Your Losses." The Investor Alert warns that "con artists across the globe have stepped up their efforts to rip off investors, especially non-U.S. residents who have lost money in the U.S. securities markets." The Investor Alert urges investors to be very skeptical of offers to exchange worthless or underperforming stocks for blue chip performers and encourages them to thoroughly investigate any investment opportunity and the person promoting it before parting with their money. It also offers tips on how to spot potential "stock swap" scams and gives investors information on where to turn for help. The Investor Alert is available at http://www.sec.gov/investor/pubs/worthless.htm.

The SEC's investigation in this matter is continuing.